A business plan is often required to apply for a bank loan. It should be around five pages long because bank managers and other lenders are very busy people and it may not be possible for them to read longer reports.
Many business plans start with an executive summary which is placed at the beginning of the business plan. It summarizes the information given in the main report of the business plan, highlighting the key points and conclusions. The executive summary of a business plan is usually no longer than one page and can be read within a few minutes to get an overview of the business plan. Hence, the executive summary can help the bank manager or a lending officer to decide whether or not to read the rest of the document.
There is no universally accepted format for writing a business plan, but we can distinguish a few sections that a typical business plan will include.
Business Overview:
– Name and address of the proposed business (for new businesses);
– Description of the business activity;
– Cost of premises and other start-up costs (for new businesses);
– Details of the owner(s) and their past business experience. Are they qualified to open this business?
– Legal entity; the type of business organization (e.g. sole trader, partnership, private limited company) and rationale why this form is the most suitable;
– Quantifiable goals and business objectives of the proposed business or project;
– Benefits of the business to the customers and how the business adds value;
– Competitive advantage.
Sales and Marketing:
– Market research and test marketing;
– Any unique or distinctive selling point to differentiate itself from rivals;
– Details of the promotional mix used to target customers. Where, when and how often the products will be purchased?
– Branding. What are brand attributes? Details about basic concepts of branding: brand development, brand loyalty, brand awareness and brand recognition;
– The distribution plan detailing where the products will be sold;
– Customer service policy.
The market:
– Brief description of the target market;
– The expected number of customers and sales forecasting;
– The nature of the market such as customer profiles and market segmentation. Who are the customers? What do they do? Where are they? What are they looking for? What benefits are they seeking from the business? What are price, quality and service expectations?
– The expected growth of the market in the foreseeable future. What is the market potential? What does the secondary market research say about trends in the industry?
– Competitor analysis (e.g. type of competition, their market share, their strengths and weaknesses, etc.). Who are main competitors? Where do they operate? What products and services do they offer?
– Government regulations.
The product:
– Details of the good(s) and service(s) that are being sold. Prepare a thorough description of products to be sold;
– Supporting evidence showing why customers will pay for the products and services;
– Where and how production will take place (e.g. the equipment and tools that are needed, etc.)?
– Details of the suppliers of resources such as raw materials or components;
– Costs of production, i.e. the expected costs of operating the business;
– Pricing strategies to be used and why suitable. What is the price range for the main products?
Finance:
– Proposed sources of finance. How will the business or project be funded?
– The Break-even Analysis. How many products need to be sold in order to break even and start making profit? What is the margin of safety? What is the profit at maximum production capacity?
– Security (financial guarantees) in case the borrower defaults on the loan;
– Cash Flow Forecast and steps to deal with potential cash flow problems;
– Forecasted Profit and Loss Account for at least the first year of trading;
– Forecasted Balance Sheet showing the firm’s financial position;
– A forecasted rate of return for investors of the business venture.
Human Resources:
– Key personnel with their titles, positions and key areas of responsibility;
– The number and job roles of the workers likely to be employed;
– Qualifications of the workers including education, experience and skillset;
– Organizational structure of human resources;
– Details of payment systems (e.g. remuneration such as salary and wage rates, etc.);
– Policies and procedures (e.g. hours of operations, vacation program, performance assessment, training and development, etc.).
Production / Operations:
– Suitable production method;
– Location of the factories;
– Location of offices;
– The amount of production workers and their skills;
– Size of the factory and production capacity;
– Equipment required, proposed technology and if automation will be used (e.g. types and number of machines, etc.);
– Leasing or ownership of details and cost estimates;
– Ways to arrange delivery of raw materials;
– Controlling quality techniques (i.e. quality assurance or quality control);
– Environmental compliance.
Many business plans also contain sections with the analysis of internal and external environment of the business, risk assessment and contingency plans to deal with crisis situations or outlining what the entrepreneur will do if things do not go as planned.
Any additional supporting information and data (such as statistics) should appear in an appendix at the end of the business plan.
