Creating an Effective Business Plan

Project criteria: You will create a business plan to guide your business through the start-up or growth phase, a search for capital, or any other endeavor your small business undertakes.

You will develop the business plan into seven key elements listed below.

I. Introductory Elements

The introductory elements of your business plan - your cover page, executive summary, and table of contents - determine what kind of first impression you make on readers. In many cases, the introductory elements, especially the executive summary, will determine whether readers read the rest of your plan at all. Moreover, your table of contents indicates how well you have organized the entire plan. For this reason, all of your introductory elements must be top-notch both in presentation and substance.

A beautifully crafted plan that is unprofessionally put together will send a strong message to readers about your professionalism and your standards. Your cover page must have all pertinent information, your executive summary must convince readers that your entire business plan is worth looking at, and your table of contents must make it easy for readers to navigate through your plan.

• Cover Page
• Executive Summary
• Table of Contents

II. Business Description

Whether you're looking for money or simply creating an internal document, you must be able to present a clear portrait of what your company does. Your business description is your corporate vision, and includes: who you are, what you will offer, what market needs you will address, and why your business idea is viable.

Too many business owners make the mistake of operating without a vision; a situation, which hampers their business' ability to grow and prosper. A business owner without a vision will have difficulty describing his or her business and will provide a long, rambling description, a few stock phrases, or a collection of incomprehensible jargon when asked for one. A concise, easy-to-understand description of your company will not only help your business plan, but will benefit you in any number of other day-to-day situations - from networking to making cold calls to approaching a newspaper for an interview. A typical business description section includes:

• An overview of your industry
• A discussion of your company
• Descriptions of your products/services
• Your positioning
• Your pricing strategy

III. The Market

This section is designed to provide enough facts to convince an investor, potential partner or other reader that your business has enough customers in a growing industry, and can garner sales despite the competition. It is one of the most important parts of the plan, taking into account current market size and trends, and may require extensive research. Many of the sections that follow - from manufacturing to marketing to the amount of money you need - will be based on the sales estimates you create here.

• Customers
• Market Size and Trends
• Competition
• Estimated Sales

IV. Development and Production

In this section you will describe the current state of your product or service and your plan for completing its development. This is also where you familiarize your reader with how your product is created or your service delivered.

This section must include details of development costs, location and labor requirements. After furnishing this information, you will be asked to generate some financial forms, including operating expenses, cost of goods, and cash flow.

• Development Status
• Production Process
• Cost of Development
• Labor Requirements
• Expenses and Capital Requirements

V. Sales and Marketing

This section of your business plan describes both the strategy and tactics you will use to get customers to buy your products or services. Sales and marketing is the weak link in many business plans, so take your time with this section. A strong sales and marketing section can serve as a roadmap for you, or as assurance to potential investors that you have a workable plan and the resources for promoting and selling your products and services. The three components of your sales and marketing section include:

• Strategy
• Method of Sales
• Advertising and Promotion

VI. Management

A good management team can take even a mediocre idea and make it fly. In fact, strong entrepreneurial teams have been known to move from business idea to business idea, repeatedly creating and running thriving companies. Conversely, weak management often cannot build a strong business out of even the best idea. For this reason, the management section of your business plan must demonstrate that the team you have assembled, or will assemble, is a winner. Each member of management must of course be talented and have experience relevant to your business, but it is also important that the people on your team have complementary skills.

• Description
• Ownership
• Board of Directors/Board of Advisors
• Support Services

VII. Financials

Financials are used to document, justify, and convince. This is the section in which you make your case in words and back up what you say with financial statements and forms that document the viability of your business and its soundness as an investment. It's also where you indicate that you have evaluated the risks associated with your venture. If you are writing a plan for investors, include the following sections:

• Risks
• Cash Flow Statement
• Balance Sheet
• Income Statement
• Funding Request and Return

Even if your plan will be used only as a road map for your business development, you still should create a cash flow statement and an income statement so you have figures by which you can gauge your company's performance.