Many entrepreneurs put off writing a business plan, yet if you’ve done your homework and follow some basic guidelines, you can put together a rough draft in a single day. Here’s how.
First, get organized. What is your product or service? Who is your target market? Also, gather information about your industry, including details about consumers, consumption patterns and trends.
Now, you’re ready to start writing. Your plan should consist of six sections.
Executive summary — The first section should be the last page you write. It highlights and condenses key points from each section into a few sentences that tell your business story. Next to the financial data, it is the most important part. Most bankers tell me they review the executive summary, and then turn to the financials if they are interested.
Business description — Keep it brief. Supply the business name, location (physical or online), list of products or services, target market, the law firm that reviews contracts and pictures of the business, floor plan, leasing arrangements, etc.
Management profile — If you are the primary manager, summarize your resume. If you have managers or partners, include their education, employment record, skills and accomplishments. Also highlight business consultants; investors gain confidence from advisers with a proven track record.
A statement about the industry — Discuss major competitors, industry trends, customer demographics, sales sensitivity to economic cycles, what sets you apart and key financial measures in the industry (profit margin).
Marketing plan — Outline the type and location of your business, products or services, describe targeted customers, and explain why customers will buy from you and strategies you will use to attract them.
Financial data — This section requires three documents: a cash flow statement, an income or profit and loss statement, and a balance sheet.
The cash flow statement helps determine a company’s short-term viability and ability to pay bills. It outlines the initial investment (beginning cash), level of sales needed to break even, expected expenses and how much money (if any) is needed from outside sources. The cash flow statement also reflects investments. Ending cash is the money in the bank at the end of the month after expenses have been paid.
In simplest terms, the income statement or P&L represents total sales and expenses for the year. Most information needed to populate this statement comes from the cash flow statement (sales, cost of goods sold, expenses). You may need to obtain depreciation and tax figures from an accountant.
The balance sheet determines how much you’re worth. This is calculated with a basic formula — total assets – liabilities = net worth. Once you’ve completed the cash flow and income statements, the balance sheet mainly requires filling in the blanks. Total assets consist of assets (cash and inventory) plus fixed assets (equipment minus depreciation). Liabilities consist of accounts payable and long-term debt.
By the end of the day, you should have a solid draft. Over the next week or so, fill in missing information. Then share your plan with consultants and advisers to get feedback. Your business plan may evolve significantly. That’s great. Done well, it becomes a living roadmap for success.
Greg Ubert is the founder and president of Crimson Cup Coffee & Tea. Since 1991, Crimson Cup has roasted sustainably sourced specialty and craft coffee in small batches. The company also teaches entrepreneurs to run a successful coffee shop through its coffee franchise alternative program, which includes a coffee shop business plan. Crimson Cup coffee is available through a community of more than 350 independent coffee shops, grocers, colleges and universities, restaurants and food service operations, as well as in the company’s own coffee shops in Columbus.