Parts of the Business Plan
This is a general business plan format. For most businesses, the information
contained in a business plan should be consistent with this format,
although section titles and order can show some variety. The following
information should be included in every business plan. A brief description
of each section follows.
I. Executive Summary
II. The Business Description
A. The Business
B. Business History
C. Form of Ownership
D. Ownership Interest
E. Industry Trends
F. Background Information About the Owners
III. The Marketing Plan
A. Products and Services
B. The Target Market
C. Business Location
E. Advertising and Promotion Strategies
IV. The Operations Plan
C. Operating Costs
D. Licenses, Permits, Zoning, Insurance, Taxpayer Number, Corporation
E. Capital Equipment
F. Production Methods
G. Management Methods
I. Outside Services
V. The Financial Plan
A. Need for and Sources of Cash
B. Equipment List
C. Income Statement
D. Break Even Analysis
E. Cash Flow Statement
F. Balance Sheet (or Personal Financial Statement)
G. Supporting Documents
The executive summary is the first and most important section of a
business plan. Its purpose is to convince the audience that this business
is worthwhile. This “opening argument” must capture and
hold the intended reader’s attention and direct it to a specific
purpose. The executive summary should avoid industrial jargon –
the reader may lose interest. Make the summery clear, concise, and convincing.
Although the executive summary appears first in the plan, usually it
is the last section written.
The Business Description
The Business. This section discusses the
business’s name and its significance, the form of ownership, the
business location, the service or product to be sold, and projections
for the future.
Business History. This section describes the
history of an existing business or need for a new business. It describes
how and why an existing business was founded or why a new business is
needed. For an existing business, it should discuss the growth of the
business on a local and regional level or beyond if appropriate. For
a new business, it should discuss the industry on a local and regional
basis and the projected growth of the business.
Form of Ownership. This section specifies
and discusses the rational for the type of business ownership. It includes
documents or agreements between partners or shareholders. It discusses
how the potential business owner determined the appropriate form of
ownership for his or her business. The Secretary of State’s office
in the state where the consumer wishes to open the business can help.
In Montana, for example, the We Mean Business booklet contains the filing
forms necessary to start a business and the information needed to determine
the appropriate form of ownership. The booklet details the legal steps
necessary to start, maintain and/or dissolve a business. A potential
business owner should also contact a certified public accountant or
a business consultant to discuss the appropriate form of ownership for
his or her particular business.
Ownership Interest. This section lists all
owners, such as major shareholders or partners. It also documents owners’
or shareholders’ willingness to provide personal guarantees for
Industry Trends. This section discusses the current
trends of the proposed (or existing) business and the industry. It describes
whether or not the demand for the product or service exceeds current
Background Information About the Owners. This
section provides information about the owner(s), describing any experience
in the industry or with managing a small business. This section also
contains information about any business advisors other than lawyers
The Marketing Plan
Products and Services. This section describes
the product or service, the currently-unsatisfied market need or desire,
and describes how the product or service will meet that need or desire.
The Target Market. This section describes
the market and the customer. Many resources are available at public
libraries that provide data on markets and customers. Here are just
- County and City Data Book
- Statistics for States and Metropolitan Areas
- Statistical Abstract of the United States
- Trade Association Publications
- A Guide to Consumer Markets
Make sure you reference all information sources and describe the method
used to gather target market data; describe the geographic market including
its physical size, history, and trends (e.g., growth); and the proximity
and relevance of potential customers. This section should also contain
an estimate of the potential market, the number of customers the business
expects to serve immediately after opening, the rate of expansion, and
possible expansion into other markets.
Business Location. Describe possible locations
explored, why the selected location is the best, and how it will benefit
Competition. This section describes others who are competing
for the same market, what they charge, their weaknesses and strengths,
how your product or service differs from theirs, and the features and
benefits of your service or product versus the features and benefits
of competitors’ service or product. Describe the methods used
for gathering this information.
Describe how you will gain market share. For example, will people patronize
your business because of price, technical sophistication, image, superior
product or service, location, or sales and/or marketing techniques?
Advertising and Promotion Strategies. This section describes
how the message about the product or service will be communicated to
the users. It should describe the business owner’s philosophy
about customer service, the image you wish to portray about your product
through packaging, brochures, letterhead, business cards, displays,
and the behavior/dress of employees. It also discusses all promotional
activities and answers the following questions. What advertising media
will be used – newspaper, radio, television, the Internet, windshield
handouts, magazines, mailings, billboards, demonstration sites? What
is the frequency of advertising – daily, weekly, monthly, bi-monthly?
Will promotions (giveaways, discounts) be used? Who will contact customers
– in-store sales staff, sales representatives, telemarketers?
How will customers be contacted – by telephone, in-person cold-calls,
trade show(s), e-mail? Will a website be created?
Finally, this section should also discuss how customer satisfaction
will be assessed. For example, through questionnaires, focus groups,
repeat business, and/or referrals to others.
The Operations Plan
The operations plan explains how the work will be done and how the
business will be managed and the business’s location. It also
describes the manufacturing process including materials used in the
process and employees and their duties. It also describes the business’s
Inputs. “Inputs” are materials,
suppliers, and arrangements with suppliers. This section describes them
and lists prices, volume discounts, and payment options that might influence
the decision to trade with a higher-priced vendor.
