How Business Plans Work

If you want your product or service to reach a broad audience and really sell, you've got some thinking to do. See more business and corporation pictures.


­So, you've decided to start your own business! You've weighed the risks and decided it fits your life goals and will be challenging and hopefully rewarding. Whether you're starting from scratch or buying a franchise, a lot of thought and planning needs to go into it before you can hope to ­make it successful. One very necessary tool that can help you cover all of the bases before you take the plunge and leave that reliable bi-weekly pay check, is a business plan. Even if you're not seeking investors in your business, you need to invest the time and effort involved in writing a business plan. While business plans are certainly a requirement for new businesses seeking outside funding, they are also a terrific way to map out your strategy. Think of the business plan as a roadmap. The road map not only lets you see exactly where you are, but where you're going to be, and what you may see along the way. While it may not be heavy on the details, it is definitely a necessity if you want to get to where you are going!


­In t­his article, we'll look at how to put together a business plan that can help you lay the foundation for your business, improve your chances of being successful, and generate enthusiasm and excitement about the business whether it's being written for those funding it, or for yourself. We'll answer your questions about what has to be covered in the plan, how to do research, how to make realistic projections, how to set milestones, and hopefully answer the hundreds of other questions that will pop into your head as you begin the planning process.

That planning process, by the way, is part of what makes putting together a business plan so important. The act of thinking about everything that must go into the plan will force you to think through the logistics of your business venture, and perhaps even come up with some ideas you hadn't considered before! You may even end up using many of the "selling words" you come up with for your business plan in your marketing efforts.





A Few Guidelines

Where to Start

The plan you write will set the scene for your business. You'll set concrete goals that include deadlines, think through your HR organizational scheme and assign responsibilities, as well as describe the business and make your financial projections. One thing to keep in mind before you begin, however, is to set realistic goals. Don't set yourself up for failure before you even leave the gate! Also, make sure your plan is results-oriented. In other words, your plan should influence opinions (even if only your own) about your business and its future. So with that in mind, let's get started.

Pre-Plan Planning

Because all businesses are different, and business plans are written for different reasons, the first thing to think about is whom you are writing for. If you are planning on using the plan to get funding then remember that as you write, being sure to get the business's most important message across immediately. Also, if you're approaching lenders rather than equity investors your projected profits won't be nearly as important. (They often associate high projections with high risk!) Know your objectives and strategies before you tackle the business plan. Remember, your objectives should be specific, concrete, and measurable; and your strategies should clearly explain how you're going to meet your objectives. Finally, keep it clear and concise, and ideally no more than 15-30 pages with attachments. Just remember KISS (keep it short and simple). Once complete, the business plan is something you should refer to often and update and change frequently to meet the changing environment of your business.


Plan Elements

Your plan should include information that falls into these categories:

  1. Your Product/The Business
  2. The Market
  3. Financials
  4. Your Management Team

If you're reviewing many of the business resources available, you'll quickly notice that every business plan outline will be slightly different. Just make sure you cover these basic categories, include an executive summary, and then add other sections that seem necessary for both the audience of your plan and your own personal use.

As we cover the steps in writing a business plan, we'll also write a plan a for a fictitious PDA software company. Watch for links to the fictitious plan at the end of each section. Now, let's go over the Executive Summary.


The Executive Summary

Usually, the first section of a business plan is the Executive Summary. This summary is often the most important part of your plan if you are seeking funding (and sometimes even if you aren't) because it provides a quick overview of everything else in the plan. Often this summary is the only chance your plan gets when it's in a stack with hundreds of other plans vying for the same investor's attention.

Although it comes first in the business plan, the executive summary is usually written last, after you have ironed out all of the details of your plan. So, once you have the meat of your plan written, come back to this section and write your executive summary.


The executive summary should briefly cover:

  • Statement of purpose -- The objectives of the plan... (i.e., to raise money, act as a policy guide, etc.)
  • Company background
  • The company's product or service
  • Strategy overview -- Why the product or service is unique
  • The market potential -- Research findings
  • Financial projections for at least 3 years into the future
  • The qualifications of the management team
  • Finance requirements -- How you plan on spending raised capital

Make sure you state in the summary why your business will succeed. You can also include your mission statement in your introductory/executive summary.


