One of the greatest mistakes an entrepreneur can make is to go into business without a thorough business plan. Business plans are the face of your company, and can make the difference in whether or not you receive a loan or whether someone chooses to invest in your company. The importance of a good business plan cannot be overstated, as it defines your business, sets your objectives, and enhances your ability to make sound business decisions in line with your overall business goals.

Although all business plans vary slightly, they can all be divided into several distinct sections and all follow the same general format. By presenting your business plan in this way, investors and lenders know immediately where to look for the information they need in order to make a decision. The primary sections that should be included in your business plan are:

• Executive Summary
• Business Opportunity
• Marketing and Sales Plan
• Management Team and Personnel
• Business Operations
• Financial Forecasts

Executive Summary

The executive summary is perhaps the most critical part of your business plan, as it is sometimes the only section that will be read before deciding whether or not to consider your business for a loan. If a lender or investor likes what is written in the executive summary, he or she will continue reading; otherwise, you may not get another chance to impress them with your business idea.

The executive summary is an overview of your business and, as the name suggests, a summary of your entire plan. It should describe your business and encompass the key points from each section of your business plan. For example, the executive summary would not include an exhaustive list of your competitors and their products—that is for the marketing and sales plan—but it would touch upon how your product differs from others on the market and what you have to offer that is special. The executive summary should be brief, no more than one or two pages. Although it comes at the beginning of your business plan, it should be written last to ensure you highlight the most important points of each section.

Many entrepreneurs misuse this section of the business plan. It should not be simply a description of your business and products; rather, it should summarize your entire plan. It should not list the contents of the business plan; instead, it should pick out key points. For example, your executive summary should not read, “This business plan will show the weaknesses of my competitors and show that what I have to offer is unique.” Instead, it should read, “This product is unique because…” Lastly, the executive summary is not a place for you to advertise your product. You are not trying to convince lenders and investors to buy your product; advertising hype will merely turn them away from reading the rest of your plan. What you are trying to do is to convince them that you have a viable business idea, an opportunity for business success, a solid marketing strategy, a qualified team in place, and the financial forecasts to ensure entrepreneurial success!

Business Opportunity

One of the most common mistakes entrepreneurs make when creating a business plan is not explaining the business opportunity clearly enough. Although the business opportunity can be written into other sections of your business plan, we have given it its own section to emphasize its importance. The business opportunity should answer the question, is my business idea viable?

This section is where you can define the simple vision for your company and a clear idea for your product or service. This section should provide an overview of your business, including the history of your business, progress to date, and vision for the future. Questions to be answered in the overview of your business should include: Have you started conducting business? If not, when? If so, what progress have you made? Did you acquire this business from a previous owner or start from scratch? If you acquired it, what is the history of the business previously?

Second, the business opportunity must address your product, including why it is different, why customers will buy your product, whether or not your product is already developed, and whether you hold or plan to hold any patents, copyrights, or trademarks. Questions to be answered in the overview of your product include: Have you already developed this product? If yes, have you begun selling the product, and how has it been received? If no, what are your plans and timeline for development? How is this product unique, and what are the benefits to using this product instead of a competitor’s product?

Marketing and Sales Plan

The marketing and sales plan is a critical part of any good business plan. The most frequent mistake entrepreneurs make in their business plan is underestimating the strength of competitors. Click here to learn how to create an effective marketing and sales plan, or go to the section titled “Knowing Your Market” under “Starting a Business”.

Management Team and Personnel

It is important to demonstrate that your management team and/or staff have the skills and qualifications to handle every facet of your business. Is there evidence of expertise in marketing, finance, operations, and development? This section of your business plan should outline the structure and key skills of your staff. Define the positions of your staff, their role in the company, and a summary of each person’s background, experience, and qualifications. Include the time commitment of each individual (e.g., full-time, part-time, one day a week); also include descriptions and qualifications for consultants and partners.

Many entrepreneurs have not begun hiring employees at the time they develop their business plan. If this is the case, include the structure and key skills of staff you plan to hire, a timeline for hiring, and the salaries you estimate to assign to each position. Identify recruitment and training procedures, timelines for doing so, and the costs of employee training.

Finally, you should also include plans to encourage employee development as well as plans to boost morale. Programs such as incentives, bonuses, and additional benefits should be included.

Operating Plan

Your business plan must include a section covering your operating capabilities and plans for upgrading. The areas you should cover in this section include office space and location, production facilities, and information technology (IT) infrastructure.

Office space and location will include where you will house your office (e.g., in your home, an office building, etc.), the costs associated with this location, the benefits and disadvantages to being housed in that location, whether you rent or own the space, and (if you rent) the duration of your lease. If you have plans for upgrading your space or relocating, that should be included as well.

If your business requires you to create a product, you will have to include a paragraph on your production facilities. This should include whether you already have facilities and whether you plan to do your own production or outsource it to another company. It should describe the benefits and disadvantages to handling your own production versus outsourcing it, as well as the facilities you have or need, the capacity of the facilities versus anticipated demand, and whether you plan on making an investment into enhancing your production capabilities.

Finally, this section should include a description of your IT infrastructure, including the strengths and weaknesses of your system, your plans to upgrade the system, and how your system will be used as a business tool.

Finances

The final component of your business plan should be your financial forecasts. The purpose of this section is to inform lenders and investors of how much capital you need, how secure their loans or investments are, how you plan to repay the loans, and what your projected sources of revenue and income will be. To do so, you should include detailed financial projections by month for the first year and by quarter for years two and three, as well as the assumptions upon which your projections were made, including the breakdown of anticipated costs and revenues for all three years. You should also include cash flow statements, loan applications, capital equipment and supply lists, and profit & loss statements.

For more information on creating a financial plan and estimating start-up costs, click here or go to the section titled “Acquiring Capital and Managing Finances” under “Starting a Business”.

For additional help in preparing your business plan and launching an entrepreneurial venture, check out TVC’s Veteran Virtual Business Incubator, a one-stop resource for Veteran entrepreneurs!