Facilities. “Facilities” include location
of the business and its physical layout. This section describes the
location, features of the building and site, ownership, lease arrangement,
remodeling needed (and costs), other businesses in the area, and zoning.
It discusses why the location was selected and its advantages and disadvantages.
It should include a floor plan. Questions that should be answered here
include: Is the business located outside of the home? Is parking adequate?
Are modifications necessary to accommodate the business owner’s
disability or to ensure ADA compliance?
Operating Costs. This section describes, and lists costs
for, all utilities (heat, light, telephone and water) to be used by
the business for production and operation.
Licenses, Permits, Zoning, Insurance, Taxpayer Number, Corporation
Status. The types of licenses, permits, insurances, and taxes
paid vary according to the business. But it is likely that a business
will require one or more of these to operate.
Capital Equipment. Capital equipment includes permanent
items that the business keeps and uses for many years. These include
equipment, furniture, and fixtures needed to start and run the business.
This section describes each piece, discusses why it is necessary, and
lists its cost and supplier.
Production Methods. This section describes both the
tools used for making the products or performing the service and the
work space(s), including the amount of room needed for each employee;
the labor needed to produce the product or provide the service; methods
for monitoring quality; and methods for complying with environmental
and safety regulations.
Management Methods. This section describes
how the business will be managed and the business owner’s knowledge,
skills and experience for completing day-to-day business functions and
obtaining specialized services.
Employees. This section describes staffing
requirements for both production and business management. It discusses
the type of work to be done, qualifications needed for the job(s), plans
for filling open positions, wage rates, and benefits package(s).
Outside Services. This section describes the
types and costs of outside services provided by non-employees, such
as lawyers, bookkeepers, CPAs, and business managers.
The Financial Plan
This section discusses the investment required, sources of funds for
the business, and financial statements.
Developing these financial statements is one of the most difficult tasks
facing a new business owner, because in most cases there is no history
for reference. Unless you plan to purchase an existing business, these
statements will be based on projections. Develop the Income Statement,
Cash Flow Projections, and Balance Sheet statements for the first 2-3
years of business operation. First-year Cash Flow is projected monthly.
Years 2 and 3 Cash Flow projections are quarterly rather than monthly.
Need for and Sources of Cash. This statement lays out
how much cash the business will need to open its doors and to operate
until it is profitable. Most of this information will come from other
parts of the business plan.
Equipment List. This is a list of each item
of business equipment and its value. Generally the items should have
a useful life of one year or longer. You should consider whether or
not to purchase or lease equipment.
Income Statement. The income statement shows
a business’s financial activity over a period of time to determine
if the business made or lost money. It matches expenses with business
revenues. The income statement includes total sales, cost of goods sold,
gross profit, indirect expenses, other expenses, pre-tax profit or loss,
taxes, and net profit or loss.
Break-Even Analysis. The break-even analysis helps you
determine the success of a business before it begins. It describes the
number of units of a product or how many hours of a service must be
sold to break even or to make a profit or the effect that changing a
product’s price or reducing expenses has on profitability.
Cash Flow Statement. Cash is even more important to
a business than profits – a profitable business may still be unable
to pay its bills. The cash flow statement shows when the business will
receive cash and when cash must be available to pay bills. The cash
flow statement shows when the cash actually will be received and
the expenses actually paid.
Don’t confuse this with your own personal cash flow statement
you completed earlier . The personal statement shows the amount of money
you need to live and cover monthly expenses. The business cash flow
statement predicts when the business will need cash and when cash will
The cash flow statement has two sections. The top section shows how
and when cash will be received by the business. The bottom section shows
how and when the money will be used to pay bills. Unlike the income
statement, the cash flow statement shows money coming in only when
the business actually receives it and going out only when the business
actually pays a bill.
Balance Sheet. The balance sheet is a snapshot
of a business at a particular point in time. It shows a business’s
assets (what the business owns), liabilities (what the
business owes), and owner’s equity (what the owner is worth).
A new business gets its first Balance sheet when the business starts.
It is updated annually thereafter, usually at year’s end. The
balance sheet shows the business’s financial status and stability,
and if the owner’s equity is increasing. It consists of two parts:
Assets and Liabilities and Owner’s Equity.
For many home-based, service businesses, or businesses where the owner
has no credit rating separating personal and business assets and liabilities
is difficult. When this is the case, a personal financial statement
may be used in lieu of the balance sheet or the balance sheet should
reflect personal assets, liabilities, and owner’s equity mixed
with those of the business.
Supporting Documents. This section includes
other documents needed to support and validate the business and business
plan. These include a cost-of-living budget and personal balance sheet
for the business owner(s), resume(s), credit reports, contracts, legal
documents, leases, job descriptions, letters of support and reference,
letters from potential customers stating they will buy from the business
when started, contracts, and other documents that bolster confidence
in the proposed business.
Other documents pertaining to or clarifying specific sections of the
© July 1998, 1st Revision June 1999, 2nd Revision February 2001