Every successful business needs a business plan that maps out the company's future. The business plan helps keep everyone in the organization on the same page. It also serves as your company's resume and can attract investors and capital.
FindLaw's Business Planning section provides information for prospective business owners on why and how to write a business plan.
Why Write a Business Plan?
Small business owners, who often feel strapped for time, may ask: “Is a business plan required by law?" No, it is not. A business plan is not a legal document. It is a tool that business owners use to increase the odds that their business will be a success.
A prospective entrepreneur needs to make many decisions about their business before they can open the doors. Writing a business plan forces you to do the research. It requires you to think about business structures, marketing strategies, and financial forecasts. You will need this information in order to make good business decisions.
Your business plan will also provide a roadmap that keeps your business on track to meet its goals. Where do you want to be in 3 years? In 5 years? It should be in your business plan.
A business plan is essential if you are seeking investors and capital. Use your business plan to sell your business idea to potential investors. Include all the market analysis and financial information an investor needs to get excited about your business venture.
Types of Business Plans
Most business plans follow a template and include the same information. But different types of business plans may require additional information or more focus on some topics over others.
How to Create a Business Plan
The process of writing a business plan has great benefits in and of itself. It gives prospective business owners an opportunity to do research, gather data, and understand their customers and their products' place in the marketplace.
Articles in this section will teach you how to create a business plan, the audiences you need to write for, the kind of plan you may need, and the components of each plan. You can use a business plan template or simply follow the guidance provided here on how to write the plan, and where you can get help.
Line up a reviewer to proofread your plan. You want it to be perfect when you show it to potential investors. And take a look at the Start-Up Checklist to ensure you've covered everything.
What's in a Business Plan
A business plan is both a marketing document and a plan for action. While different types of business plans will have different goals and audiences, key elements of the plan will be the same. The article “What's in a Business Plan" goes over in detail exactly what should be included in each section of a standard business plan.
A good business plan will include:
- A company description and an overview of your business
- Product line description, including new products
- Market research and the market segment of your company and its products
- Competitive analysis, and the value proposition offered by your product or service
- Business strategy and the things that give your company a competitive advantage
- Customer research, including potential customer demographics, target market
- Marketing strategy and a marketing plan to drive new business
- Management team information, an organizational chart of team members
- The legal structure of the business, intellectual property, and copyrights held
- Financial plans and financial statements, such as financial projection, cash flow statements, balance sheets, income statements, a break-even analysis, profit margins. The type of financial information you have available will depend upon where your business is in its lifecycle and the type of business plan you are crafting. A startup business will have projections, rather than historic financial reports.
(See the Types of Business Plan page to learn about unique sections to include in plans other than start-up business plans.)
Don't forget the Executive Summary section of your business plan. It is often read as a stand-alone document. It pays to put extra time into making this the most inspiring four pages your audience will read.
An Effective Marketing Strategy Is Key for the Success of Your Business
While developing an effective marketing strategy isn't easy, it is an essential component of a business plan. It's virtually impossible to successfully market to everyone all at once, so concentrate your efforts where you think you can move the needle first.
Financial Projections
The most important audiences for your business plan will focus on the financial projections and financial summaries provided in the plan. As a business owner, financial projections will help guide the development of your business. For lenders and investors, these documents tell them if your plan is realistic and if you are a good bet for their business loan or investment dollar.
A breakeven analysis is one of the key documents you need to include in a business plan. "At what level of sales will my company make a profit?" A breakeven analysis answers that question. It identifies when your business will be able to cover all of its expenses and begin to make a profit.
It's also important to identify your startup costs, which will help you determine the sales revenue needed to pay ongoing business expenses.
Talk to a Lawyer When Writing a Business Plan
A lawyer can help in many business scenarios. While you can certainly write a business plan on your own, the insights you can gain from talking with an experienced business start-up lawyer are many. Before you visit, complete the Confidential Business Start-Up Information Questionnaire. Take it with you so you are prepared to talk.
Contact a business and commercial law attorney in your state for sound advice.