The Business Profile

Legal Structure

Briefly explain the legal structure of your company. Is it a proprietorship, a partnership, a corporation or any of the other variations of these models?

Business/Concept Summary

Give your reader the "Big Picture" in this section. Explain the business opportunity you've seen in the current market. Give an overview of the industry and explain why your business is unique, as well as why it will succeed. Describe your product or service in a non-technical way, focusing on what you are doing that will make your product stand out in the marketplace. For example, you may have noticed your competition's products do not meet the needs of certain markets, so your strategy is to create a product that does meet those needs in order to reach those untapped markets and gain a stronger competitive advantage. Make sure you make this type of strategy pop out in this section.


Describe both the present industry scene, as well as future projections. If you find that you can't describe your business clearly and simply, then you probably have not thought it through. If this is the case, stop where you are and take the time to mull through all aspects of your business idea from start to finish until you've boiled it down to its essence.

Current Situation

Explain where you are with your business right now. For startups this should be a short explanation that simply states whether you have a product, or simply an idea, and the stage you are at in its development. For existing businesses, this means explaining your background, current sales levels, and standing in the market.


List the objectives of your company. For instance, do you want to become one of the top ten companies in your industry within the next four years? Do you want to have a staff of ten within the next two years? Do you want to gross $XX by year five. Do you want a positive return on investment by the end of the second year? Keep them specific and measurable.


The Market

Determining the size of your market is much easier today than it was 10-15 years ago. If you have a personal computer and Internet access you're halfway there. You can access quite a bit of secondary research data via the Internet. (It is helpful to know the Standard Industrial Classification of your business (or your target market) when searching these databases.)You may also have to do some of your own primary research to get a better feel for your market's likes and dislikes. Don't forget to check with your product or service industry's trade associations. Many trade associations actively monitor the market, tracking industry sales, projections and trends. There are also many other sites that provide industry demographic information and market analyses. (See the related HowStuffWorks article on "How to Conduct Market Research.")

Once you've done your research, pull all of the raw material into a clear description of the current market, your target audience, your competition, and how your product is going to jump onto this big roller coaster. Make sure you're answering these questions:


  • How big is the potential market?
  • Is the market growing, flat, or shrinking? What changes do you see happening?
  • Is the market segmented either by pricing, quality, age, income, or product usage?
  • Who is your target audience?
  • Who are your competitors?

In the next few sections, we'll discuss each of the questions.


The Market: Analysis & Segmentation

Market Analysis

In the first section of the Market Analysis, define your market using concrete numbers and percentages. In other words, how many potential users are there for your product or service? If you are offering a regional service and have found that there are 80,000 potential customers in your geographic area, then this is where you put that information. Explain the growth and other changes you see in the market and how the competition is flailing, failing or flourishing as a result. Include some market history if it applies to your product and market. You may not be able to go back three years because the market didn't exist! Refer to the statistics and data you've discovered through your market research and be sure to quote the source and date. You can also include information about outside influences on the market (i.e., government regulations, union activities, etc.), seasonality of the market, and the typical industry life cycle.


Your market may be segmented by price, quality, region, customer age, income, buying behavior, industry or anything else. Determine what those segments are and describe the ones you are going to target. By focusing on specific segments you'll have a better chance of success. Remember it's hard to be all things to all people. Keep in mind that your product will probably also cross into several market segments. Remember to address each segment in your marketing planning.



The Market: Strengths & Weaknesses


It's a jungle out there. What is your edge? Expound on your strengths and any elements of your strategy that will give your product a better chance in the market. For startups, this is a section where you really need to have done your homework. If you're an existing business and already have a foothold on a part of the market then this is the section where you can boast! Explain the particulars of your business that have gotten you where you are, such as your marketing plan, exceptional customer service, or your introduction of new, innovative products.


