Overview
The organization of a Business Plan is very important. I use an eight section plan format that is in a specific order as each section builds from the previous section (note: you may have to jump back and forth on a limited basis between the Products and Services Section and the Marketing Section, as well as, the Strategic Section, depending on the extent of your market and product development to date). There is fluid thought and connected reasoning employed to achieve a Plan that reaches its intended purpose (i.e. to run a business, to buy a business, to enter a Joint Venture, to finance a business, to complete a particular project, etc). Although the Executive Summary is the first section of a Plan, it should be written last. All the other Sections should be developed in a build block order provided in a Business Plan Workbook Process.
A Business Plan is a business document; you are not writing prose. It should contain a precise and concise format and be organized into numbered Sections and Sub-Sections, which contain specific information in short, paragraph form. Plans should be produced in paper form, computer format and online format. Computer Format means the Plan is integrated into the Company's Computer Network. It also means the Table of Content's Sections are hyperlinked so you can easily navigate and access information on the Plan just by clicking on the links.
You should have your Business Plan uploaded securely, online (via login and password access) on your website so that Key Managers, Employees, Sales People, etc can access the information remotely no matter their location. You can have different versions available online for particular purposes, segregated by different logins and passwords. For Example, you can have your Sales Plan accessible remotely so your Salespeople can use it as a sales tool or update it with up to the minute feedback for the Sales Manager and the Marketing Department. Another example would be having your Funding Business Plan accessible online with versions for different audiences: bankers, venture capitalists, angel investors, etc.
Business Plan Sections
1) Table of Contents
The Table of Contents is one of the most important parts of the Plan. The TOC should be very detailed and well organized so that the reader and user can find and access the information easily and quickly. You can write a great Plan with all the necessary information in it, but if the reader can't easily find or access the information, then the Plan ceases to be a useful tool.
The TOC should be organized by each Section and Sub-Sections of the Plan with the corresponding page numbers. It is strongly recommended that your Plan be developed as an outline document, with all the Sections and Sub-Sections in the Table of Contents hyperlinked to the page where the information resides. This way the reader and user can access the information quickly and easily.
2) Section One: Executive Summary
The Executive Summary should be written last. Why? Because it organizes and summarizes the entire Business Plan. You cannot achieve this effectively until all the other sections (2 thru 8) of the Plan are completed. We suggest developing two renditions of the Executive Summary - a short version of 2 - 3 pages in length and a longer version of 5 - 7 pages. The short version should be written after the long version is completed, keying on the most significant information from the long version.
The Executive Summary gives the reader a quick overview of the important facts contained in your Business Plan. The long version of the Executive Summary can act as a standalone document to be used to succinctly explain your Business and generate interest in your opportunity, or products and services. For instance, the long version of the Summary can be sent to a Venture Capital Firm to generate and gauge initial interest, to be accompanied by your one-sheeters: Fact Sheet / Venture Overview / Investment Overview. If interest is indicated, you can send the VC Firm a custom tailored Funding Business Plan (customized to their particular investment requirements) which will contain the short version Executive Summary.
Brevity, yet completeness and inclusiveness, is key when writing your Executive Summary. It should be concise yet have adequate detail about your Business Plan. It may take several attempts to achieve this balance.
3) Section Two: Company Overview
This section encapsulates who you are as a Company: the History, Structure, Ownership, Locations, Products and Services Summary, Strengths and Weaknesses, Performance, Customers, Trends, Company Assets and so forth. This section comes first in the Business Plan (following the Executive Summary) since it serves as an introduction to the necessary details and background of your company.
4) Section Three: Management and Operations
This section builds on the Company Section explaining in more detail who will run the company and how it will be run. You can have the greatest business idea but lack the right people to execute your Plan. Therefore, the Management and Operations Section is one of the most important elements of the Plan.
5) Section Four: Products and Services
Now that you have developed the Company and Management / Operations Sections, it is time to describe your Company's Products and Services in detail. This section identifies why your Product and Service is unique and where weaknesses reside. Customer and Market identification, analysis and segmentation starts in this section to be later developed in the Marketing Plan and implemented through the Strategic Plan.
6) Section Five: Marketing Analysis and Plan
The Marketing Section explains in great detail how your Product and Service will be positioned and distributed in the market, supported by detailed, believable market research. This section deals with your Industry, Market Segments, Target Markets, Market Trends and Growth, General Competitive Environment, Customer Choices and Competitive Analysis / Positioning / Edge, to culminate in your Marketing Strategy and Programs.
7) Section Six: Strategic & Sales Plan
The Strategic Plan puts the Marketing Plan into action, showing how to implement the Marketing Plan into a cohesive and executable Sales Plan. The Strategic Plan develops a system to effectively deal with Potential Problems and Risks and culminates in producing Company Strategies, Tactics and Strategic Programs. These programs are implemented through the developed Sales Programs and Sales Plan. Operating Budgets, Control Mechanisms, Milestones and Sales Forecasts are also integral parts of the Strategic Plan.
The Strategic Plan provides a process for Strategic Management, Auditing and Reassessment. It measures performance, has control functions and corrective actions, reassessing when and where necessary. Strategic Planning is top-down and bottom-up, completely integral to your Company's Operations, from the Vision and Leadership of the CEO, to Management's Implementation Oversight, to the Sales and Operations Units. It provides company-wide Strategic Vision, Focus, Structure and Discipline, while providing an atmosphere of learning and awareness, with a process for identifying deficiencies and, in turn, fixing those challenges.
8 ) Section Seven: Financials
If you develop an effective Strategic Plan through our a well prescribed process, completing the Financial Section will not be as difficult as often anticipated. The principal reason why business owners have such a hard time constructing the Financial Section is most often due to a cursory job on their Strategic Planning Process. Financial Projections are not believable or realistic when the Strategic Plan doesn't do an adequate job of harnessing the Market Plan into an achievable well thought out Company Strategy. Good Financial Forecasting starts with a well developed Product or Service Plan (Section 4), a well researched Market Analysis and resulting Marketing Plan (Section 5) and culminating into a solid Strategic Planning Process (Section 6). This ensures your "best guesses" as to future performance are well researched and developed. This is why it is so critical that you work through a good Business Planning Workbook in a building block order; otherwise, your Financials will be lacking accurate forecasting. The culmination of a good Strategic Planning Process makes for solid Financial Projections.
Probably the most important of all the Financials is the Cash Flow Statement. The Cash Flow will assist you on a daily basis in running your business effectively. Simply put, the Cash Flow shows the influx of cash and the outflow of cash in your Business. Cash Management is absolutely critical in successfully running your business, project or venture. The Cash Flow Statement is also very important when you are seeking funding for your operation and analyzed closely by lenders, investors and venture capitalists alike. Your Cash Flow is also critically important to your relationship with your Suppliers. Having a Supplier Business Plan containing a history and projection of Cash Flow can really help your Suppliers become good partners in managing your cash flow, thereby, enhancing your profitability significantly.
The Cash Flow Statement should be your guiding force in Financial Modeling and Cash Management. Effectively managing your Cash creates leverage, which will lead toward increased profitability. The leverage is created within a Cash Flow Management System as it shows how much cash is necessary to grow and finance your Company. Many businesses focus on the Profit and Loss Statement, which is very important; however, they often over look the Cash Flow Statement. Good financial analysis focuses on the Cash Flow Statement, then relates it to the Profit & Loss components (i.e. minimizing costs), which in turn increases Profitability and results in a stronger asset and equity base on the Balance Sheet. Financials and good Financial Management stem from the inter-connectivity of a Company's Financials. Don't forget how important Cash Flow Management is to your Company's future profitability and net worth.
Another very important Financial, which works hand in hand with the Cash Flow Statement and Cash Management, is your Company's Target and Actual Budget. Budgets are used principally for two purposes: Planning and Control. A Budget matches short term targets with long term Strategic Planning, while providing an indicator of future problems ahead. A good Budgeting System will indicate when Costs and Expenses are heading over Budget (Actual vs. Target), providing the business owner time and opportunity to correct the problem before it significantly affects Cash Flow. Your Budget is an extension of (and a result of) your Cash Flow Statement, helping you to effectively control and plan your operational cash, costs and expenses.
We recommend Rolling Budgets which look forward 12 months on a monthly basis, budgeting an additional three months at the end of each quarter. This way you always have a 12 month continuous outlook for Planning Purposes, yet provides you real time Cost Basis for Control purposes. A Budget should be flexible so that you can separate the effects of variations between Actual and Estimated results. Moreover, a Budget is a tool to evaluate your Business Units (Departments) and Management's Performance. Needless to say, assembling a good Budget requires the input of your entire organization, which in turn, is a very good thing. Just as your Business Plan should be an integral part of your Company's every day operations, so too should your Cash Flow, Cash Management and Budgeting Process be intertwined fully into company operations.
It is important to understand how your Financials relate to each other as you build and develop them. This is why Financial Software Programs are so beneficial, making Financial Analysis, Development and Projections a snap (once you have developed a solid Strategic Plan). There's a lot of back and forth between the Profit and Loss Statement, Balance Sheet and Cash Flow Statement. When using a Financial Software Program, it is important that the program allows you to customize the Formats for your specific needs and download the Financials into Excel Spreadsheets for maximum utility and flexibility.
When making Financial Projections, the projection period differs for the particular company, venture or project. For instance, a large scale Real Estate Development Project's Cash Flow Projection could be three, five or ten years, depending on the project scope and length. Also Real Estate Companies and Projects typically require additional Financials, such as, the Construction Cost Analysis and Cash Flow, Schedule of Real Estate, Construction Cost and Disbursement Schedule, and so on (Note: some of these may be applicable to other business sectors as well- for instance, a Tire Distribution Company may have substantial real estate holdings, hence, a Schedule of Real Estate would apply). Also, for Real Estate Companies and Projects (as well as for companies applying for business finance), the Loan Package is an important aspect of your Business Plan.
A very important component of the Financial Section is the Assumptions sub-section. This details the assumptions you have utilized in developing your financials. It is important to list the various calculations and formulas used in developing your Financials since those formulas can be company, deal or project specific. Detailed assumptions provide transparency to your Financials.
Financial Projections need to be believable and realistic. If anything, they need to be conservative. Too often we also see extremes of too few numbers or too many numbers. Provide best case, worst case and expected Financial Projections, along with simple and detailed formats. Remember that if you build out your Financials as a result of a good Strategic Planning Process, the financial results will most likely be believable and realistic as possible. We find that if your Financials have truly conservative numbers (yet still see profitability), you will often exceed your Plan which becomes a great Psychological boost for your Company (and any lenders or investors).
9) Section Eight: Appendix
The Appendix Section of a business plan can be aptly called the Due Diligence section. It contains the "proof in the pudding". It contains all the Bulky Documents which supply merit and proof to your Business Plan's assertions. Since the Appendix is large in volume, it is important to have a separate Table of Contents with Tabbed Sections for easy reference for this section.
The organization of a Business Plan is very important. I use an eight section plan format that is in a specific order as each section builds from the previous section (note: you may have to jump back and forth on a limited basis between the Products and Services Section and the Marketing Section, as well as, the Strategic Section, depending on the extent of your market and product development to date). There is fluid thought and connected reasoning employed to achieve a Plan that reaches its intended purpose (i.e. to run a business, to buy a business, to enter a Joint Venture, to finance a business, to complete a particular project, etc). Although the Executive Summary is the first section of a Plan, it should be written last. All the other Sections should be developed in a build block order provided in a Business Plan Workbook Process.
A Business Plan is a business document; you are not writing prose. It should contain a precise and concise format and be organized into numbered Sections and Sub-Sections, which contain specific information in short, paragraph form. Plans should be produced in paper form, computer format and online format. Computer Format means the Plan is integrated into the Company's Computer Network. It also means the Table of Content's Sections are hyperlinked so you can easily navigate and access information on the Plan just by clicking on the links.
You should have your Business Plan uploaded securely, online (via login and password access) on your website so that Key Managers, Employees, Sales People, etc can access the information remotely no matter their location. You can have different versions available online for particular purposes, segregated by different logins and passwords. For Example, you can have your Sales Plan accessible remotely so your Salespeople can use it as a sales tool or update it with up to the minute feedback for the Sales Manager and the Marketing Department. Another example would be having your Funding Business Plan accessible online with versions for different audiences: bankers, venture capitalists, angel investors, etc.
Business Plan Sections
1) Table of Contents
The Table of Contents is one of the most important parts of the Plan. The TOC should be very detailed and well organized so that the reader and user can find and access the information easily and quickly. You can write a great Plan with all the necessary information in it, but if the reader can't easily find or access the information, then the Plan ceases to be a useful tool.
The TOC should be organized by each Section and Sub-Sections of the Plan with the corresponding page numbers. It is strongly recommended that your Plan be developed as an outline document, with all the Sections and Sub-Sections in the Table of Contents hyperlinked to the page where the information resides. This way the reader and user can access the information quickly and easily.
2) Section One: Executive Summary
The Executive Summary should be written last. Why? Because it organizes and summarizes the entire Business Plan. You cannot achieve this effectively until all the other sections (2 thru 8) of the Plan are completed. We suggest developing two renditions of the Executive Summary - a short version of 2 - 3 pages in length and a longer version of 5 - 7 pages. The short version should be written after the long version is completed, keying on the most significant information from the long version.
The Executive Summary gives the reader a quick overview of the important facts contained in your Business Plan. The long version of the Executive Summary can act as a standalone document to be used to succinctly explain your Business and generate interest in your opportunity, or products and services. For instance, the long version of the Summary can be sent to a Venture Capital Firm to generate and gauge initial interest, to be accompanied by your one-sheeters: Fact Sheet / Venture Overview / Investment Overview. If interest is indicated, you can send the VC Firm a custom tailored Funding Business Plan (customized to their particular investment requirements) which will contain the short version Executive Summary.
Brevity, yet completeness and inclusiveness, is key when writing your Executive Summary. It should be concise yet have adequate detail about your Business Plan. It may take several attempts to achieve this balance.
3) Section Two: Company Overview
This section encapsulates who you are as a Company: the History, Structure, Ownership, Locations, Products and Services Summary, Strengths and Weaknesses, Performance, Customers, Trends, Company Assets and so forth. This section comes first in the Business Plan (following the Executive Summary) since it serves as an introduction to the necessary details and background of your company.
4) Section Three: Management and Operations
This section builds on the Company Section explaining in more detail who will run the company and how it will be run. You can have the greatest business idea but lack the right people to execute your Plan. Therefore, the Management and Operations Section is one of the most important elements of the Plan.
5) Section Four: Products and Services
Now that you have developed the Company and Management / Operations Sections, it is time to describe your Company's Products and Services in detail. This section identifies why your Product and Service is unique and where weaknesses reside. Customer and Market identification, analysis and segmentation starts in this section to be later developed in the Marketing Plan and implemented through the Strategic Plan.
6) Section Five: Marketing Analysis and Plan
The Marketing Section explains in great detail how your Product and Service will be positioned and distributed in the market, supported by detailed, believable market research. This section deals with your Industry, Market Segments, Target Markets, Market Trends and Growth, General Competitive Environment, Customer Choices and Competitive Analysis / Positioning / Edge, to culminate in your Marketing Strategy and Programs.
7) Section Six: Strategic & Sales Plan
The Strategic Plan puts the Marketing Plan into action, showing how to implement the Marketing Plan into a cohesive and executable Sales Plan. The Strategic Plan develops a system to effectively deal with Potential Problems and Risks and culminates in producing Company Strategies, Tactics and Strategic Programs. These programs are implemented through the developed Sales Programs and Sales Plan. Operating Budgets, Control Mechanisms, Milestones and Sales Forecasts are also integral parts of the Strategic Plan.
The Strategic Plan provides a process for Strategic Management, Auditing and Reassessment. It measures performance, has control functions and corrective actions, reassessing when and where necessary. Strategic Planning is top-down and bottom-up, completely integral to your Company's Operations, from the Vision and Leadership of the CEO, to Management's Implementation Oversight, to the Sales and Operations Units. It provides company-wide Strategic Vision, Focus, Structure and Discipline, while providing an atmosphere of learning and awareness, with a process for identifying deficiencies and, in turn, fixing those challenges.
8 ) Section Seven: Financials
If you develop an effective Strategic Plan through our a well prescribed process, completing the Financial Section will not be as difficult as often anticipated. The principal reason why business owners have such a hard time constructing the Financial Section is most often due to a cursory job on their Strategic Planning Process. Financial Projections are not believable or realistic when the Strategic Plan doesn't do an adequate job of harnessing the Market Plan into an achievable well thought out Company Strategy. Good Financial Forecasting starts with a well developed Product or Service Plan (Section 4), a well researched Market Analysis and resulting Marketing Plan (Section 5) and culminating into a solid Strategic Planning Process (Section 6). This ensures your "best guesses" as to future performance are well researched and developed. This is why it is so critical that you work through a good Business Planning Workbook in a building block order; otherwise, your Financials will be lacking accurate forecasting. The culmination of a good Strategic Planning Process makes for solid Financial Projections.
Probably the most important of all the Financials is the Cash Flow Statement. The Cash Flow will assist you on a daily basis in running your business effectively. Simply put, the Cash Flow shows the influx of cash and the outflow of cash in your Business. Cash Management is absolutely critical in successfully running your business, project or venture. The Cash Flow Statement is also very important when you are seeking funding for your operation and analyzed closely by lenders, investors and venture capitalists alike. Your Cash Flow is also critically important to your relationship with your Suppliers. Having a Supplier Business Plan containing a history and projection of Cash Flow can really help your Suppliers become good partners in managing your cash flow, thereby, enhancing your profitability significantly.
The Cash Flow Statement should be your guiding force in Financial Modeling and Cash Management. Effectively managing your Cash creates leverage, which will lead toward increased profitability. The leverage is created within a Cash Flow Management System as it shows how much cash is necessary to grow and finance your Company. Many businesses focus on the Profit and Loss Statement, which is very important; however, they often over look the Cash Flow Statement. Good financial analysis focuses on the Cash Flow Statement, then relates it to the Profit & Loss components (i.e. minimizing costs), which in turn increases Profitability and results in a stronger asset and equity base on the Balance Sheet. Financials and good Financial Management stem from the inter-connectivity of a Company's Financials. Don't forget how important Cash Flow Management is to your Company's future profitability and net worth.
Another very important Financial, which works hand in hand with the Cash Flow Statement and Cash Management, is your Company's Target and Actual Budget. Budgets are used principally for two purposes: Planning and Control. A Budget matches short term targets with long term Strategic Planning, while providing an indicator of future problems ahead. A good Budgeting System will indicate when Costs and Expenses are heading over Budget (Actual vs. Target), providing the business owner time and opportunity to correct the problem before it significantly affects Cash Flow. Your Budget is an extension of (and a result of) your Cash Flow Statement, helping you to effectively control and plan your operational cash, costs and expenses.
We recommend Rolling Budgets which look forward 12 months on a monthly basis, budgeting an additional three months at the end of each quarter. This way you always have a 12 month continuous outlook for Planning Purposes, yet provides you real time Cost Basis for Control purposes. A Budget should be flexible so that you can separate the effects of variations between Actual and Estimated results. Moreover, a Budget is a tool to evaluate your Business Units (Departments) and Management's Performance. Needless to say, assembling a good Budget requires the input of your entire organization, which in turn, is a very good thing. Just as your Business Plan should be an integral part of your Company's every day operations, so too should your Cash Flow, Cash Management and Budgeting Process be intertwined fully into company operations.
It is important to understand how your Financials relate to each other as you build and develop them. This is why Financial Software Programs are so beneficial, making Financial Analysis, Development and Projections a snap (once you have developed a solid Strategic Plan). There's a lot of back and forth between the Profit and Loss Statement, Balance Sheet and Cash Flow Statement. When using a Financial Software Program, it is important that the program allows you to customize the Formats for your specific needs and download the Financials into Excel Spreadsheets for maximum utility and flexibility.
When making Financial Projections, the projection period differs for the particular company, venture or project. For instance, a large scale Real Estate Development Project's Cash Flow Projection could be three, five or ten years, depending on the project scope and length. Also Real Estate Companies and Projects typically require additional Financials, such as, the Construction Cost Analysis and Cash Flow, Schedule of Real Estate, Construction Cost and Disbursement Schedule, and so on (Note: some of these may be applicable to other business sectors as well- for instance, a Tire Distribution Company may have substantial real estate holdings, hence, a Schedule of Real Estate would apply). Also, for Real Estate Companies and Projects (as well as for companies applying for business finance), the Loan Package is an important aspect of your Business Plan.
A very important component of the Financial Section is the Assumptions sub-section. This details the assumptions you have utilized in developing your financials. It is important to list the various calculations and formulas used in developing your Financials since those formulas can be company, deal or project specific. Detailed assumptions provide transparency to your Financials.
Financial Projections need to be believable and realistic. If anything, they need to be conservative. Too often we also see extremes of too few numbers or too many numbers. Provide best case, worst case and expected Financial Projections, along with simple and detailed formats. Remember that if you build out your Financials as a result of a good Strategic Planning Process, the financial results will most likely be believable and realistic as possible. We find that if your Financials have truly conservative numbers (yet still see profitability), you will often exceed your Plan which becomes a great Psychological boost for your Company (and any lenders or investors).
9) Section Eight: Appendix
The Appendix Section of a business plan can be aptly called the Due Diligence section. It contains the "proof in the pudding". It contains all the Bulky Documents which supply merit and proof to your Business Plan's assertions. Since the Appendix is large in volume, it is important to have a separate Table of Contents with Tabbed Sections for easy reference for this section.
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