The most important part of a business plan is the financial projections. In short, a sound financial plan will help you get business funding from a bank or lender. The next most important part of the business plan is the business plan and marketing plan (section). Banks and lenders need to understand how your business will operate, attract customers and close sales. Explaining how your business generates revenue will help banks and lenders make sense out of the financial projections.
Overall, your business plan should be a step-by-step guide that defines how you serve your target market and generate revenue and a return on investment (ROI). ROI is important because banks and lenders will want to know how they will be paid back. In this blog I go into detail about the elements of a professional business plan that are needed to portray your business as one that is capable of sustainability and a good return on investment (so that you’ll have a better chance of getting funding from a bank or lender).
Sidebar: A professional business plan is written by a professional business planner and/or business plan writer. I strongly suggest you seek the assistance of a business planner and/or business plan writer if you plan on applying for any type of small business funding. It’s a step that should be taken to be certain that all of the necessary details are accurately outlined in the business plan.
What You Need to Know First: There are 3 Sections of a Business Plan
There are three sections of a business plan and different information is covered in each section. All three are needed because they cover the top three most important aspects of the business—the business industry and how well it is doing, how the business will attract customers and close sales and how much revenue will be generated from closed sales. Within each section are subsections t
hat cover a specific topic about the business. These sections encompass everything a bank or lender need to know about your business to determine if it’s viable.
What You Need to Outline in the Business Plan Section
The business plan section covers over 20 topics of information related to your business. Here’s a list of those topics and a brief description of what should be discussed about the topic:
- Executive Summary – The key points of the business plan are outlined in the executive summary. Key points can include what products or services are offered, who started the business and why, how the company gets customers, how much revenue the business will, has generated and/or will continue to generate, and how much startup or working capital is needed. The executive summary should be written in a way that you can use it as a one-page business plan. Some banks and lenders may request a short executive summary instead of a full business plan.
- Business Goals & Objectives – These are measurable activities management team and staff will implement to accomplish the results wanted. An example of a business goal is to “obtain a new contract.” An objective for that goal would be to bid on local, federal and state contracts.” This is because the only way a business will win a contract would be to bid on them (depending on the industry). An objective is an activity that is done to ensure the goal is realized.
- Keys to Success – These are factors that will contribute to the overall success of the business. An example of a key success factor is the location of the business. This just means that the success of the business largely depends on the area it is in and who lives in the area (e.g. target market demographics).
- Company Summary – This is a summary describing what products or services are offered by the company (and to who) and where the company is located.
- Company Ownership – The owners of the company are identified along with the start date of the business and the location of incorporation.
- Company History – The history behind the start of the company is discussed under this topic. It covers why the business was started, the experience of the business owners, and what milestones (i.e. accomplishments) have been reached so far.
- Company Location & Facilities – The physical and mailing addresses are identified in this section. Whether facilities are leased or owned is also identified.
- Services Description – The products or services offered by the business are described in greater detail (than in the company summary section).
- Future Products & Services – If the company planning on offering new products or services in the next three years, each product or service should be identified here. A detailed description of each is best.
- Fulfillment & Distribution of Products or Services – The steps taken to deliver a product or service is described in this section.
- Business Model Description & Chart – Your business model is described in this section. A business model consists of all of the elements outlined here as described by the Stategyzer team.
- Operations & Technology – The hardware, software, equipment and supplies used to run the business should be identified here.
- Service Business Analysis – The NAICS (North American Industry Classification System) Code and description for your industry should be provided in this section. NAICS Codes are series of numbers that the government, banks and lenders use to identify each business industry. The NAICS description for each code describes the business industry. NAICS Codes and descriptions can be obtained via the U.S. Census Bureau website.
- Business Industry Analysis – The size of the industry, how well it is doing and why is described here.
- Business Industry Trends – New changes within the industry (and how those change affect long term business growth and sustainability is described here).
- Business Industry Growth Analysis – The rate of industry revenue growth and what affects industry revenue growth is identified in this section.
- Business Industry Risks – Challenges within the industry that can negatively affect the overall growth and sustainability of the business are identified here. How those challenges are dealt with is also discussed.
- Business Industry Participants & Main Competitors – The largest industry competitors and the amount of market share they possess is discussed here. Local and regional competitors are also identified. Their level of market share is also discussed.
