This is a 4 part blog series that’s designed to educate entrepreneurs and small business owners on how to develop a business plan according to the average lender’s standards. Developing a business plan that meets lender standards will contribute to getting your small business loan request approved. This is part two of the blog series. Go here to read parts one, two, and three.
How you present the information in your business plan will be a key factor in whether or not your small business loan request will be approved. If you approach a lender with a skimpy business plan that lacks accurate information and is not well structured, a lender will send you on your way in a heartbeat. To save yourself the embarrassment you should apply the last part of my formula for writing a winning business plan to your own business plan.
As I stated in part one of this blog series, the last critical part of my formula for writing a winning business plan is its “Structure and Setup.” Below I provide an outline of each section you should include in the business plan, along with a description of what you should discuss in each section. I also include which answers to the questions I outlined in part two of this blog series should be included in each section. You will need to use part two of the blog series along with part four to know what answers go where.
[Sidebar: Each section should be very detailed. Even if you gave a short answer, you should stretch it out as much as possible when writing the actual business plan.]
- Cover Page (answers to questions 1, 2, 3, and 4) – This page simply includes your company name, location, and contact information. You should also include the current date.
- Confidentiality Agreement – This page should include a short confidentiality agreement that all readers should sign before viewing the business plan. An example confidentiality agreement for a business plan can be viewed here.
1.0 Executive Summary (answers to questions 5 and 6) – This section should include a description of your company and services. This includes what you have to offer and your reason for being in business (i.e. your mission statement).
1.1 Objectives (answers to question 7) – This section should include at least 3 measurable business goals that you want to accomplish over the next 5 years.
1.2 Mission Statement (answers to 6) – This section should include your mission statement. Your mission statement is your primary reason(s) for being in business.
1.3 Keys to Success (answers to questions 6 and 7) – This section should include a list of at least 8 keys things you need to do on a continuous basis to build and sustain a successful business. This could be building partnerships with other companies in your industry or joining business associations so you can network and build your contact and client base.
2.0 Company Summary (answers to question 5) – You can use the same content for this section as you used in section 1.0.
2.1 Company Ownership (answers to questions 2, 4, and 9) – This section should include information about the owners and when the company was legally registered in the state where it conducts business.
2.1.1 Company History (answers to question 10) – This section should include information about the past history of the business including company accomplishments and milestones. A good example would be the number of customers, clients, and/or contracts obtained and the amount of revenue generated to date.
2.2 Company Location & Facilities (answers to question 3) – This section should include information about your business location – (i.e. address and whether or not it’s a home or commercial office space).
2.3 Products & Services Description (answers to question 5) – This should include a detailed description of your product or service offering. You can use content from section 1.0 and 2.0 for this section.
2.4 Future Products & Services (answers to question 11) – This section should include information about any future products and services you plan on offering.
2.5 Fulfillment & Distribution of Services (answers to questions 12 and 13) – This section should include a step by step outline of how you deliver your products and/or services to your customer.
2.6 Business Model Description and Chart (answers to questions 14, 15, 12, 6, 5, 16, 20) – Your business model should outline how you operate your business. The experts over at Business Model Foundry have created an easy to follow format for designing business models. You can visit their website to learn how to develop your business model chart. I strongly suggest the use of this site when writing your business plan. I have used their format to design 100’s of business model charts for small business owners who have been able to raise thousands of dollars in funding.
2.6.1 Operations and Technology (answers to question 16) – This sections should include information about what supplies, equipment, and software programs you use to operate your business. Just about any technology you need to use to operate your business effectively should be discussed here.
3.0 Service Business Analysis –The section should include the business industry NAICS code and description which can be obtained from the S. Census Bureau website. (I discussed using the U.S. Census Bureau a as a research source in part three of this blog series). Lenders use the NAICS code to define your business industry.
4.0 Market Analysis – This section should include County Business Patterns charts from the U.S. Census Bureau website. These charts give an analysis of business industries based on the number of establishments in each industry, their location, the number of paid employees a business industry has, and the number of sales in the industry per location.