Now for the flip side, as hard as it may be, describe the weaknesses your company may have in the market. This may be as fixable as not having enough sales staff, or not having a company web site. Also note any weaknesses inherent to the market itself. This may not be as easily "fixed" but keep in mind that your competition must deal with it as well. Also remember to note any possible threats to your product such as regulatory issues, or environmental concerns.



The Market: Target & Competition

Target Audience

Determining the right target audience is probably the most important part of your marketing efforts, because it doesn't matter what you're saying if you're not saying it to the right people! In this section of your business plan, go into as much detail as possible about who your market is. At a minimum, you should describe your typical customer. What is the age group, gender, family size, income, and geographic location. For business-to-business markets make sure you include the industry type (or SIC), company size, job titles/departments, annual revenue, and geographic areas. Include as much additional demographic and psychographic information as you can dig up, such as what their spending patterns are, whether they are brand conscious when it comes to your product type, what influences their buying behavior, what promotional efforts do they respond to most often, etc, etc.

Embarking on a journey into your target audience's brain, also known as psychographics is often key to your marketing efforts and will be demonstrated in more detail in our Marketing Plan Workshop.


Just as with all of the other sections of your business plan, there is no absolute for organizing your plan. Organize the market analysis section in the way that seems most logical and will best illustrate your product's market.

The Competition

Give a complete and thorough overview of the competitive market. Who are the heavy hitters? What are their strengths and weaknesses? Identify the differences between your product offerings and theirs. What is their pricing structure? Sometimes your suppliers are good sources of information about your competition. Visit your competitors' locations, Web sites, exhibit booths, etc. Information is often the key to a strong competitive advantage.



Look back at your objectives from the Business/Concept section. How are you going to achieve them? This is the section of your business plan where you can really get down to the meat and potatoes of how you are going to make those goals and objectives a reality.

For each goal, assign a strategy. For each strategy, describe your tactics -- how you will implement the steps to reach it. Finally, identify the details such as the milestones and specific activities that will help make it succeed.


For example, if your goal is to take 20% of the market within the first two years of operation, then your strategy might be to offer the most stress-free buying experience for your customers. Your tactics could include setting up a 24/7 customer service hotline, and offering an unconditional satisfaction guarantee. The specific steps and milestones of this plan could include week-long, customer-oriented training sessions for your sales staff, establishing a live Web site help desk, paying the return postage for customers who were unsatisfied with your product, and conducting customer surveys to determine and improve satisfaction levels.

In the following sections, we'll discuss the two main strategy areas: marketing and sales.


Strategies: Marketing

When it comes to identifying your marketing strategies, think about how you are going make your product stand out from the pack. If you have a product that no one else offers, your job is not so difficult. If you don't then you have a little more work ahead of you. Find (or create) your competitive edge. What is your Unique Selling Advantage? If your product does what the others do but you can offer it cheaper then you're on to something. If your product is packed with features that the others don't offer then you're also on to something. Whatever it is, find the differences in your product or service and capitalize on them.

One method for brainstorming is to put yourself in your customers' shoes! Walk the walk and talk the talk. Ask yourself why you buy one product over another. What media do you really pay attention to? All these thought processes will help you nail down the best strategies for getting your products into your potential customers' hands.


In this section, present an overview of your strategies and then move into how you are going to position your product, how you will price it, and how you plan to promote and distribute it.

How you position your product is how you want your target market to perceive it in the marketplace. Is it the premier product for business executives, or is it a less expensive alternative to the "big guy's" product? Do you want your product to be seen as an investment or an expense? Put into words the ideas you came up with while "walking the walk" above. According to David Ogilvy, founder of an extremely successful advertising agency, positioning is the most important aspect of your marketing efforts. You have to find your niche.

Also explain how you price your product in this section. Start with how your main competitors price their products. Is your product better (be objective!), or just comparable to theirs? Have you done any research into what people would pay for your product? Get as much competitive pricing information as possible and combine that information with a feature comparison. If your product is obviously better (be objective!) then you can probably price it at or above your established competitors' prices. If it isn't then you probably should lower your price in order to get a share of the market. Pricing increases can come later once you have a good hold on a piece of the market.