- SWOT Analysis – The strengths and weaknesses of the business, management team, and staff are outlined here. The opportunities for growth within the industry are also identified as well as all of the challenges (i.e. threats) that come along with those strengths, weaknesses, and opportunities for growth.
- Management Team & Personnel Plan – The management team and staff experience, responsibilities and pay are described here.
- Personnel Training Plan – How the staff is trained by the management team should be outlined here.
- Organizational Structure – Who reports to who is described in this section. This describes the hierarchy of the organization such as which staff member reports to a certain supervisor and so on.
What You Need to Outline in the Marketing Plan Section
The marketing plan can cover fewer topics than the business plan, however they are equally important. Here are the most critical topics that should be covered in a marketing plan.
- Buying Patterns – This sections describes how, when and why people buy the products or services offered in your business industry. For example, it describes whether or not they buy during a certain time of the year (i.e. Christmas) or for certain reasons (i.e. a death in the family), etc.
- Target Market Description & Segmentation – Your target customer is identified in this section. Why you are targeting them, where they are located, and characteristics like their age (or their industry if your business is B2B) is described.
- Target Market Needs – The basic needs of your target market in relation to your products or services are described. Describe all of the needs that are met for your target market when they use your products or services.
- Community Benefits – How your business benefits the surrounding community (in which it is located) should be described here.
- Marketing Strategy & Vision – The marketing and advertising techniques that you use to attract your target market (to turn them into customers) should be described in this section.
What You Need to Outline in the Financial Plan Section
The financial plan describes how many sales are closes, how much money each product or service generates for the business, how much it costs to closes sales and generate revenue (i.e. expenses), and whether or not the business turned a profit. Ideally, the financial projections should at least cover the next three years of operations. Here’s a list of the topics you can cover in the financial plan section to clearly communicate this information to a bank or lender.
- Past Sales Performance – Business revenue generated (for each product or service) for the past three years should be described here.
- Future Sales Performance (Sales Forecast) – Business revenue that will be generated for the next three years should be outlined here.
- Sales Performance by Month and Year – The number of products or services sold by month and year (along with the revenue generated from those sales during those times) is identified.
- Management Team & Personnel Salaries – The management team and staff positions are listed along with the amount of pay that will be paid to each position over the next three years.
- Benchmarks – The performance of the business is measured via benchmarks such as the number of sales, gross profit margin and operating expenses. As a rule of thumb, sales and gross profit margin should be high in comparison to operating expenses. Benchmarks help a bank or lender understand how the success of the business is determined.
- Break-Even Analysis – Describes the point in which the business generates enough revenue to turn a profit.
- Profit & Loss – Describes the amount of business revenue generated and expenses incurred during a specific time period.
- Profit Monthly & Yearly – Outlines how much the business actually profited from the sale of its products or services (on a monthly and yearly basis) after all expenses were paid.
- Gross Profit Margin Monthly & Yearly – Outlines how much the business profited after subtracting the cost of selling its products or services.
- Cash Flow – Outlines the amount of money flowing in and out of the business on a monthly and yearly basis.
- Balance Sheet – Describes the assets, liabilities and capital of a business during a specific time period.
- Ratios – Describes the overall financial health of the business. A detailed description of ratios is outlined here.
You Can Use This as Your Business Plan Template & Consult w/a Business Planner
You can start writing your business plan using the business plan outline identified in this blog. All of the sections described in the business plan outline covers the information that banks and lenders want to see in a business plan. After writing a rough draft of your business plan, contact a business planner or business plan writer. What you have written will help a business planner or business plan writer develop a finalized business plan for your company.
The Best Business Planner Understands Banking & Finance
I recommend QT Business Solutions for business planning and writing because the company was started by a former banker who understands what banks and lender want to see in a business plan. The QT team knows how to develop a business plan that will increase your chances of obtaining the startup or working capital you need to be successful. The company has been around for 16+ years and the team has 60+ years of combined experience writing business plans and helping business owners get capital. They even offer a guarantee that you will be approved for [debt] financing as result of using the business plan they write for you (as long as you meet their minimum credit requirements). If you’re ready to get funding for your business, take first step and start writing your business plan. It can make the process of obtaining funding for the business much simpler.