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How to Develop a Business Plan

What is a Business Plan?

A business plan is a written document describing the nature of your proposed business, the sales and marketing strategy, the financial background, and contains a projected profit and loss statement.

A good business plan guides the reader through each stage of starting and managing your business. You’ll use this plan as a roadmap for how to structure, run, and grow your business. A well structure business plan is an outlet to express and describe the key elements necessary for your business to succeed.

When writing your business plan, it is not necessary to abide to the business plan template, exactly. Instead, it is more vital to give focus to sections pertaining to your business and needs the most.

Traditional business plans typically use a combinations of these elements:

Company Description

Detailed information about your company. Go into detail about the problems your business solves, the community benefits it provides, and the competitive advantages that will make your business succeed. Be specific– list the consumers, organizations, or businesses your company plans to service. Your company description is also the perfect place to boast about your company’s strengths.

Executive Summary

A brief summary of what your company is and why it will be successful. This will include: your mission statement, your product and services, basic information about your company’s leadership team, employees, and location. Also included, should be financial information and high-level growth plans, if you plan to ask for financing.

Market Analysis

A thorough understanding of your industry outlook and target market are necessary. Conducting competitive research will show you what other businesses are doing and what their strengths are. Research your market and find trends and themes. Ask yourself, What do successful competitors do? Why does it work? Can I do it better? This is your opportunity to find comprehensive answers to these questions.

Organization and Management

This section will focus on the legal structure of your business. Describe how your company will be structured and who will run it. State whether you have or intent to incorporate your business as a C or an S corporation, form a general or limited partnership, or if you’re a sole proprietor or LLC. Use an organizational chart to lay out who’s in charge of what in your company. Show how each person’s unique experience will contribute to the success of your venture. Consider including resumes and CVs of key members of your team.

Service or Product Line

A description of what you sell or what service you offer. Explain how it benefits your customers, and/or community. Explain what the product lifecycle looks like. Share your plans for intellectual property– like copyright or patent filings. Explain, in detail, all research and development you’ve conducted for your service and/or product.

Marketing and Sales

Your goal in this section is to describe how you’ll attract and retain customers (marketing), as well as describe the process of selling your product and/or service (sales). This section can be used as referral in future occasions to develop financial projections– so, be certain to thoroughly describe your complete marketing and sales strategies.

Funding Request

If your initial business proposal requires acquiring funding from outside sources, an outline of the funding requirements should also be included in your business plan. Your goal is to clearly explain how much funding you’ll need over, at the least, the next five years and what the funds will be used for. Specify whether you business will be wanting debt or equity, the terms you’d like applied, and the length of time your request will cover. A detailed description of how you’ll use the funds is extremely important. Specify if you need funds to buy equipment or materials, pay salaries, or cover specific bills until revenue increases. Always include a description of your future financial plans, like paying off debt or selling your business.

Financial Projections

Supplement your funding request with financial projections. Your goal is to highlight your business’s stability and longevity, as well as, demonstrate its ability to be financially successful. If your business is already established, include income statements, balance sheets, and cash flow statements for, at the least, the last five years. Businesses with less than five years of financial records should simply include all statements acquired since the inception of the business. All collateral that can be put up against a loan, list them here.

A financial projection should provide a prospective financial outlook for your business for the next five years– this should include forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets. Following the grand-opening of your business, it is critical, for the first year of business, to be very specific and use quarterly, or even monthly, financial projections. These projections can be used for both, internal records, as well as, future business plans, and provide insight to investors about how and where funds were spent. These projections should be explained clearly, and blatantly represent the connection between the funding streams you acquired and the financial progress you’ve achieved.

This section is a great opportunity to use graphs and charts that tell the financial story of your business!

Appendix

Use the appendix of your business plan to provide supporting documents or other materials specifically requested. This section should also include credit histories, resumes, product pictures, letters of reference, licenses, permits, or patents, legal documents, permits, and other contracts.

Create Your Business Plan, Today!

 The Southeast Colorado SBDC has created a tradition business plan template to help ensure financial success for you and your business!

What is a Lean Startup Business Plan?

Lean startup business plans are less common but still use a standard structure. They focus on summarizing only the most important and key elements of your business plan. A lean startup business plan shouldn’t take very long to create and should typically only be one page. This type of plan is high-level focus, fast to write, and contains key elements only.

Lean startup formats are charts that use only a handful of elements to describe your company’s value proposition, infrastructure, customer relations, and finances. This type of business plan is useful for quick, to-the-point, visual tradeoffs and fundamental facts about your business.

Although many versions have been structured throughout the years, the most commonly used format for a lean startup business plan is the:
Business Model Canvas, developed by Alex Osterwalder.

Lean startup business plans typically use a combinations of these elements:

Key Partnerships

The other businesses, services, and entities you’ll work with to run your business. Think about suppliers, manufacturers, subcontractors, and similar strategic partners.

Key Activities

List the ways your business will gain a competitive advantage. Highlight aspects such as selling direct to costumers, or using technology to tap into the sharing economy.

Key Resources

List any resources you’ll leverage to create value for your customers. Your most important assets include staff, capital, or intellectual property.

