What Is a Business Plan?

by Tim Berry

Business planning is about results. You need to make the contents of your plan match
your purpose. Don’t accept a standard outline just because it’s there.

What is a business plan?

A business plan is any plan that works for a business to look ahead, allocate resources,
focus on key points, and prepare for problems and opportunities.

Unfortunately, many people think of business plans only for starting a new business or
applying for business loans. But they are also vital for running a business, whether or not
the business needs new loans or new investments. Businesses need plans to optimize
growth and development according to priorities.

What’s a startup plan?

A simple startup plan includes a summary, mission statement, keys to success, market
analysis, and break-even analysis. This kind of plan is good for deciding whether or not
to proceed with a plan, to tell if there is a business worth pursuing, but it is not enough to
run a business with.

Is there a standard business plan?

A normal business plan (one that follows the advice of business experts) includes a
standard set of elements, as shown below. Plan formats and outlines vary, but generally a
plan will include components such as descriptions of the company, product or service,
market, forecasts, management team, and financial analysis.

Article continues below advertisement

Your plan will depend on your specific situation. For example, description of the
management team is very important for investors while financial history is most
important for banks. However, if you’re developing a plan for internal use only, you may
not need to include all the background details that you already know. Make your plan
match its purpose.

What is most important in a plan?

It depends on the case, but usually it’s the cash flow analysis and specific implementation
details.
• Cash flow is both vital to a company and hard to follow. Cash is usually
misunderstood as profits, and they are different. Profits don’t guarantee cash in
the bank. Lots of profitable companies go under because of cash flow problems. It
just isn’t intuitive.
• Implementation details are what make things happen. Your brilliant strategies and
beautifully formatted planning documents are just theory unless you assign
responsibilities, with dates and budgets, follow up with those responsible, and
track results. Business plans are really about getting results and improving your
company.

Can you suggest a standard outline?

If you have the main components, the order doesn’t matter that much, but here’s the
outline order we suggest in Business Plan Pro software:

1. Executive Summary: Write this last. It’s just a page or two of highlights.
2. Company Description: Legal establishment, history, start-up plans, etc.
3. Product or Service: Describe what you’re selling. Focus on customer benefits.
4. Market Analysis: You need to know your market, customer needs, where they are,
how to reach them, etc.
5. Strategy and Implementation: Be specific. Include management responsibilities
with dates and budget.
6. Management Team: Include backgrounds of key members of the team, personnel
strategy, and details.
7. Financial Plan: Include profit and loss, cash flow, balance sheet, break-even
analysis, assumptions, business ratios, etc.

View an expanded business plan outline

We don’t recommend developing the plan in the same order you present it as a finished
document. For example, although the Executive Summary comes as the first section of a
business plan, we recommend writing it after everything else is done.

What can help me write a business plan?

It can be helpful to view real sample business plans to get ideas for your own business
plan.

This free fill-in-the-blanks business plan template follows the format that is preferred by
the SBA and lenders and can be a useful guide when writing your plan.

As mentioned before, reviewing a standard business plan outline can also be a good
starting point.
A Standard Business Plan Outline
by Tim Berry

What information needs to be in your business plan? What is the order of information
that will make the most sense to lenders and investors? You can answer these questions
with the business plan outlines provided below.

What are the standard elements of a business plan? If you do need a standard business
plan to seek funding — as opposed to a plan-as-you-go approach for running your
business, which I describe below — there are predictable contents of a standard business
plan outline.

For example, a business plan normally starts with an Executive Summary, which should
be concise and interesting. People almost always expect to see sections covering the
Company, the Market, the Product, the Management Team, Strategy, Implementation,
and Financial Analysis. The precise business plan format can vary.

Is the order important? If you have the main components, the order doesn’t matter that
much, but here’s the sequence I suggest for a business plan. I have provided two outlines,
one simple and the other more detailed.

Simple business plan outline

1. Executive Summary: Write this last. It’s just a page or two of highlights.
2. Company Description: Legal establishment, history, start-up plans, etc.
3. Product or Service: Describe what you’re selling. Focus on customer benefits.
4. Market Analysis: You need to know your market, customer needs, where they
are, how to reach them, etc.
5. Strategy and Implementation: Be specific. Include management responsibilities
with dates and budgets. Make sure you can track results.
6. Web Plan Summary: For e-commerce, include discussion of website,
development costs, operations, sales and marketing strategies.
7. Management Team: Describe the organization and the key management team
members.
8. Financial Analysis: Make sure to include at the very least your projected Profit
and Loss and Cash Flow tables.

