Loans for Start Up Business

Business Plans

OverviewThe business plan is more than a plan—it is a tool that helps you evaluate your business concept, your product or service, and discusses how to implement your ideas. A business plan is also a tool to obtain investors, lenders, and strategic partners. You can find many resources and opinions on the Internet as well as your local bookstore on how to build an effective business plan. The components of a business plan are detailed below.

The Executive Summary

We recommend writing your plan in two parts. Start by briefly outlining the major selling points of your business. After completing your outline, revisit this section and complete the executive summary. Following this methodology will help you think about the message that you want to put across to investors as you build your business plan.

Include in your executive summary:

• Your mission statement and the market need.
• A brief description of your business, your product or service, and the investment opportunity.
• Any financial requirements.

The Company

In this section, you will describe your company and the nature of your business. Be sure to include:

• A description of the company.
• Short- and long-term goals for your company.
• Your business legal structure: sole proprietorship, partnership, LLC, or corporation.
• The type of operation: retail, wholesale, manufacturing, or service provider.
• What products or services the company offers.
• A description of the opportunity that the company is capitalizing on.
• Such details as the proposed location, offices, and employees.
• The length of time you’ve been in the business (if you’re already operational), the business location, number of employees (if any), and other relevant information.

The Product or Service

In this section, you will describe your product or service.

• Explain your product or service, including photos or diagrams if applicable.
• Describe your business niche in the marketplace. Identify the market need for your product or service and your business solution.
• Describe how your product or service is different from others on the market.
• Indicate if you need a trademark, copyright, or patent. What steps are you using to secure this protection?

The Market

In this section, you will analyze the market for your product.

• Explain the market size and describe its features.
• Explain market trends that affect the market and how you will capitalize from them.
• What are the barriers of entry (if any) in this market? For example: high start-up cost, regulation, or lack of brand recognition?
• If you have been in business, provide actual data supporting your market estimates for your product or service in your industry. Support that information with independent sources.
• If your business is a start-up, find current and projected independent information supporting your product or service revenue estimates and market size.
• Include any potential issues with the market that may affect your estimates such as seasonality, price competition, or low cost of entry and how you plan to compensate for them.

Analyze Your Customer and Competition

In this section, you will describe your prospective customer and analyze the competition.

• Identify your prospective customers, demographics, income levels, preferences, and other customer characteristics.
• Describe the products or services that your potential customer already buys to fulfill the need your business hopes to address.
• Why would customers use your products or services over the ones already existing in the market?
• Who are your direct competitors?
• What is their size? Are you going to compete with them in terms of price, quality, or distribution?
• What are your competitors’ current strategies?

Marketing Strategy

In this section, you will describe your marketing strategy.

• How do you plan to reach your customer? How do you plan to introduce your product or service to the market? Will you use direct marketing? Word-of-mouth? Internet? Advertisements? Be specific and describe not only the strategy, but also where and how you plan to use your marketing initiatives.
• Describe your pricing plan, promotion plan, distribution plan, and customer service plan for your product or service.
• What is your relative position in the marketplace? How does your product compare to others in the market?
• How you will plan a budget and milestones to track your success.

Operating Plan

In this section, you will describe your operating plan.

• Describe how you will deliver the goods or services within specific periods.
• What is the process for product or service delivery?
• How are you going to implement quality control?
• What type of training will employees have?
• What are your business operating hours?

The Management Team

In this section, you will describe your management team.

• Identify your management team. What are their skills, experience, education, and potential contacts?
• Explain the roles of your appointed team members in your company.
• Who is going to be part of your board of directors?
• Do you have advisors? Explain who they are, their role in your company, and their qualifications and experience.

Financial Request (If Looking for Financing)

In this section, you will describe exactly what kind of financing you are seeking.

• What are you looking for—equity, loan, or both? Describe your capital requirements and how are you planning to use the funds.
• If requesting equity, explain the terms for investors—profit potential, exit strategy (how and when are investors going to recuperate their initial investment), and time frame for cash flows.
• If requesting a loan, include the loan repayment schedule. If collateral is part of the deal, what interest rate can be expected?

Financial Projections

In this section, you will describe your financial projections.

• Include profit and loss statements (for three years), a pro-forma balance sheet, and cash flow statements.
• For the cash flow statements, project monthly revenues and costs for the first year and quarterly for years two and three.
• Provide projected income statements for all three years.
• Include a break-even analysis.
• Include a narrative on how the projections and estimates were derived. In particular, how revenue assumptions.
• Verify that the numbers you included in your financial projections match the numbers you wrote into your business plan.

Although we recommend that you write the plan yourself (or do the research and think through the issues if you are not a good writer), there are services that will write the business plan for you. The fee will range from a few hundred to thousands of dollars depending on the quality—this includes the writer’s professional experience and qualifications and the level of detail needed.

There are government-sponsored services that you can use such as the Small Business Development Centers, SCORE (www.score.org), the National Women’s Business Center (www.womensbusinesscenter.org), and others that will review and critique your business plan. These organizations will give you useful insight into how to strengthen your plan.

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