No matter the stage of your small business, it’s best to prepare for future success as soon as possible. The more you plan ahead, the easier it is to move your business in the direction you want it to go. One great way to be proactive in shaping your business’s future is to create a business plan. Small business lenders and investors use business plans to understand your business and make their decisions, and it is often their first impression of your business.
What is a Business Plan?
A business plan provides a thorough report of your business’s current activity, future goals, and resources for achieving those goals. It’s a valuable tool to demonstrate your business’s credibility and preparedness for growth when seeking funding from small business lenders or investors.
Sections of a Business Plan
Executive Summary
This section provides a brief overview of your small business and what is included in the rest of the plan. It should include your small business’s name, location, and mission statement, as well as basic information about your business’s leadership team and employees. This section can also include your business goals.
Company Description
This section provides a more thorough overview of your small business. It should include information about your business’s history, target audience, and characteristics that make it stand out. You may choose to list your business goals here instead of including them in the executive summary.
Company Key Players & Roles
This section describes the organizational structure of your small business and the key people within it. It should outline your business’s departments and the role of each leader within them who helps your business function.
Products and Services
This section describes what your small business provides. It should highlight the specific benefits of your business’s offerings and why they exceed those of your competitors. This section can also include details about product pricing, life cycle, patents, manufacturing, and research and development.
Financial Standing
This section is created using the information gathered from financial statements, including balance sheets, income statements (or profit & loss statements), and cash flow statements. It demonstrates the financial health of your small business by providing a detailed record of your business’s finances.
Budget
This section outlines all costs and expenses associated with running your small business. Costs can be broken down on a monthly, quarterly, or annual basis.
Market Standing
This section provides an analysis of the market in which your small business operates and your business’s positioning within it. It should include a description of the market, key players or competitors, your business’s strengths and weaknesses, and your competitors’ strengths and weaknesses.
Marketing Strategy
This section explains how you plan to reach your business’s target audience and convert them into loyal customers. It should include the methods your business will use to reach consumers (advertisements, PR materials, etc.) and how your business will execute those methods, as well as plans for marketing campaigns.
The U.S. Small Business Administration offers more details and some templates to help you get started. Once you have your business plan, remember to update it every two years or whenever a major change occurs within your business.
Even if your small business isn’t ready to grow yet, creating a business plan is an important step you can take now to build a path for success when it is. Presenting potential funders with a business plan demonstrates that you have thoughtfully considered your business’s future and are prepared to take the necessary steps for growth.