How to Formulate a Strategic Business Plan

A business plan is essential to getting a startup loan from the bank.

A lot of planning goes into the equation once you decide to start your own business. In order to receive a loan from the bank to jump-start your enterprise, it is required that you submit a detailed business plan. Therefore, along with being a concise summary of your goals, a business plan can also be seen as an appeal to the bank to demonstrate how safe of an investment your company would be. A good business plan encompasses a clear pin-point of your target customers, a mission statement, products offered and market research.

Things You'll Need

• Spreadsheet maker (such as Excel)
• Pie chart maker (such as PieColor)
• Table maker (can be found in Word)

Instructions

Executive Summary

1. Describe the nature of your business in two or three sentences, including what sets your idea apart from similar, preexisting businesses.

2. Describe how and by whom your business will be managed in two or three sentences. Include a brief summary of your credentials along with those of others who own (or manage) the company.

3. Identify the market and your customers. Describe how you plan on filling a void in the market you're choosing to venture into, providing statistics and information you have found through research. Describe your customers and how you will be meeting one or more of their needs.

4. Identify marketing strategies such as emphasizing the superiority of your products/services, special deals, etc.

5. Speculate your sales projections for the first year, along with the salary of the co-owners. Determine the amount needed to finance your first year in business, and the amount invested by each of the co-owners.

6. Write a closing sentence that demonstrates how your business will meet the needs of, and appeal to, your target audience.

Company Summary

1. Give a more detailed overview of your business, including the business' legal name, address, mailing address, your contact information, the type of proprietorship, names of the owners, bank and branch location for operations and the business' background. Also include with that any of the owners' personal goals.

2. Determine your supplier(s) and hours of operation.

3. Clearly state your business' vision and short and long-term objectives.

4. Provide a thorough product overview, including a list of all services/products offered and your competitive advantage.

5. Describe the services/products offered in detail. In the case of a restaurant, determine the menu, ingredients and recipes, along with the interior accouterments. List how these elements contribute to the appeal of your business.

Market Analysis Summary

1. Identify and describe your target audience and clearly explain how you will appeal to their needs/wants.

2. Make a pie chart of potential customers (which will come from the target audience previously established), speculating how much money each group will bring into the company for the first five years of business.

3. Cite the sources you used to conduct your market research.

Strategy and Implementation Summary

1. Summarize your plan for success by determining the elements that make up your "IT" factor (in other words, your competitive edge).

2. Provide brief research on your competition. Analyze their weaknesses and strong points and describe what sets you apart from them.

3. Make up a table involving the estimated revenue from each of the products/services given, and the production costs for the next three years.

Management Summary

1. Identify the manager and list his/her experience.

2. Map out the organizational structure, such as any possible future additions to the company (in high positions).

3. 

   Tables enable you to clearly see where your money will be going.

   Make a table including the staff and their salaries for the next three years, thus calculating the yearly amount spent on payroll.

Financial Plan

1. Determine how much you will invest into the start of the company, and from where and how much you will borrow elsewhere.

2. Determine the start-up costs such as:

   business registration fees

   business licensing and permits

   starting inventory

   rent deposits

   down payments on property

   down payments on equipment

   utility set up fees

3. Determine operation costs for a month such as:

   salaries (yours and staff)

   rent or mortgage payments

   telecommunications

   utilities

   raw materials

   storage

   distribution

   promotion

   loan payments

   office supplies

   maintenance

   Multiply figures by six to find the approximate amounts for a full six months.

4. Add the operation costs with your total start-up costs to determine the rough amount you'll need to start your business.

Income Tax Statement

1. List your business name at the top of your Income Statement.

2. Write the time period the Income Statement is being used for (usually one year) with the year ending listed as well. Make a row for each month that your Income Statement is being created for, using a spreadsheet application.

3. Create columns for each of the following items (according to your specific business), listing every month your Income Statement includes:

   REVENUE : You can put as subheads all the services/products you offer.

   EXPENSES: Include subheadings such as direct costs (materials, equipment rentals, owner salary, wages, wage expenses) and administration (professional fees, advertising and promotion, bad debts, bank charges, depreciation, insurance, rent, telephone, utilities, credit card fees). Total each section as well as the entire expenses category.

   INCOME TAX PAYABLE: Speak with an accountant to estimate the amount of income tax you'll be required to pay on a monthly or yearly basis.

   NET INCOME: Add your expenses and income tax payable together, and subtract this number from your total revenue. This is your net income (or loss).

Cash Flow Projection and Revenue

1. List all of the expected revenues (all sales from products and/or services received in cash and not accounts payable) for each month in your year-long cash flow projection.

2. Total the list of monthly expenditures such as rent, utilities, salaries, wages, professional services, advertising and inventory, and list them in a column on a monthly basis.

3. Carry over the revenue of the month before, add any new revenues and minus any disbursements to determine if there is enough cash flow to run the business in that particular month.

4. Create a balance sheet. At the top of the page, list the company name on one line, and the date the balance sheet is relevant for on the next. Make a section each for assets, liabilities and equity. List each item in columnar format, being added or subtracted.

5. Effectuate the following equations to get amounts for the asset section:

   current assets + cash in the bank + petty cash = net cash (by totaling the previous three items);

   inventory + accounts receivable + net cash = total current assets

   fixed assets + land + buildings - depreciation = net land and buildings

   equipment - depreciation = net equipment

   total assets

6. Effectuate the following equation to fill out the liability section:

   accounts payable + wages payable + taxes payable = total current liabilities

   long-term loans + mortgage = total long-term liabilities

   total liabilities

7. Add in these elements to complete the equity section:

   owners equity + owners draws + retained earnings + current earnings = total earnings

   total equity

Tips & Warnings

• Provide a cover letter and table of contents.

• Use a strong vocabulary in your business plan.

• Make your plan as professional as possible.

• Your executive plan should be brief-everything will be elaborated on in the other sections of the business plan.

• Do not exaggerate the facts, but do demonstrate how well your company will fare against your competition.

• Get a second or third opinion and/or hire a consultant.

• The financial speculations should be more than guesses-carefully think about the figures.

References

• Venture Choice, Creating Venture Value: How to Describe Your Business Plan
• BPlans: Writing a Business Plan
• RBC:Business Plans

Resources

• RBC: Balance Sheet For a Small Business