What Should a Good Business Plan Contain

[KristineS]

I have to confess, I studied all this stuff in college, but it's been a while. For those who are thinking about creating a business plan, I thought it might be nice to have a refresher course. So, I'm throwing myself on the mercy of the forum. What do you think should be in a business plan?

[huntwriter]

Never made a business plan and to be honest I do not know much about it.
However, commonsense tells me that the plan should contain long term and short term goals, market niche, financing plan, branching out possibilities and promotional options.

[KristineS]

I think market niche is the one that a lot of people forget. Market analysis is so important particularly when you are planning a business.

[orion_joel]

I beleive that what is needed in a business plan can vary greatly depending on what you want from the business and what direction you are looking to take the business.

BUSINESS PLAN FOR YOURSELF

If you are really creating the business plan just to give yourself a good idea of the direction that you are taking and what your ultimate goals are then it is not always about including everything a regular business plan would include. It is more about writing a document that includes the information that you need to know and writing in the way that your mind thinks. For example some people love point by point lists, others like stories, and some like the numbered headings thta are common to formal business plans.

Think about how you normally write and include the information that is relevant to your business which will generally include as a minimum, short, medium and long term goals, define your market (try and keep it to a niche or a limited size market), how you plan to finance the business, if and when you may need staff and anything else you may think is relevant to the business.

A FORMAL BUSINESS PLAN

When creating a formal business plan there are often some expectation's on what will be included, and some key information which may be sought in the plan especially by lenders or investors if you are seeking capital. The outline that i normally operate with when creating a formal business is as follows:

1.0 EXECUTIVE SUMMARY
1.1 OBJECTIVES
1.2 MISSION
1.3 KEYS TO SUCCESS
2.0 COMPANY SUMMARY
2.1 COMPANY OWNERSHIP
2.2 COMPANY FACILITIES AND LOCATIONS
3.0 PRODUCTS AND SERVICES
3.1 PRODUCT AND SERVICE DESCRIPTION
3.2 COMPETITIVE COMPARISION
3.3 SOURCING
3.4 TECHNOLOGY
3.5 FUTURE PRODUCTS AND SERVICES
4.0 MARKET ANALYSIS
4.1 MARKET SEGMENTATION
4.2 MARKET NEEDS
4.3 MARKET TRENDS
4.4 MARKET GROWTH
4.5 INDUSTRY ANALYSIS
5.0 STRATAGY AND IMPLEMENTATION SUMMARY
5.1 VALUE PROPOSITION
5.2 COMPETITIVE EDGE
5.3 MARKETING STRATEGY
5.4 SALES STRATEGY
5.5 STRATEGIC ALLIANCES
6.0 MANAGEMENT SUMMARY
6.1 PERSONNEL PLAN
7.0 FINANCIAL PLAN

That is the basic outline that i use, it is very much open to expansion of area's, or removing some as required, for example and simplicity here, i removed the sub headings i normall use with the marketing and sales strategy to better define some of the area's here. I usually expand with more headings under the financial plan area as well, however these change with different plans i have done.

For businesses with more then just yourself as an employee or that are seeking finance or such it could also be useful to a Succession plan into the business plan to show thought for the future.

[rocketman]

I have always noticed that the biggest problem is that people often do not narrow their business idea down to something manageable. Your product or service should target your key demographic (or early adopters) first and if that doesn't work you know you probably have a lemon right off the bat.

[vangogh]

Joel I followed the outline you posted, but didn't fill in all the sections. I was completely lost about the financial section because I had no idea how to reasonable estimate how much money I might make. I could probably do it now, but then I would have just been making up numbers.

I also never filled out the marketing strategy part (section 5) because I had planned on creating a dedicated marketing plan. I never did get to that marketing plan, but I've been thinking about working on one recently.

@rocketman - I agree. It's easy to do though. Joel and I were talking in another thread about trying to identify our markets and defining them too broadly. I think when people are first starting a business there's a tendency to want to cast as wide a net as possible, not realizing that the wide net leaves too many holes and everyone slips through.

You're right that you need to narrow your market into something more manageable. It's better to stand out in a smaller marketing than to be lost in a large one and the more you refine your market the more you can tailor your products or services to the needs and wants of that market.

[orion_joel]

I have had similar troubles getting through the financial section, and really do agree that it is so much easier when you have some numbers to start with.

However there are some ways to calculate these numbers beforehand depending on the business that you are in. While web based business make it more difficult allround. For things like retail businesses and fixed business that have alot of example's you can look at there is at least a starting point.

I think another large portion of this section basicaly comes down to working out the figures that you are going to be comfortable with, which is more so to do with profit levels nd such. Most of the fixed expenses and can be found out, and the vairable are usually a known percentage of sales. This fianlly leaves you working out the sales as a level to cover exences and make a profit that you are happy with, This means that you are really just setting a goal that you hope to achieve, and it would be hoped that you do know enough about the business that the you can tell if this level is achievable or not.

This is the primary reason i have not gone into a retail business as yet, because i cannot work out if the numbers do really add up that i would be able to make the level of profit that i want to make from it.

[vangogh]

Makes sense. I was thinking some of the financial section is about trying to make reasonable projections and once you do you can see how everything else lines up. Like seeing how much spend is needed if you want to male $X each month.

Once you've been in business for six months or a year it's much easier to make those projects realistic.

[orion_joel]

I think the financial section of my business plan was probably my biggest downfall, i would be constantly altering the financial projections. While some of this was good i was moving the bar higher, it was all based on what i had been making which was all things happening that i was not controlling but the client at that point.

Now in the last six months i have spent probably in excess of 100hours, playing with the numbers on a few different ideas to see if they are profitable ideas or not and that i think is probably just a bit to much time, in respect to what i am really doing.

[vangogh]

I had a feeling I might do the same thing and alter the projections to tell me what I wanted to hear and decided not to bother with that part. I wasn't looking for a loan, I didn't need much capital to get started, and I had every intention of going through with the business regardless so I just worked on the other parts.

The financial projects seem to be more important for some time of businesses than others. If your business is going to call for an outlay of cash then it does make sense to run the numbers to get a better understanding about whether or not an idea is feasible or what will be required in order to turn a profit.