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How to Write a Great Business Plan

The following are recommended components of your business plan, although the order in which you write and present these sections can be subject to change:

• Executive Summary: This is the abstract of your business plan, a summary of everything you will say in greater detail in the ensuing pages. It spells out the content and goals of your plan, hitting all the highlights. This section is key if you are seeking outside funding as it introduces possible investors to your business. Be sure to include background about your company, the market opportunity, your capital requirements, a mission statement, an overview of management, competitors, your business's competitive advantages, and a summary of your financial projections over the next three years. "Some people write the executive summary first, but I would never do that," Pinson says. "I would go through and write my plan first and come back to the executive summary." Keep this to no greater than three or four pages.
• Company Overview: The company overview is designed to provide more information about your business, why and when it was formed, its mission, business model, strategy, and any existing strategic relationships. Pinson recommends including this section as part of an Organizational Plan that also covers administrative issues, such as intellectual property you may own, costs associated with your location, the legal structure of your company, management, personnel, and how you address accounting, legal, insurance, and security matters.
• Business Offering: Here's where you talk about why you're in business and what you're selling, whether it's products and/or services. If you sell products, state whether you are the manufacturer, distributor, and/or retailer or a product and tell about your manufacturing process, availability of materials, how you handle inventory and fulfillment, etc. If you provide services, describe those services. Make sure to address any new product lines or service lines that you expect to enter into in the future.
• Marketing Plan and Analysis: In this section, you spell out your marketing strategy, addressing details of your market analysis, sales, customer service, advertising, and public relations. Many businesses use this space to showcase their vision of why their business will be successful, backing that up with market research that identifies their target market and industry and customer trends. But sometimes small and mid-sized businesses don't have the deep pockets to hire outside firms to undertake exhaustive market research. "A sizeable majority of smaller entrepreneurial companies are going to bet the company on their own sense of the market without the validation of outside research," Berry says. In lieu of research, Berry, who sits on a panel of angel investors, the Willamette Angel Conference, says companies can provide testimonials from existing customers.
• Strategy and Implementation: Every business plan needs details. This section is where many should go. "This is where I'm going to be looking as an investor for dates and deadlines," Berry says. "I'll be looking for things we'll be able to track. When you're going to be able to do the first release, how many visitors are you going to get on the Web, etc." Make sure to include the details in a table called "Milestones." That table should lay out the dates and deadlines. This is also a section in which to include your sales forecasts, Berry says.
• Management Team: If writing the business plan for investors or bankers, you want to explain the background of your company executives and managers and explain how that will help you meet business goals. "For investors, it's an important element to include who these people are and what their experience is," Berry says. "Investors need to evaluate risk, and the general assumption is that management team experience greatly affects risk. The more seasoned the management team, the less the risk." If writing this solely for internal purposes, you may want to explain how managers expect to grow the staff of the business in the future to meet business objectives.
• Financial Projections: In the financial section, you provide "the quantitative interpretation" of everything you stated in your organizational and marketing sections, Pinson says. She also advises not to write the financial section until those other sections are complete. This is where you include your projected profit and loss statements, your balance sheet, and your cash flow statements for the next three years. "Those are forward-looking projections," Berry points out. "It's not your accounting." That's often a source of confusion. The order of the numbers will be very much like they appear in accounting statements but they will be forecasts for the future. "Accounting is today backwards into the past," Berry says. "Planning is today forward into the future."

You may want to include supporting documents to back up statements or decisions you've made. These should be included in a separate section. These supplemental materials might include resumes of your managers, credit reports, copies of leases or contracts, or letters of reference from people who can attest that you are a reputable and reliable business person.

Dig Deeper: The Executive Summary as a Guiding Light

How to Write a Business Plan: Use Your Business Plan Internally

Build in metrics to your business plan so that you can use the document internally to help manage your business going forward. Berry recommends that business executives review the business plan regularly to see if they are on track with expectations or to revise those expectations going forward. "One of the great mistakes people make is to view the business plan as something you do once a year and then follow it blindly," Berry says. "That's a damaging myth. Planning is a continuous process."

Berry advises that executives revisit the plan once a month. "On the third Thursday of every month, for example, you could go to a conference room and order in lunch and take an hour or two to look at how your assumptions have changed, look at your progress," Berry says.

Specifics are vital. A business plan should not be solely about strategy; include specifics like who's responsible for what, when it happens, how much your products or services cost, the sales your business will generate, etc. Business planning is about what's going to happen. Fill your plan with metrics, measurements and information you can later review. One good test of this part of the plan is whether or not you've actually implemented it.

Always include cash flow projections, Berry says. "Businesses live with cash and die without it. Profits are nice, but you spend cash, not profits." Profitable companies go bankrupt all the time because they don't have money. It isn't intuitive, but the math and financial principles involved are not that hard when you lay out your cash in logical order. "Look at the difference between making a sale and getting paid for the sale, which is an issue for just about every business-to-business sale you make," Berry says. "Look at the cash flow impacted by inventory, which can have you paying for things you buy long before you get paid for things you sell."

Lastly, if you don't have somebody outside the company reading your plan, then you might not need to put it out onto paper. "The business plan is the content, the strategy, and the specifics of what is going to happen to your business," Berry says, "not the document."

Dig Deeper: Planning for an Economic Rebound

Recommended Resources:
Bplans.com
More than 100 free sample business plans plus articles, tips, and tools for developing your plan

Hurdle: The Book on Business Planning
A book by Tim Berry, which you can read online or order from Amazon.com and Palo Alto Software

Out of Your Mind and Into the Marketplace
Linda Pinson's business selling books and software for business planning

Palo Alto Software
Business planning tools and information from the maker of the Business Plan Pro software

U.S. Small Business Administration
Government-sponsored website for writing a business plan for small and mid-sized businesses

Elizabeth Wasserman is editor of Inc.'s technology website, IncTechnology.com. Based in the Washington, D.C. area, she has more than 15 years experience writing about business, technology, and politics for newspapers, magazines and websites. Her work has appeared in such publications as Congressional Quarterly, Business Week, Portfolio and Slate.