Once you've established your product's position and pricing, move into the exciting world of promotion and advertising. This should cover every avenue you'll travel in getting the word out about your business and your products or services, from free promotion via press releases, to trade shows, to million dollar TV ad campaigns. Your promotions should always have specific goals. For example, are you trying to build brand awareness, make immediate sales, promote a special event, or simply generate interest and leads?

Once you have goals set, build on the information you've already assembled about your target market and your marketing strategies, and once again, get into your prospects' heads. What media do they use? What are their buying habits? Where would your advertising dollars be best spent? What are their interests? How can you use that information to sell your product or otherwise meet the goals you've just set?

For example, let's use a Brady Bunch illustration and say we are in the business of selling cars -- specifically cars with a high passenger capacity. If the Brady's fall into our Target Audience, we know that our audience watches little TV, reads the newspaper, tends to make decisions as a family (so getting the attention of the kids is key), and likes to travel by car on long trips out west. Therefore, our advertising and promotions would probably work best in print -- specifically newspaper -- and our sales literature and other tactics need to be designed with kids in mind.

Now, that example is definitely oversimplified, but you should get the idea of what you have to think about. Basically you have to decide, based on your audience's habits:

  1. what your advertising message should be,
  2. how you need to say it,
  3. and where you need to say it.

In the promotions section of business plan, briefly explain the what, how and where listed above. The "where" part of those questions is called your advertising mix and is sometimes the easiest of the three to determine. This section doesn't always have to be that detailed. In other words, you don't have go into exactly what your advertising themes will be unless you feel they are key to your business's success. Save those details for your marketing plan.

Next discuss how your product will be distributed. Will you go through retail chains, online sales, direct sales, etc? Describe the standard distribution channels for your industry, and explain the strengths and weaknesses of each method. Is one channel better from a financial standpoint, but not from a customer service standpoint? Will you have a network of distributors? There are several options for distribution channels including retail outlets (either your own or an existing chain), wholesale outlets, sales force, telemarketing, cybermarketing, or direct marketing on TV and cable shopping channels.


Strategies: Sales

Your sales should go into detail about how the sales transaction will actually take place. What steps do your sales reps go through to actually close the sale. What is their commission structure? What are their incentives to sell? How much are they involved in the actual delivery of the product or service? What is their role after the sale? Are they divided into territories based on geographic regions, product lines, or something else? What is the organization of your sales department and how will that specific way of organizing and compensating put you ahead of your competition?

Sales Forecasts

When it comes down to it your sales forecasts may be only slightly more scientific than throwing darts at numbers on the wall. Use your instincts, what you know about your market, the experience of your sales team, and the strength of your marketing program to come up with an educated guess for your sales forecasts. If you have set sales goal for your sales team already then it may make sense to base your projections on the percentage of that goal that you feel will be achieved by each rep. Estimate sales figures for each rep on a monthly basis and you should have a good starting point for your projections.

Strategic Alliances

Do you see opportunities for strategic alliances with non-competing companies? These types of strategies can be very beneficial for startups. Make sure your agreement is well thought-out and your company is not getting the short end of the stick.

View Strategies for PDAware.

Management Structure: Staff Positions and Management Section

The first thing many investors may look at in your plan is the management structure. If you're not looking for investors, this section will still help you plan your organization's structure and help you make sure you have the skill sets you need to succeed. Investors want to make sure you have the necessary resources to properly plan, organize, control and lead your business. They will look for weaknesses in your management team's experience, so before they can do that you should do it. Assuming you already have your technical staff in place, set up a management team that has good experience and track records in marketing, finance and operations. It can make the difference in whether your business plan works or doesn't work. In fact, 98% of small business's that fail do so because of weaknesses in their management staff.

