How to Write a Business Plan for Small Start Up Companies

Tips small businesses can use when writing business plans

by Rod Dunne on November 30, 2011

in Entrepreneurial

Many people interested in starting a small business don’t know how to write a business plan, and may wonder why it is necessary. For one thing, the business plan will be part of the bank or financiers’ loan application package.

In addition, the act of business plan writing guides the owner’s research to help determine if the business can succeed along with what type of strategic planning models they should be using to set up and grow the business.

In this post, I’ll walk you through the critical things you need to keep in mind when writing even simple business plans for small businesses along with some of the best practices for structuring/formatting actual content of your plan.

Key Steps in Starting a Small Business

The first step is to decide what kind of product or service the business will offer. Identify the market, and what the businessperson brings to the table. This can include industry knowledge, experience, money, willingness to work extra long hours, or a mentor/franchisor.

Once these issues have been determined, there are several important websites to research. One is the Internal Revenue Service, where potential business owners can learn how the IRS determines the difference between a business and a hobby.

Next, decide where the business will be located. Check with the local city or county offices to determine if that type of business is allowed in its planned location. For example, even small manufacturing operations which produce a lot of noise pollution may be restricted to specific districts within the city limits.

One helpful step at this point is the Small Business Administration (SBA) website. There, business owners will find all kinds of help on every aspect of running a business. It explains how to write business plans for small business in a generic sense, and even covers where to get help on future business issues like expansion (locally and overseas) and finances (including venture capital/angel investors).

Writing the Business Plan

The next step is to determine how to write a business plan. If money is not an issue, there are consultants who can write the plan for a fee. There are also business plan writing templates for sale on the internet.

It is not necessary to spend money at this stage, however. The Small Business Administration website tells how to write a business plan. They also offer free templates for business plan writing.

In place from day one you are setting out a clear vision for what your business will turn into. Even the most easy businesses to start up will benefit from having a plan which shows the different development stages you wish to pursue along with the types of finance that will be required to take you to each new level.

At the end of the day, no matter which templates you use or if you bring in outside consultants it is in your best interests to have a hands-on role in producing the content the document. After all, you’re setting out future vision and objectives for what your business is going to achieve and you alone will be responsible for driving most of that work.

Many word processing programs include business plans, free with software that may already be on the owner’s computer. Programs differ, but some free business plan software is located under the heading Presentations, and business plans fall under the subcategory of Content. The Design category offers different layouts, colors, and graphics. It helps to look through all the business plans under both categories, because they ask different questions, depending on the type of business.

Writing for Your Audience

The business plan should be thoroughly researched before it is submitted to a bank or other financier, who will scrutinize it like a detective. It helps to consider the plan from a loan officer’s perspective. Would someone loan money based on these answers?

When you include financial projections you have to make sure that you can backup this information with data or research. This form of analysis requires looking into potential market sizes, understanding your markup rates, target price balance, expected percentage of the market you hope to gain in year 1/2/3/etc.

Your audience should be able to understand what the key selling points are going to be in the industry you pursue. As a result, you should emphasize these in your business plan writing. For example, when starting a small business where faults are not tolerated (e.g. producing equipment for medical procedures) then having a well-defined quality control plan of the essential part of your documentation.

Critical Sections

The executive plan summary offers a precise business plan overview. It is the first thing people read, and explains why the business will succeed. It also contains a Mission Statement, which will help bankers, and even the owner, understand what the business is about.

In truth,  the executive summary and mission statement often set out exactly what is covered in the rest of your document. The remaining sections are there for investors who wish to drill down into some of the figures, resources and capabilities behind your startup.

Other critical sections address the owner’s expertise in this field. They also ask why this business would stand out against the competition. They will also want to know who will handle the small business marketing, accounting and sales teams/channels you intend incorporating.

The financier will ask who will manage the company, and will look at their background. This means including sections regarding the key employees along with their backgrounds. They need the owner’s financial statement, and want to see how much money the owner is contributing.

If other financiers are involved and were just looking for additional finance then details of other interested parties with definitely need to be included. Another important item is a projected income statement to show that the business could make loan payments.

Details of your product/service always you need to be included in sufficient detail and written clearly, concisely and with a view to emphasizing your unique selling proposition.

In marketing terms, you need to understand how your product/service will be promoted and advertised. Your brand should be a key part of this as is your company name choice. I’ve documented previously how to name a business in such a way that you can work both online and off-line, so won’t go into it further here.

Seeking Advice

Make several copies. Once it is complete, but before turning it in, invite several friends and business acquaintances to review the rough draft. It is important to choose individuals who you can trust and who will have sensible insights to provide. If necessary you may need to ask them to sign a nondisclosure agreement if you are providing details of intellectual property or business concepts you wish to protect within the plan.

Change the document as needed following the review, and ask other different people for feedback. At this point, seeking advice from a solicitor or accountant to give your business plan writing that final polish is a wise move. The plan should make sense to everyone who reads it, particularly the business owner, who will have to answer the financier’s questions.

TO SUM UP: Starting a small business can be exciting, rewarding, and profitable. The most important thing is to check out the Small Business Administration (SBA) website. There, potential business owners will find everything they want to know about, including how to write a business plan right down to the formatting of the document and some of the critical elements you need to include.

Author Rod Dunne...

Blog owner and sole writer Rod DunneI am the owner and sole writer on Product-ivity.com. This is my personal blog detailing troubleshooting tips for small businesses. Posts are based upon 2 decades in consultancy & innovation management within startups/maturing companies.

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