Six Steps to Developing a Business Plan

Perhaps you have a great idea for a business and you’re considering becoming one of the more than half a million people who starts a new business each month. One of the first things you’ll need: a solid business plan. While the thought of writing one may sound daunting, it shouldn’t scare you. Here are six components every good business plan should contain — and what to include in each of these sections.

Executive summary 

The executive summary should be a high-level overview of the rest of the document and tell the reader about the business you want to start, its planned model, its economic potential and its financial needs. This should be short — ideally a single page but up to two pages if necessary. It’s your chance to grab the reader’s attention so that they’ll read the remainder of the document.

Opportunity

Here’s where you tell the reader which need(s) among consumers you are filling — or which problem your business is going to solve. This should include information on the market you’ll be targeting: Who are they? What are their spending habits and patterns, and why do you think they will spend with you? And how much of that market can you hope to capture. This last part is of particular importance to potential investors or lenders.

Execution

This is where you get to discuss how you plan to take your idea and opportunity and create a thriving company. You’ll need to answer questions including: How will you get the product/service to market/potential customers? How will you market and advertise? What state and/or federal regulatory challenges you will be prepared to handle? What expenses you expect to incur? How will you outsell/out-service your competitors?

Team and company

While you will have touched on this subject lightly in your executive summary, here’s where you’ll go into more detail. Who will be by your side as you start and then run your new business? If you don’t yet know, how will you go about attracting the right people, and what will be your qualifications? What will be the titles, roles, and responsibilities of each member of your proposed team? What are the levels of compensation, and what is the compensation structure (i.e., do you plan to offer equity in the company?)?

Just as importantly, in this section you’ll discuss the location you’ve chosen for your business. If yours is a web-based enterprise that won’t require a specific space for success, opt for shared office space — and save a significant amount on rent.

Financial plan 

The financial section will probably be the one that’s most read by potential investors and lenders. It should consist of your income statement (a ‘snapshot’ of your current income sources), balance sheet (your worth) and cash-flow projection (the flow of cash during a particular period, and how much you have now).

Appendix

The appendix is where you will put the plan’s supporting documentation. This might include receipts, bank statements and the resumes of key management.

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