Minimum Staff Positions

The staff you'll need to run your business will really depend a lot on the type and size of your business, and the scope of what you are offering. As a general guideline you'll need:

  • Technical staff to develop and build your product or service
  • Staff who can manage your finances
  • Staff who can market your product
  • Staff who can oversee your operations
  • Administrative staff

Writing the Management Section

Start with a summary of your overall management philosophy. Identify your company founders and board of directors. Answer the obvious questions such as how many employees you will have over given periods of time, how many of those will be managers, what their experience and credentials need to be, etc.

For the key players you already have in place, provide summaries of their resumes highlighting pertinent experience and achievements, salary levels, and their areas of responsibility. For positions you are still trying to fill, summarize your minimum requirements for likely candidates along with the responsibilities of those positions. Or, contract those positions out to professionals who specialize in the area you need. You may find that contracting work out is the best solution initially anyway. Be sure you include the credentials and track records of your contracted help. Also, remember to include time tables for hiring additional staff.

Include a section on outside support, such as your CPA, your attorney, your banker, and your insurance broker. Also include any other outside resources such as your board of directors or management consultants.

Look at your management plan critically and search for weaknesses in your organization Spell those weaknesses out here, and identify your plans to address them. Even if you don't see the weaknesses, it is very likely that your potential investors will.

Management Structure: Org Chart, Staffing Costs & Facilities

The Org Chart

Set up an organizational chart. Having a visual illustration makes it easier for both you and your readers to understand the organization and see any possible gaps.

Staffing Costs

Include either a table or a description identifying your personnel costs. These costs are also used in your profit and loss statement described in the previous session. You can either break it down by individual, or department. Include the title, department or group salary level and then in a separate line add 15%-20% to cover employee benefits, taxes, etc. (also referred to as your Payroll Burden.) Extend this table to cover then next 2-3 years.


You can also cover your facility information in this section. Describe the type of space your business requires, the costs and lease length and terms, your time table for moving to larger facilities, and any other pertinent information.


These are the basic areas that need to be covered in your management section, but there is additional information you can include if you think it would help an investor make the decision to fund your plan. For example, if a large part of your strategy is to gain market share based on excellent customer service, then you may want to include a section about your Customer Service plan. Or, if you are starting a business in an industry that has notorious difficulty's keeping technical staff, then you may want to include your Human Resources and Benefits plan to layout your strategy for getting and keeping top talent.

Other Things to Think About

Some other things you should keep in mind when writing this section include:

  • Do any of your staff members have non-compete agreements they are bound to? Are there any other limitations that should be considered?
  • Do your outside resources have experience in your particular industry?
  • Do your outside resources or your existing management staff have experience with startups?
  • Do you have stockholders, and if so will they have any say so in management decisions?
  • What role will your investors play?

Financials: Financial Plan & Needs Summary

If you're seeking funding for your business venture, you have two options. You can go to banks and other lending institutions and seek a business loan, or you can go in search of venture capitalists. Which source you choose, will depend on the amount of funding you need. And the type of funding you need will dictate how your plan (especially the financial section) is written. In other words, investors will want to know how they are going to profit from this investment down the road, while lenders will want to see how you will be repaying their loan.

Regardless of the funder, you'll need solid financial projections that cover all of the bases. Your business plan's Financial Plan is critical. For many, the financial portion of your business plan is its heart. If you think about it, why else are you going into business? To fill a need you saw in the market? Yeah, maybe, but most likely what you're really after is making money! And, your potential investors or lenders are reading your plan to see when (or if) you're going to make that money. So the financials of your plan can certainly be referred to as the heart, the meat, the big enchilada -- insert your own mega metaphor here.

What makes up the heart of your business plan is the profit and loss (or income) statement, the balance sheet, and a cash-flow statement. If your business is a startup, these will all be projections, or pro forma statements. If you're writing this for an existing business, then these statements will reflect your past business history and current financial situation. Break your financials down into monthly projections for the first two years and then move to annual projections. Since this is a very critical part of your business plan, make sure you follow Generally Accepted Accounting Standards, and that your financial statements are all prepared correctly. It may be well worth the expense to enlist the help of an accountant to prepare them, or at the very least to review them. If you do have an accountant prepare your financials for your company, make sure you completely understand the process and what the terms and figures mean. Potential investors often feel more comfortable investing in a company whose owners have shown a good understanding of the financial aspects of the business.

