Business Planning 101: Why Create a Plan and What to Include

By Frank Whelan, Vice President, Commercial Banker on August 11, 2014

A business plan is the foundation of all businesses—new, old, large, or small—because it serves as a visionary roadmap and living document of where you want your business to go and how you will get it there. Business plans are not just for start-ups. Existing companies need planning, too.

Investors and bankers will read your business plan, but its real purpose goes far beyond raising funds from investors or borrowing money. Your business plan is what keeps you on track and helps everyone execute to your vision.  It’s your touchstone throughout the year. Most importantly, a business plan is not a “one-and-done document.” The business plan should be referred to constantly to measure progress and revised annually so that adjustments are made reflecting changing dynamics.    
Other reasons supporting the necessity of a business plan include the following:

  • Helps establish specific objectives for the business that management can use as a measuring stick

  • Enables you to make more effective strategic decisions around asset acquisition, finances, hiring, etc.

  • Incorporates your hiring strategy

  • Identifies your competition

  • Examines risks associated with your business and identifies how you will mitigate them

  • Establishes an expansion strategy for your business

  • Communicates values, goals, and plans with management, team, new employees, and the public

  • Demonstrates collaboration with professional service providers such as CPAs, attorneys, your banker, and consultants

  • Serves as useful document in the event the business is sold or you are seeking investors or applying for a loan

According to the Small Business Administration, there are seven essential components to all business plans:

  1. Executive Summary: This succinct snapshot provides information about your company’s goals and objectives and why your ideas will be successful. If you are seeking financing, the executive summary is your first opportunity to garner an investor’s interest. This 1-2 page (or even 140 characters or fewer) document will allow those who want to learn more about your company to get a good snapshot before going into the full document.  

  2. Mission Statement – This section explains what your business is all about. It should be between several sentences and a paragraph. A word of advice: Make every word count. For more inspiration, check out the mission statements of these Fortune 500 companies.   

  3. Company Information – Include a short statement that covers when your business was formed, the names of the founders and their roles, the number of employees, and your business location(s).

  4. Growth Highlights – Include examples of company growth, such as financial or market highlights. For example, “XYZ Firm increased profit margins and market share year-over-year since its foundation.” Graphs and charts can be helpful in this section. If you are just starting a business, you won't have as much information as an established company. Instead, focus your business plan on your professional experience and background, as well as why you have decided to start your own business.

  5. Products/Services – Briefly describe the products or services you provide.

  6. Financial Information – If you are seeking financing, include any information about your current bank, investors, and other valuable figures and projections. Much like the growth highlights, if you’re starting a new business you may not have as much information. However, all companies should include these financial statements: Projected income, projected balance sheet, and projected cash flow. You also may want to include market size and market growth. 

  7. Summarize Future Plans – Explain where you would like to take your business three, five and 10 years down the road.

Remember, your business plan is your long-term strategic roadmap. Take the time to plan and think through your purpose and strategy; it will pay off 10-fold when compared to those who just wing it. As we witnessed in the latest recession, businesses that were proactive in their planning and identified ways to weather the storm were much more likely to survive and ultimately thrive. Be proactive; take some time to craft your plan today.

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