Cash flow is both vital to a company and hard to follow and normal business plan includes a standard set of elements, as shown below. Plan formats and outlines vary, but generally a plan will include components such as descriptions of the company, product or service, market, forecasts, management team, and financial analysis.
Your plan will depend on your specific situation. For example, description of the management team is very important for investors while financial history is most important for banks. However, if you’re developing a plan for internal use only, you may not need to include all the background details that you already know. Make your plan match its purpose.
Cash is usually misunderstood as profits, and they are different. Profits don’t guarantee cash in the bank. Lots of profitable companies go under because of cash flow problems. It just isn’t intuitive.
Implementation details are what make things happen. Your brilliant strategies and beautifully formatted planning documents are just theory unless you assign responsibilities, with dates and budgets, follow up with those responsible, and track results. Business plans are really about getting results and improving your company.
Can you suggest a standard outline?
If you have the main components, the order doesn’t matter that much, but here’s the outline order we suggest in Business Plan Pro and LivePlan software:
Executive Summary: Write this last. It’s just a page or two of highlights.
Company Description: Legal establishment, history, start-up plans, etc.
Product or Service: Describe what you’re selling. Focus on customer benefits.
Market Analysis: You need to know your market, customer needs, where they are, how to reach them, etc.
Strategy and Implementation: Be specific. Include management responsibilities with dates and budget.
Management Team: Include backgrounds of key members of the team, personnel strategy, and details.
Financial Plan: Include profit and loss, cash flow, balance sheet, break-even analysis, assumptions, business ratios, etc.
View an expanded business plan outline
We don’t recommend developing the plan in the same order you present it as a finished document. For example, although the Executive Summary comes as the first section of a business plan, we recommend writing it after everything else is done.
This free fill-in-the-blanks business plan template follows the format that is preferred by the SBA and lenders and can be a useful guide when writing your plan.
As mentioned before, reviewing a standard business plan outline can also be a good starting point.
If you are looking for additional help, a tool like LivePlan or Business Plan Pro is a good option.
If you are approaching a banker for a loan for a startup business, your loan officer may suggest a Small Business Administration (SBA) loan, which will require a business plan. If you have an existing business and are approaching a bank for capital to expand the business, they often will not require a business plan, but they may look more favorably on your application if you have one.
A business plan should prove that your business will generate enough revenue to cover your expenses, but a business plan may vary depending on your audience. If you are writing a plan for your colleagues and partners to expand an existing business, then the focus of that plan may be more operational than financial. If you are writing a plan for a bank, the most important aspect to the bank manager will be your financials. Are your assumptions realistic? Will the cash flow be enough that you can make the monthly payments for the loan you have requested? If your business is making $1,000 a month and your payments are $1,200 a month, the bank is likely to turn you away.
If you are writing a plan for a venture capitalist, the most important factor in a decision to invest in a company is the quality of the people.
Your business plan is like your calling card; it will get you in the door where you’ll have to convince investors and loan officers that you can put your plan into action. You want your calling card to look impressive, so make sure your business plan is printed out on good quality paper, you have checked the spelling and grammar, and that your numbers add up. Anyone who sees errors while reading your plan will wonder whether you are going to make similar errors in running your business.
A great business plan is the best way to show bankers, venture capitalists, and other investors that you are worthy of financial support. Make sure that your plan is clear, focused and realistic. Then show them that you have the tools, talent and team to make it happen.
You need a business plan if you’re running a business.
A business plan is like a map and a compass for a business. Without it you’re traveling blind. With a plan you set objectives, establish priorities, and provide for cash flow.
You need a business plan if you’re applying for a business loan.
Most banks require it, and even those that don’t strictly require it expect it. They expect it to be a summary of the business, with some predictable key points.
The plan won’t get you the investment, but not having a plan will mean you won’t get investment. Investors require a business plan. They invest in the people, the idea, the track records, the market, the technology, and other factors; but they look to the business plan to define and explain the business.
You need a business plan if you’re working with partners.The business plan defines agreements between partners about what’s going to happen.You need a business plan to communicate with a management team.