Financial Needs Summary

Before you throw numbers and spread sheets at your readers, summarize your financial needs. If you are seeking investors, this is where you will indicate how much cash you need to begin operations. Then describe how these funds will be used. How much will have to be spent on computer equipment, office furniture, etc? You can break these down into "operating projections" or "capital needs" or whatever makes the most sense based on your needs and what you are seeking. Also, remember to have documentation to back up this information.

Financials: Revenue Model, Assumptions and Comments

Depending upon your business, you may also want to include a section describing your revenue model. This should describe the various revenue streams your business will be putting in place and how each will bring in money. If you've come up with a unique revenue stream then be sure to describe it clearly. (You may also want to make sure you have confidentiality forms signed.)

When writing your assumptions, you are essentially setting the scene for what is about to follow. Explain the techniques you came up with to arrive at the information in your financial statements. For instance, you may want to state that all sales and purchases are assumed to be cash based, certain inventory levels are maintained and paid for on specific terms, your sales commissions are based on x% of sales totals, etc. You can also include information about the general climate of your industry. This can be a bulleted list of short statements, or written in paragraph form.

For your own internal use, it is helpful to put together an assumptions spreadsheet that lists individual salaries (including costs of benefits), marketing expenses, other known budgeted business expenses, as well as revenue projections. This spreadsheet can help you identify when your expenses are going to peak due to marketing activity and planned hiring schedules.

Financials: Profit & Loss Statement

Your profit and loss statement (also referred to as an income statement) lists your revenues and expenses, and tells you the profit or loss of your business for a given period of time. It is helpful for planning and to help control operations expenses. List monthly projections for the first year and include the following information:

  • Sales Projections - Include the number of units sold, the retail price, the net price and the gross revenue.
  • Cost of Goods - Include your cost for manufacturing a single unit including labor and all other indirect costs such as shipping, packaging, etc.
  • Controllable Expenses - This includes salaries and payroll expenses (benefits, etc.), legal and accounting expenses, advertising and marketing expenses, auto expenses, office supplies, utilities, repair and maintenance, and other outside services. Anything that fluctuates in cost from month to month.
  • Fixed Expenses - These include office rent, depreciation (amortization of capital assets), loan payments, insurance, licenses and permits, and other fixed monthly expenses.

Once you have these items listed, subtract your total expenses from your gross profit to get your Net Profit (or Loss) before taxes.

Enter your tax information and be sure you include all taxes such as sales tax, excise tax, property tax, etc. To arrive at your Net Profit (or loss) after taxes, take the total tax figure and subtract it from your Net Profit (or Loss) before taxes. (See sample Profit and Loss Statement.)

Financials: Cash Flow Statement

Your cash flow statement shows the amounts of cash needed to go out over a period of time, as well as cash that is coming in. It is very helpful for planning for large purchases, or to help be prepared for slow periods in the business. In simple terms, your Cash Flow equals your cash receipts minus your cash disbursements. What's left over is your Net Cash Flow, and when you add that to your beginning balance (before any receipts) you get your Cumulative Cash Flow. As a startup, when you complete your Cash Flow Projection, may want to include two columns for each month - one for your projections, and one for your actuals. The content of the statement consists of:

  • Cash Receipts - include all sources of cash inflow such as cash sales, collections from credit sales, loans, etc.
  • Cash Distributions - include all of your fixed and controllable expenses.
  • A summary of your current cash position - begin with your opening balance, add your cash receipts, subtract your cash distributions, and you're left with your new balance.

You may also need to add notes to your Cash Flow Statements identifying certain cash terms, other sources of income, and explaining changes in your monthly distributions.

(See sample Cash Flow Statement.)

Financials: Balance Sheet

Your balance sheet gives a bird's eye view of your financial situation (or projection) at a given date in time. You'll typically create a balance sheet for the last day of your fiscal year. It includes your assets and liabilities and tells you your business's net worth. As a startup, this will of course be speculative and based on your own assumptions. Unlike the other financial statements, the balance sheet should follow a strict format and include standard information in a specific order because it is used for analysis and comparison. You can define your categories to more closely fit your business, but don't stray from the order.