4.1 Market Trends (answers to question 17) – This section should include data from FirstResearch. FirstResearch includes a “market trends” section in reports for all industries (so does IBISWorld). I mentioned these research sources in part three of this blog series.
4.2.1 Market Risks (answers to question 18) – This section should include data from FirstResearch. FirstResearch includes a “business challenges” section in reports for all industries (so does IBISWorld).
4.3 Business Participants & Main Competitors (answers to question 19) – This section should include data from FirstResearch. FirstResearch includes a “competitive landscape” section in reports for all industries (so does IBISWorld).
4.4 Competition & Buying Patterns – This section should include data from FirstResearch. FirstResearch includes a “sales, operations, and technology” section in reports for all industries (so does IBISWorld). You should use the information about industry sales for this section.
4.5 Target Market Description & Segmentation (answers to question 20) – This section should include data from American FactFinder (offered by the U.S. Census Bureau). You will be able to select the characteristics that fit your target market and the American FactFinder tool will generate a table with the data included.
4.6 Target Market Needs (answers to questions 21 and 22) – This section should include information about the needs of your target market as it relates to your product or service.
4.7 Community Benefits (answers to questions 23 and 24) – This section should include information about how your business will benefit your local community.
5.0 Marketing Plan Summary (answers to question 33) – This section should include your marketing vision and strategy. Your marketing strategy is how you plan on gaining exposure for your business and reaching your target customers. Your vision is the outcome you expect from implementing your marketing strategy.
6.0 SWOT Analysis – This section is an introduction to your strengths, weaknesses, opportunities, and threats.
6.1 Strengths (answers to question 25) – Discuss your strengths. These are things that will contribute to the success of your business. It can include your experience, your industry connections, your licenses, your affiliations, etc.
6.2 Weaknesses (answers to question 26) – Discuss weaknesses that will slow the success of your business. This could include a lack of capital or human resources to run the business.
6.3 Opportunities (answers to question 27) – This section should include your answers and data from FirstResearch. FirstResearch includes an “opportunities” section in reports for all industries (so does IBISWorld).
6.4 Threats (answers to question 21) – This section should include your answers and data from FirstResearch. FirstResearch includes a “business challenges” section in reports for all industries (so does IBISWorld).
7.0 Management Team Summary (answers to question 28) – This section should include the names of each management team member, their position titles as well as duties and responsibilities.
7.1 Management Team Gaps (answers to question 29) – This section should include information about any management team members that you need and currently do not have, including the position title and responsibilities.
7.2 Personnel Plan (answers to questions 30 and 31) – This section should include data from FirstResearch or IBISWorld. They both have “human resources” sections that discuss industry pay rate averages and Bureau of Labor statistics. It should also include your personnel plan chart which should outline each position and the salary that will be paid to people in each position over the next 3 years.
7.3 Personnel Training Plan (answers to questions 32) – This section should include details about how you will train your employees.
7.4 Organizational Chart (answers to questions 33) – This section should include your organizational chart. An organizational chart shows the hierarchy of employees in your organization based on position. An example organizational chart can be viewed here.
8.0 Financial Plan Summary (answers to questions 34, 35, and 36) – This section should include your full financial plan. Your financial plan should include at least 3 years of financial projections. You should discuss your expenses, estimated sales, and estimated revenue. Keep in mind that your financial projections should be very detailed and not simplified in any way. (I strongly suggest consulting with an expert when writing the financial section. A personal or small business banker could provide you with valuable feedback).
That concludes this blog series! You should now be able to at least write a basic business plan that will help you get your small business loan request approved, the first time you apply. If you think you still need help writing your business plan, consulting with a business plan writing experts like CapitaLinker might help. CapitaLinker has partnered with a funding company that is owned by a former small business banker whose team has written hundreds of business plans for small business owners in need of a small business loan. And their customers have actually been able to secure funding using the business plan, especially microloans up to $50,000. Check them out if you need assistance. They use the same formula I have outlined in this blog series to write business plans that get approved. Good luck!