How to Organize a Business Plan

Business plans can seem like the term papers of the corporate world, but creating one is more than just an academic exercise. In addition to being essential for raising funds from investors, a good business plan can be an effective management tool, providing a guideline for future actions. The following steps can guide you through the process of creating the perfect plan.

Instructions

Difficulty: Easy

The Basics

1. Describe your business mission in the lead section of a 2- or 3-page executive summary. This sounds obvious, but many plans bury this essential information. Be passionate but factual. Use testimonials only if they are from highly regarded sources.
2. Follow your business outline with a concise description of the market potential and the products or services that will form the core of your business, a description of the management team, and basic financial forecasts and needs.

The Body

3. Show the management structure with a simple organizational chart. Point out any gaps in the management team and detail plans to recruit for these positions. Summarize salaries, benefits and stock-option plans.
4. List the board of directors (and any subcommittees) and specify the proposed extent of the board's involvement in key management decisions.
5. Indicate locations and facilities, and explain the key administrative functions.
6. Outline the marketing plan in detail. Give an assessment of market potential, an analysis of the competition and the proposed marketing strategies. Be specific about anticipated accomplishments, avoiding vague performance promises.
7. List the operational action plans. Detail major milestones and the timeline scheduled for their achievement. Describe your contingency plans in case conditions change rapidly.
8. Present the financial data. Show how much money is needed in each phase of the business. Describe how you will use the funds, as well as when and how your business will pay back loans. Include an income statement, a cash-flow analysis, a balance sheet and a ratio analysis. Compare projected ratios with industry norms and explain any major deviations. Use visuals such as graphs and flowcharts to clarify the information throughout this section.
9. Describe why your product or service is better or more advanced than existing ones. What do you have to offer that your competitors don't? Explain the status of product development, being careful not to use overly technical language if you are presenting the plan to potential investors.
10. Specify the manufacturing data, including plant locations, capital equipment requirements, the size of the labor force, and supply sources, if applicable.
11. Report on methods for hiring, training and retaining employees. Make this a major emphasis if your business is service-related.

The Future

12. Project the pertinent portions of the plan over the next 2 to 5 years. Changes along the way will be inevitable, but it's a healthy exercise to consider future opportunities and challenges.
13. Hire a skilled facilitator to add an impartial point of view to the planning process. He or she can help you assess your company's strengths and weaknesses, as well as identify opportunities and dangers.
14. Schedule an off-site retreat where the major players can concentrate on the long-range plan without the myriad interruptions of the workplace.
15. Assign an individual advocate from the management team to each long-range goal. These champions should meet on a regular basis to report on successes and failures.
16. Detail the plan monthly for the first year, quarterly for the second and third years, and semiannually for the fourth and fifth years.

The Finale

17. End with a summary, delineating the company's unique keys to success as well as a commentary on where it's going.
18. Attach an appendix of backup data. The selection of documents will vary according to whether you're slanting the plan toward potential investors or designing it as an internal road map for company planning. Your appendices might include the following: the re'sume's, tax returns and/or personal financial statements of management principals; a copy of the franchise contract (for franchised businesses); copies of any real-estate documents (leases, purchase agreements); copies of pertinent licenses; and brief descriptions of supporting external advisers and relationships, such as attorneys, accountants, other investors and lenders.
19. Design a professional-looking cover that incorporates your corporate logo, then create a detailed table of contents.

Tips & Warnings

• Review examples of actual business plans listed on the Internet. Numerous Web sites provide plans grouped by industry or major service activity.
• Aim for 15 to 20 pages, excluding appendixes. Plans intended to woo investors may run even longer; those used primarily for internal planning tend to be shorter.
• Address the challenges of growth and how you'll handle them. Be candid about the company's risks. It would be very damaging if pre-existing risks and problems came to light later.