Start with your Assets. These should include:

  • Current assets - such as cash from all accounts and accessible sources (stocks, bonds, CDs, etc.), and resources that you can convert to cash within one year, all accounts receivables, all inventories (include any materials used for production), and any prepaid expenses such as insurance premiums, and supplies. (NOTE: To come up with a realistic estimate of your accounts receivable, you might estimate that you'll still be waiting to receive payment for 30% of sales two months prior to that date, 60% of sales one month prior, and all of sales of the given month of your balance sheet.)
  • Fixed assets - items that have an expected useful business life that can be measured in longer periods of time such as land, equipment, buildings, vehicles, and furniture.
  • Long-term investments and other assets - these include intangible assets such as copyrights, patents, and stocks or bonds that the company intends to keep for more than one year.

Liabilities should include:

  • Current liabilities - all of your payables including accounts payable, notes payable, taxes, payroll expenses, interest on borrowed capital, and any other payment obligations for the current year.
  • Long-term liabilities - include all notes payable such as mortgages, contract payments, etc. that are due over a period greater than one year.

Next comes Net Worth which is the owner's equity and is simply the total liabilities subtracted from the total assets.

Finally, add the total liabilities to the net worth to get to your bottom line. (See sample Balance Sheet.)

Again, it would be wise to have an accountant either prepare or review these statements to ensure that they are prepared correctly and accurately.

View Financials for PDAware.

Other Plan Elements

Milestones/Implementation Schedule

It is often helpful to set up a time table of milestones for tracking and measuring your business's progress. This can be done in each section that would require it, or set up as a separate table in it's own section. Remember that knowing your milestones is helpful for you as you run your business.

Research and Development

You can also include a section detailing your strategies for introducing new products and services. A full scale R&D department isn't a requirement for this, just your technique for conducting your research and making your plans for product development. For example, if you offer consulting services based on government agency activities, part of your R&D activities might be to get all of the publications that agency puts out, make personal contacts within the agency, and attend all public functions the agency offers - all in order to stay on top of their activities and be prepared to offer new services to meet new regulations and requirements.

Exit Strategy

As hard as it may be to admit it, and as hard as it may be to think about, you need to have an idea of what you will do if your business fails, or for whatever other reason you need to close the doors. This could be simply that you're ready to retire (good for you!), you're tired of the long hours, you've lost some key people, or it's just not working. Whatever happens, you should have an idea of how you will handle disassembling your business. Your potential investors will also be interested in this section because they want to know how they will get their money back!

Some possible scenarios...

  • Initial Public Offering (IPO)
  • Selling/Acquisition by a larger company
  • Passing it on to your children
  • Liquidating your assets
  • Bankruptcy

Whatever the plan of action is, take some time in your plan to go over the most likely outcomes and strategies for removing yourself from the business, or closing the doors.

Putting it All Together

So now you've written the plan, put together your financials, mulled it over and over in your head until you just can't mull anymore! You next job is to get the plan put into a visually appealing and easy to read format. It sounds like a no-brainer, but you'd be surprised how many plans don't get selected just because they aren't laid out very well and don't make the information easy to find. (Or, how many get tubed because there isn't a phone number on the front to call the business!)

Rule number one: Make it visually attractive and easy to read!

Rule number two: Don't make your readers have to work to find something or understand what you're saying.

OK. I know there should now be rules number three through whatever, but from here on we just have some simple guidelines for you. First off is your Cover Sheet. Make sure you include at a minimum the company name and the title of the document (yes, actually call it a "business plan"), include the addresses and telephone numbers of the business or the principals, and include the name of the person who wrote the plan (in other words, you!). Include a Table of Contents that is detailed enough to allow the reader to find specific information easily, but not so long that it becomes confusing. Sure, that's easy for us to say! Just include your headers, sub-headers and appendix information.

