Preparing a Business Plan
A business plan is simply a written document that describes the future path of a business. A good business plan explains the business concept, summarizes the objectives of the business, identifies the resources (both in terms of money and people) that will be needed by the business, describes how those resources will be obtained, and tells the reader why the business will succeed.
Virtually all sources of financing will want to see your plan, and a substantial part of the lender/investor’s decision on whether or not to finance the business is based on this plan.
There are many substantial benefits to writing a business plan. First and foremost research has shown that 60 percent of businesses that complete a business plan survive two or more years; whereas, 15 percent of businesses without business plans survive two or more years. Your success is largely dependent on how much you understand your business and business sector.
Writing a business plan will force you to think about your business, research some options, recognize opportunities and risks, and test some of your assumptions. As such, it helps you organize your thoughts and your resources. It will help you identify the cash needs of your business. A business plan can be used to raise funding from banks and from investors.
I. Executive Summary. This is an important section of the plan because it provides a concise overview of the complete plan. Often a lender or prospective investor may only read this section and the financial plan. This section should be written last.
II. Business Description. This section provides a description of the type, form, and history of the business. It answers some simple questions such as: Why will this business be successful? What is the growth potential? What is your “competitive advantage”?
III. Industry Analysis. Recent trends in the industry will be elaborated on in this section, as well as various characteristics of firms in the industry such as average firm size, cost structure, typical profit margins, seasonal sales patterns, and other important characteristics. Often you will find an industry outlook or forecast as well.
- Competitive Analysis. This section answers who are your competitors, what are their strengths and weaknesses, and what can you learn from competitors?
- Market Analysis. Define the market (who buys and why?). Describe your customer buying practices. Describe market trends and growth potential.
- Marketing Plan. What are your marketing objectives? How will you position your business in the market? How will you advertise and promote your products services? What is your marketing budget?
VII. Management Plan. Who will manage the business? What qualifications do they have? Describe the strengths/weaknesses of the management team. What legal format will be used? Describe your accounting and record keeping system. What consultants or specialists will you need?
VIII. Operations Plan. Describe your production and/or service delivery methods. Describe your facilities, capital equipment and technology requirements. How many employees will you need? Who are your suppliers and contractors? Identify fixed and variable costs of production/service delivery. Describe your quality control methods.
- Financial Plan. Provide a detailed list of start-up costs. What is your break even volume? Provide proforma (projected) financial statements for the first three years, including an Income Statement, a Cash Flow Statement, and a Balance Sheet. Explain all assumptions used in developing financial projections.
- Milestone Schedule. What is the timeline (key activities and target dates for start-up). Describe key objectives and the schedule for their accomplishment.
- Critical Risks. What potential problems could arise? How likely are they to occur? How do you plan to manage or overcome these problems?
XII. Appendix. This section should include all supporting documentation such as resumes, contracts, advertisements, price quotes, magazine articles, etc. They should be referenced in the text and placed here.
Only you can write your business plan. A business plan is an expression of your ideas and no one can possibly understand your ideas better than you. You could have someone else write your business plan, but then it would not be your business plan. This does not mean that you cannot or should not get help in preparing your business plan. If you need help with the writing, the research, or the financial projections contact Claire Thompson, Kewaunee Co. UW-Extension at 920-388-7136.
Small Business Resource Guide, a publication by Calumet County, Wisconsin
Twenty Questions Before Starting a Business
So you’ve got what it takes to be an entrepreneur? Now, ask yourself these 20 questions to make sure you’re thinking about the right key business decisions:
- Why am I starting a business?
- What kind of business do I want?
- Who is my ideal customer?
- What products or services will my business provide?
- Am I prepared to spend the time and money needed to get my business started?
- What differentiates my business idea and the products or services I will provide from others in the market?
- Where will my business be located?
- How many employees will I need?
- What types of suppliers do I need?
- How much money do I need to get started?
- Will I need to get a loan?
- How soon will it take before my products or services are available?
- How long do I have until I start making a profit?
- Who is my competition?
- How will I price my product compared to my competition?
- How will I set up the legal structure of my business?
- What taxes do I need to pay?
- What kind of insurance do I need?
- How will I manage my business?
- How will I advertise my business?
SBA—US Small Business Administration
Local Government Center
Developing Your Annual Budget Wednesday, June 7 10:30-12:00
About this time each year, local governments throughout the state are beginning to develop and think about next year’s budget. Join this program to learn the requirements of Wisconsin Statutes 60, 61, and 65 and procedures that local governments are subject to in developing their annual budget. Gain not only a good understanding of the policies and rules that apply but also the “how and why” of local government budgets.
Program is offered via teleconference. For registration and cost information, visit lgc.uwex.edu or call 608-262-0810.
University of Wisconsin Extension
Community Development Educator