Business Plan
Business Plans come in a variety of shapes and forms, and can be referred to in different ways (for example, strategic plans, product plans, annual plans, etc.).  No matter how you title your plan, one thing is certain:  business plans are very important documents for all enterprises, from the start-up venture to the mature company looking to maximize its growth. 

Although Business Plans vary in length and name, the purpose of the plan is the same:  to clearly explain detailed parts of the company for the management team, investors, venture capitalists, and/or anyone else requiring such information.

When creating a business plan, make sure to leave plenty of time to fully explain the details. Oftentimes, people want to skip the business plan altogether, or just “gloss over” the important parts. This is not such a good idea, as the effort you put into creating the plan from the get-go will pay for itself ten times over once you have established the business and need a quick reference on certain key elements.

Business Plans for start-ups traditionally include the following 7 elements:

1. Executive Summary: Briefly summarize the highlights of your business.  The first sentence of the Executive Summary should be the best sentence you have ever written in your life!  Oftentimes, venture capitalists (or others reviewing your biz plan) won’t read beyond the Exec. Summary unless their attention is captured in the first line.  If possible, write this statement after you have finished the rest of the biz plan—doing this may help you capture the highlights better.
2. Company Description: Use this section to describe everything about your company, from its history (from where the original idea came), start-up plans, legal issues, etc.
3. Product or Service: This is your chance to describe what you're selling.  If it is an actual product, explain how it works, how it is made or manufactured and how it can help consumers.  If you are going to provide a service, be sure to include information regarding how you will deliver this service to your customers, what it will entail and how your clients will profit.  Always remember to focus on the customer benefits in this section.
4. Market Analysis: For this section, you will need to do some market research.  This means that you will have to learn about your “target market” or primary customers.  You can get such info by interviewing individual people, doing research online or talking with others who have experience running similar businesses to yours.  During your research, be sure to get as much information about your target market as you can, including:

a. Age range (kids/teens/adults/seniors/etc.)
b. Gender (male/female/both)
c. Needs (what they are looking for in a given product or service)
d. Location (cities/suburbs/rural areas; regional/national/worldwide, etc.)
e. Means of communication (via newspaper, internet, telephone, etc.)
f. Other market information that you feel is necessary

5. Strategy and Implementation: This is where you get to explain how you will actually take your idea and convert it into reality!  Be specific and include as much information as you can, including management responsibilities, various departments, manufacturing processes (if applicable), etc.  Reference particular dates and budget information whenever possible.
6. Management Team: Identify key members of your management team, and include their background information, personnel strategy, and any other details that apply.  Be sure that each member of your management team works in an area that corresponds with his/her expertise.  You would not, for example, want your creative or absent-minded staff to manage the finances!
7. Financial Plan: Depending on your experience, this could be the most grueling part of the business plan (of course, it could be the most fun, too!).  In this section, you will need to compose all financial statements, ranging from the balance sheet to the statement of cash flows to a break-even analysis. See below for more details regarding the various financial statements.

Other Terms You Should Know

Venture:  This term is often used to describe a new business or other projects involving chance, risk, or danger.
 
Capital:  Although you may want to shout out Boston, Sacramento or Denver, this term is used in business to describe the money that is invested in a business.  Businesses that require a lot of money to produce goods or services are considered “capital-intensive”, while start-ups that need few funds immediately are not.  Companies with a lot of capital have large amounts of cash or other assets.

Patents, Trademarks and Copyrights: These are various ways you can protect your ideas or inventions, so no one else can copy them.  There are different ways of patenting your ideas, so check out the United States Patent and Trademark Office at www.uspto.gov.

Funding Your New Venture
Finding the money to start your new business can be a full-time job in and of itself!  Some ventures may not need much money up front, while others are very “capital-intensive”. 

Whether you need just a few dollars to get going or millions to start your business, having a solid business plan to show potential investors is a must.  Remember, using your own money (or working part-time somewhere else to help you pay for your new business) is your best bet to avoid high interest rates and debt problems.  If you need additional funding, however, consider the following options:

“Angel” Investors:  These are people who donate personal funds towards your new venture, usually in exchange for partial ownership of the business.  Not all “angel” investors have the same goals in mind, so be sure to talk with them ahead of time so you clearly understand exactly how they want to be involved with the company.  “Angel” investors can be successful business people, wealthy acquaintances, an investment group or other group of professionals.  Other investors could include personal friends or family.

 

Banks:  Your local bank can help fund your start-up by giving you a small business loan at a certain interest rate.  Depending on your age and how much money you need, the bank may require a co-signer (someone who can help you repay your debt).

 

Venture Capitalists:  Known as VCs for short, these people are a group of professionals who help fund new ventures from a pool of money they have available.  By doing this, VCs assume the role of “limited partnership”, which means that they own part of the business until the debt is paid back.  VCs usually charge a high interest rate, so you will want to repay them as quickly as you can.

 

SBA:  The Small Business Administration’s Export Working Capital Program (EWCP) can help you get the financing you need when the other options do not seem reasonable.

Financial Statements
Financial Statements are very important parts of the biz plan—investors and other people lending you money for your venture will want to see how you plan to make (and spend) money during the early years.  It is a good idea to show your calculations for the first five years:  the first year financial statements should be broken down by month, while years 2-3 (or 4) can be shown by quarter (every 3 months).  Year 5 can be a general overview for the whole year.

Although there are a variety of financial statements you will need to include in your biz plan, the most common statements are:

Balance Sheet:  This is a “snapshot” of your financial records at a specific moment in time.  This sheet shows your assets (cash, accounts that receive money, buildings, equipment, etc.), liabilities (debts and other obligations owed to others) and capital (stock information and other earnings).
Click here for an example

 

Income Statement:  As its second name (Profit-and-Loss Statement) suggests, this document contains a summary of the money your company earns and spends over a given period of time (usually 1 year).  This is a way for managers and investors to see how much money the company makes over a certain period of time, in order to figure out how that left over cash will be divided among the company and the investors.
Click here for an example