How to Prepare a Business Plan

Learning how to prepare a business plan will help your business to start out on the right foot by directly declaring its goals and objectives up front. Business owners and managers will prepare a business plan as a presentation to seek funding for their business or as a general guideline for the execution of the business' mission. A good business plan will give any reader an understanding of the business model, the competitive environment, and, at least on a macro level, the strategic direction that the company will take to achieve its goals. It will offer a budget and cash flow analysis as well as financial statements if it is an ongoing business. And if it is to be the centerpiece of an investment presentation, it will also offer an exit strategy.

Summary

The plan begins with an executive summary. This should be a relatively brief overview of the business with an explanation as to how it will make money and how it will build the value of its equity. If there is a key competitive element that is a reason for forming the business, such as a patent, for example, then that should be mentioned in the executive summary as well. There should also be a detailed analysis of the competitive environment in which the business will function. Analysis of the most directly competitive companies is an important component along with how the business can get a competitive advantage against them. There should be a section presenting the biographies of the key executives who will establish the company's strategic direction and supervise the execution of the business plan. The specific roles of each person and their qualifications to perform those roles should be emphasized in this section. There should be a detailed description of the products and services that the company will offer its potential customers with an explanation as to why they expect to get market share. And a marketing, promotion and press plan should be presented in as much detail as possible. Finally there should be a section on production, sales, and operations to give an overview of how the company will perform those vital functions.

Quantitative Section

Once this is completely written, you need to develop the quantitative section of the plan. It is crucially important to make sure that any assumptions regarding the numbers that you generate can be supported by the qualitative section of the plan and by market conditions. For example, when you make your sales projections, they must be reflective of the amount of resources that you have committed to sales and marketing. Unless your product is so unique and extraordinary or you have an enormous budget for advertising, you cannot expect a new business to grab off too much market share in its first year.

Budget

Now you have to do your budget. Do your research to determine what the costs of operating your business will be on a monthly basis. Figure production, overhead, salaries and commissions, advertising and promotion, outside professionals, cost of sales, and all other costs. Set this against a monthly projection of sales revenue. Most likely you will be running a negative cash flow at the beginning. Run out your projections for several years. When you reach positive cash flow you will see when the business will start to finance itself. The negative amount up until then is the minimum financing that you will need to run your business.