Don’t forget to leverage business resources that might be available exclusively to women, minorities, veterans, Native Americans, and HUB Zone businesses.

Value Proposition

Make an clear and compelling statement about the unique value your company brings to the market.

Customer Relationships

Describe how customers will interact with, and benefit from your business. Think through the customer experience from start to finish.

Customer Segments

Be specific when you name your target market. Your business won’t be for everybody, so it’s important to have a clear sense of who your business will serve.

Channels

List the most important streams of communications you will use to interact with your customers. All successful businesses use a mix of communication channels and optimize their usage over time.

Cost Structure

Will your company focus on reducing cost or maximizing value? Define your strategy, then list the most significant costs you’ll face.

Revenue Streams

Explain how your company will actually make money. Some examples are direct sales, membership fees, and selling advertising spaces. If your company has multiple revenue streams, list them all here.

Here is an Example of a Lean Startup Business Plan in the Osterwalder’s Business Model Canvas:

Slow Mo Joe’s “Hemp Head”

Key Resources:
Clearly identify the name of your business, the product and/or service your business provides, how you plan to provide your service, and/or source the materials needed to produce your product, and give a brief explanation of production details.
Identity
Slow Mo Joe manufactures high-quality hair mousse, Hemp Head, exclusively using materials made from marijuana hemp for all production purposes, ranging from the mousse itself to the product packaging. All materials are sourced from local hemp farmers, within the Otero county region.
Problem
Cosmetologists, and consumers alike, are looking for high-quality hair products that both help revert the plastic waste problem in America, as well as, promotes the plentiful uses of marijuana hemp.
Customer Relationships
Explain how your service and/or product will benefit your community. Does your service and/or product, help “solve a problem?” or provide a “better way of doing things?”
Value Proposition:
Alongside, again, a brief explanation of your service and/or product, should be included, a statement describing why your business is valuable and effective.
Our Solution
Our handcrafted hair mousse is made from 100% all natural, locally sourced hemp materials. Our product is designed to reduce plastic waste and promote hemp production.
Target Market
The target audience is adults and teenagers specifically looking for a high-quality hair product made with hemp materials.
Customer Segment:
Describe your target audience, (who will benefit from your service and/or product).
Value Proposition:
Explain, briefly, the competition your business will be selling against, and how you plan to excel against said competition.
The Competition
All hair products are part of a niche market with companies of all sizes. Competitors combining hair cosmetics with hemp production include: High Times Hairstyles, Hempy Hair, Cliché, and Roovers International. Slow Mo Joe intends to excel against competitors by offering consumers a free sample of Hemp Head after signing up
Revenue Streams
Slow Mo Joe will sell directly to costumers from a physical location located at 123 Adams Ave, La Junta, Colorado 81050, as well as, at craft fairs and online sales through Slow Mo Joe’s Facebook page, and website at Slowmojoe’shemphead.com
Revenue Streams:
List all streams of revenue and income platforms.
Channels:
Describe the streams of communication, advertising, and marketing your business is or will be utilizing.
Marketing Activities
Slow Mo Joe will communicate with customers through an email newsletter, targeted Google, Facebook, Snapchat, and Instagram ads, social media platforms, and in person at specialty events and craft fairs. Slow Mo Joe will also partner with local headshops and marijuana dispensaries for resale, and advertising and marketing opportunities.
Expenses
  • Materials used to create hair mousse.
  • Materials used to create packaging.
  • Marketing and travel costs.
  • Inventory space for product.
  • Daily production costs for satellite store.
Cost Structure:
Provide a brief list of all expenses related to your business ventures.
Key Activities:
List all current, and future plans for, employees, investors, partners, parent companies, etc.
Team and Key Roles
Currently, the only team member is the Owner, Morris Joe Armstrong, with four partnered investors: Jo-Ann Stevens, Marcus Du-Brea, John Wills, and Prudence Clovers. As profits increase, Slow Mo Joe will look to add employees to assist with production duties– at which time, the partnered investors will assist with the final decision-making processes.
Milestones
Within our first year of business, Slow Mo Joe has partnered with three different entities: Rocky Mtn Dispensary, the Buried Treasure Boutique, and Natural Foods. Slow Mo Joe is contracting with said companies to sell Hemp Head in each of their establishments. As business grows, Slow Mo Joe will continue to pursue partnerships with more companies.
Key Partnerships:
Describe how your business has used key partnerships and relationships to build revenue streams. Detail the financial milestones your business has achieved.

Download our Step-by-Step Business Plan Workbook

If you are currently running, or in the process of developing, your business- It is important that you write your business plan. Why? You will gain in-depth knowledge about your business, which will make it easier to answer lender’s questions. The process of writing your business plan will clarify what is involved in making your business work successfully.

The Colorado SBDC has created a step-by-step business plan workbook, The Plan, to help ensure financial success for you and your business! The Plan helps you find hidden flaws and makes you think carefully about each phase of your business.

Discover more information about developing and managing your business plan at the
United States Small Business Administration.

Do you have more questions about developing a business plan?

The Southeast Colorado SBDC consultant team consists of six members, each specializing in distinct realms of business and education. Get in touch with a member of our team today and get help developing your business plan!

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