The day-to-day business routine is distracting, problems come up, opportunities appear, and commitments should be followed and tracked. How do you know where you are in business without establishing where you started and where you intended to go? How can people commit to a plan they can’t see?You need a business plan to sell a business, or to set a value on a business for tax or other purposes such as estate planning, or divorce.
The classic uses are seeking investment or applying for a loan. There are also the obvious communication with employees, partners, family members, consultants. And there is valuation, sometimes for tax purposes, sometimes for growth, divorce, estates.
Too many people think of business plans as something you do to start a company, apply for a loan, or find investors. Yes, they are vital for those purposes, but there’s a lot more to it. Preparing a business plan is an organized, logical way to look at all of the important aspects of a business. First, decide what you will use the plan for, such as to:
- Define and fix objectives, and programs to achieve those objectives.
- Create regular business review and course correction.
- Define a new business.
- Support a loan application.
- Define agreements between partners.
- Set a value on a business for sale or legal purposes.
- Evaluate a new product line, promotion, or expansion.
Sadly, many of the people who need a plan don’t know they need it. They get trapped by the myths of business planning. They don’t realize that plans are not just for start-ups, loans, or investment. They don’t realize that business plans are easier to develop than most people think. To succeed in business you simply must plan the steps, set priorities, allocate resources, and manage the cash. Sure, some people say they don’t plan, but if they’re successful then they’re actually always planning in their heads. And you can keep that plan in your head if your business is very simple, cash flow is always adequate, you don’t work with other people, and you don’t need to communicate your business plan with other people either.
Don’t accept disadvantages in business. Don’t try to run without a plan. Doing a plan is probably much easier than you think, and much more valuable.
Business plans are also called strategic plans, investment plans, expansion plans, operational plans, annual plans, internal plans, growth plans, product plans, feasibility plans, and many other names. These are all business plans.
In all these different varieties of business plan, the plan matches your specific situation. For example, if you’re developing a plan for internal use only, not for sending out to banks or investors, you may not need to include all the background details that you already know. Description of the management team is very important for investors, while financial history is most important for banks.
Some of these specific case differences lead to different types of plans:
The most standard business plan is a start-up plan, which defines the steps for a new business. It covers standard topics including the company, product or service, market, forecasts, strategy, implementation milestones, management team, and financial analysis. The financial analysis includes projected sales, profit and loss, balance sheet, cash flow, and probably a few other tables. The plan starts with an executive summary and ends with appendices showing monthly projections for the first year.
Internal plans are not intended for outside investors, banks, or other third parties. They might not include detailed description of company or management team. They may or may not include detailed financial projections that become forecasts and budgets. They may cover main points as bullet points in slides (such as PowerPoint slides) rather than detailed texts.
An operations plan is normally an internal plan, and it might also be called an internal plan or an annual plan. It would normally be more detailed on specific implementation milestones, dates, deadlines, and responsibilities of teams and managers.
A strategic plan is usually also an internal plan, but it focuses more on high-level options and setting main priorities than on the detailed dates and specific responsibilities. Like most internal plans, it wouldn’t include descriptions of the company or the management team. It might also leave out some of the detailed financial projections. It might be more bullet points and slides than text.
A growth plan or expansion plan or new product plan will sometimes focus on a specific area of business, or a subset of the business. These plans could be internal plans or not, depending on whether or not they are being linked to loan applications or new investment. For example, an expansion plan requiring new investment would include full company descriptions and background on the management team, as much as a start-up plan for investors. Loan applications will require this much detail as well. However, an internal plan, used to set the steps for growth or expansion funded internally, might skip these descriptions. It might not include detailed financial projections for the whole company, but it should at least include detailed forecasts of sales and expenses for the new venture.
A feasibility plan is a very simple start-up plan that includes a summary, mission statement, keys to success, basic market analysis, and preliminary analysis of costs, pricing, and probable expenses. This kind of plan is good for deciding whether or not to proceed with a plan, to tell if there is a business worth pursuing.