Build your plan, then organize it. I don’t recommend developing the plan in the same
order you present it as a finished document. For example, although the Executive
Summary obviously comes as the first section of a business plan, I recommend writing it
after everything else is done. It will appear first, but you write it last.
Article continues below advertisement

Standard tables and charts

There are also some business tables and charts that are normally expected in a standard
business plan.

Cash flow is the single most important numerical analysis in a plan, and should never be
missing. Most plans will also have Sales Forecast and Profit and Loss statements. I
believe they should also have separate Personnel listings, projected Balance Sheet,
projected Business Ratios, and Market Analysis tables.

I also believe that every plan should include bar charts and pie charts to illustrate the
numbers.

Expanded business plan outline

Here’s an expanded full business plan outline, with details you might want to include in
your own business plan.

1.0 Executive Summary

1.1 Objectives
1.2 Mission
1.3 Keys to Success

2.0 Company Summary

2.1 Company Ownership
2.2 Company History (for ongoing companies) or Start-up Plan (for new companies)
2.3 Company Locations and Facilities

3.0 Products and Services

3.1 Product and Service Description
3.2 Competitive Comparison
3.3 Sales Literature
3.4 Sourcing and Fulfillment
3.5 Technology
3.6 Future Products and Services

4.0 Market Analysis Summary

4.1 Market Segmentation
4.2 Target Market Segment Strategy
4.2.1 Market Needs
4.2.2 Market Trends
4.2.3 Market Growth
4.3 Industry Analysis
4.3.1 Industry Participants
4.3.2 Distribution Patterns
4.3.3 Competition and Buying Patterns
4.3.4 Main Competitors

5.0 Strategy and Implementation Summary

5.1 Strategy Pyramids
5.2 Value Proposition
5.3 Competitive Edge
5.4 Marketing Strategy
5.4.1 Positioning Statements
5.4.2 Pricing Strategy
5.4.3 Promotion Strategy
5.4.4 Distribution Patterns
5.4.5 Marketing Programs
5.5 Sales Strategy
5.5.1 Sales Forecast
5.5.2 Sales Programs
5.6 Strategic Alliances
5.7 Milestones

6.0 Web Plan Summary

6.1 Website Marketing Strategy
6.2 Development Requirements

7.0 Management Summary

7.1 Organizational Structure
7.2 Management Team
7.3 Management Team Gaps
7.4 Personnel Plan

8.0 Financial Plan

8.1 Important Assumptions
8.2 Key Financial Indicators
8.3 Break-even Analysis
8.4 Projected Profit and Loss
8.5 Projected Cash Flow
8.6 Projected Balance Sheet
8.7 Business Ratios
8.8 Long-term Plan
Business plan outline advice

Size your business plan to fit your business. Remember that your business plan should
be only as big as what you need to run your business. While everybody should have
planning to help run a business, not everyone needs to develop a complete formal
business plan suitable for submitting to a potential investor, or bank, or venture contest.
So don’t include outline points just because they are on a big list somewhere, or on this
list, unless you’re developing a standard business plan that you’ll be showing to
somebody else who expects a standard business plan.

Consider plan-as-you-go business planning. I’ve done a lot of work on this idea lately,
resulting in my new “Plan As You Go” business planning, which is a now a book
published by Entrepreneur Press, available through Amazon.com, Barnes and Noble, and
Borders, and bundled as an eBook with Business Plan Pro. I’ve also added a short video
here to the right, illustrating how the outline could be simpler with a new approach

How Will You Use Your Plan?

by Tim Berry

The classic uses are seeking investment or applying for a loan. There are also the obvious
communication with employees, partners, family members, consultants. And there is
valuation, sometimes for tax purposes, sometimes for growth, divorce, estates.

Too many people think of business plans as something you do to start a company, apply
for a loan, or find investors. Yes, they are vital for those purposes, but there’s a lot more
to it. Preparing a business plan is an organized, logical way to look at all of the important
aspects of a business. First, decide what you will use the plan for, such as to:

• Define and fix objectives, and programs to achieve those objectives.

• Create regular business review and course correction.
• Define a new business.
• Support a loan application.
• Define agreements between partners.
• Set a value on a business for sale or legal purposes.
• Evaluate a new product line, promotion, or expansion.