Formatting the Document Sections

The key here is consistency. Above all else maintain the same format for each section change. Setting up a style sheet will make it easier to maintain consistent spacing before and after headers, maintain consistent font face and size, etc. Your word processing program probably has these capabilities, so if you're not familiar with style sheets check your software user's guide. Also check for pre-set templates that your software may have come with. There may be a format that will work nicely for your business plan and has all of the styles pre-set. (Or wing it and just try to keep up with the text styles as you go along!) See HSW Business Plan Template.


  • Make your headers large enough that they stand out as major category changes. It also helps to have your major categories begin a new page unless your plan is very short and these sections are all less than one page in length.
  • Set up your sub-heads so that they are obviously a part of the same category and easily identify topic changes.
  • Use bullet points wherever you can. They are usually easier to read than a paragraph of text.
  • Include charts and graphs anywhere that they will make it easier to understand the information. Include color for your charts and graphs if you can.
  • Make sure your plan is bound in a way that will withstand handling. The last thing you want is your plan to fall apart in a potential investor's hands! (Would that be a reflection of the chances your business will have in holding together! Nah!) Spiral binding makes it easier to flip pages and lay the document down flat on a desk.
  • Make sure all of your claims are documented and include reference information.
  • Proof, proof, proof! Read it over several times yourself, but also have a friend or business associate proof it. When you've written something yourself, your eyes will often skip over mistakes because you already know what you're reading. It's easy to miss mistakes in your own work!
  • Do whatever you have to do to make it easier on the reader!


­Corporation: An organization formed under specific state statutes in order to separate (usually financially) the organization from those running it.

Demographics: Objective population characteristics such as geographic areas, sex, age, income level, education, family size, dwelling type, and other vital statistics used for market research, and other types of sociological analyses.

Generally Accepted Accounting Standards: The accepted method of preparation for financial documents.

Mission Statement: A business's guiding principles that state what the company's goals are, what their values are, where they are headed. The mission statement defines the company's overall plan in a succinct and interesting manner with a tone reflective of the tone of the business itself.

Partnership: Two or more people associated in order to work together as co-owners of a business.

Primary Research: Specific research conducted for an individual product or service. Research you conduct yourself. Types of primary research include: surveys, focus groups, interviews, etc.

Pro forma (as in Financial Statements): A projection or an estimate of the company's financial situation if certain assumptions are met. A statement based on assumption.

Proprietorship (sole): A business owned by an individual who is liable for all of the company debts.

Psychographics: The values, attitudes, etc. of consumer populations. These include measurements such as the type of lifestyle, self-image, opinions, interests, habits, buying behaviors. Marketers make use this data to develop product promotions that will target very specific groups of people in order to get the highest return.

Secondary Research: Research data drawn from existing databases such as the U.S. Government's Census Data, data from the Department of Labor, and the Bureau of Labor Statistics, etc.

Standard Industrial Classification: [SIC] The Standard Industrial Classific system classifies establishments by their primary type of activity. This system is currently being replaced by the the North American Industry Classification System (NAICS). NAICS was developed jointly by the U.S., Canada, and Mexico to provide new comparability in statistics about business activity across North America. [Source: NAICS]

Trade Shows: A large event at which buyers and sellers gather in a large open facility. Sellers are in 10+ foot booth spaces and display their products or service offerings to potential buyers. Also known as conventions, exhibitions, and conferences.

Unique Selling Advantage: A single, unique advantage used to distinguish one product over another in marketing, sales, and other promotional activities. Typically, USAs (also known as USPs, Unique Selling Propositions) are short and catchy so they can be used in advertising slogans. Think of them as your product's "edge."

Tools, Checklists and Forms



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There are several software packages that can help you put your business plan together. Here is a sampling of them. HowStuffWorks has not reviewed any of these products and offers no endorsement of them. They are provided to help you be aware of what is available.

In addition to software programs, don't forget the Small Business Administration and SCORE (Service Corps of Retired Executives). SCORE works in association with SBA to help advise business startups. Some other helpful sites are: