Writing a business plan

Most business plans are either traditional or lean startups. Each has four key elements of both formats.

Traditional business plans are most commonly used when you’re planning to request financing from traditional sources. They use a standard structure with detailed descriptions in each section, typically require more work upfront and can be several pages long. Lenders and investors commonly request this plan. Traditional formats include:

• Executive summary, company description: Describe what your company is and why it will be successful, including your mission statement, your product or service and basic information about your company’s leadership team, employees and location. Detail the problems your company solves listing consumers, organizations or businesses you plan to serve.
• Organization and management: List the competitive advantages that make your company a success, such as experts on your team or the perfect location for your store. Detail your company’s legal structure and who will run it. State your intent to incorporate your business as a C or an S corporation, form a general or limited partnership, or if you’re a sole proprietor or limited liability company (LLC).
• Market analysis, marketing and sales: You need a good understanding of your target market. Research shows what other businesses are doing and what their strengths are. Look for trends and themes on what successful competitors do, why it works and how you can do better. Describe your complete marketing and sales strategies, how you’ll attract and retain customers and how a sale will happen.
• Funding request and financial projections: Be specific about whether you want debt or equity, the terms you want applied and the time your request will cover. Specify funding needs such as for equipment, salaries or bills until revenue increases. Include forecasted income statements, balance sheets, cash flow statements and capital expenditure budgets using graphs and charts to tell your company’s financial story.

Lean startups create more of a business model and summarize the most important elements of their plan. They can be created quickly and are typically one page. Some lenders and investors may want more information. Lean formats include:

• Key partnerships and activities: Reference the outside businesses or services you’ll work with, noting suppliers, manufacturers, subcontractors and similar strategic partners.
• Key resources and value proposition: Make a compelling statement about the unique value your business brings to the market. List all resources you’ll leverage to create value for your customer including staff, capital or intellectual property.
• Customer relationships, segments and channels: Portray how customers will interact with your company. In person or online? Automated or personal? Since your business won’t be for everyone, it’s important to be specific when you name your target market and list the ways you’ll talk to your clients.
• Cost structures and revenue streams: Whether your company focuses on reducing costs or maximizing value, define your strategy, list the most important costs you’ll face and define how your company will generate income such as direct sales, membership fees or selling advertising space.

Featured image at top: Courtesy of Mimi Thian, Unsplash