Amid COVID-19, many individuals throughout the United States are starting small businesses for the first time. Since May 27th, 2020, the number of employer identification number (EIN) filings rose 1%, alongside individuals filing business applications.
As soon-to-be entrepreneurs figure out the viability of their business ideas and begin to choose a business model, the next item on their to-do list is to draft a business plan. Having a business plan does not automatically guarantee overnight success for a small business. However, it does allow the business to take a glimpse into its future.
With the help of a business plan, entrepreneurs may be able to do the following:
- Examine each stage of their business goals and set the steps for how to reach each one.
- Evaluate the feasibility of the company from an objective and critical standpoint.
- Align the owner (and any team members) toward a common vision for the business.
- Attract investors that may be interested in funding your company.
What goes into a business plan? A traditional business plan contains the following sections that detail everything about the business from its offerings to its cash flow.
1. Executive Summary
In just a few pages, you should be able to quickly summarize a basic description of your business.
An executive summary details who you, and your business, are. It also covers what the company does, the industry it’s in, and when you’ll start doing business. You will also need to detail how the business will make money as well as why consumers will want to pay for your offerings and/or services.
2. Business Description, Concept, and Strategy
You shared a brief overview of basic information as it pertains to your small business. Now, you may share more background information about your startup. Use this section to detail where the idea for your company came from and what your products or services do. What makes your offerings unique to customers while helping solve their everyday problems?
If your startup is still quite young, you may use this section to note how far along you are in the development stages. Then, detail the strategy and goals for the business. You may include a series of steps you plan to take in order to reach said goals as well as a timeline for anticipated completion.
3. Industry Analysis
Who makes up your competition, both direct and indirect?
An industry analysis will take a closer look at your competitors. You should be able to understand their offerings and services as well as why consumers would choose your services over theirs.
4. Market Analysis
You know which companies are considered competition to your own business. Now, you need to understand which demographics make up your target audience.
Use this section of your business plan to outline the target market of your business. Detail your ideal customer and their demographic profiles. Analyze plans for how you will attract, capture, and retain this audience. Look ahead to the future as well. You should be able to determine if your marketing is growing and what future opportunities look like.
5. Organization and Management
Are there other members or employees within your company? Use this section of your business plan to create biographies for the rest of your management team. Share profile of each member that include their biographies, current job title, and core responsibilities in the business.
6. Financial Projections
This portion of your business plan will contain the most charts and tables. The financial projections pertain to the finances of the business. It is necessary to outline the cash flow of the company for potential investors and lenders interested in investing in your business. They will want to see how profitable the startup has been, so make sure your financial projections are realistic and thoughtful.
Additional financial projections should include, but are not limited to, projected profit and loss, a sales forecast, expenses budget, 12-month income statement, balance sheet, and break-even analysis.
7. Financing Request
It may be one of the last aspects to cover in a business plan, but if you require funding to run your business you will need to include a financing request. This is the exact amount of financing necessary to run the business — which should project out as far as the next five years in business.
Be honest about the amount of capital necessary to run the company. Additionally, share how you plan to spend the money and the manner in which it will be spent.
In closing, you may also choose to share notes on strategic financial situational plans for your company. In the event that your startup becomes incredibly popular or possesses a unicorn status that allows it to be quickly acquired, you will need to detail what happens next via a strategic financial situational plan.