We can argue all day long about whether your business plan should be 3 pages or 30 pages, but one thing is certain: You aren’t finished with the plan until you can describe the 5 critical aspects of your company: The idea, the product, the market, the team, and the money.
As you write your plan, be sure that you add detailed descriptions to each of these five sections:
1. Business Idea: What are you building?
This is harder than it sounds. Being able to tell your friends “I’m starting an internet business” is one thing. Describing the business in a meaningful way is something else. How about “My business will be a subscription-only website where independent music labels can find, organize, qualify and coordinate the musicians, engineers and marketing experts they need to publish successful CDs.”
TIP: If you get stuck on this step, try asking yourself a different question, like “why is this business important?” Then talk through your answer with a friend until you can describe the key features and benefits of the business in one or two tight sentences.
2. Product & Sales: How will you make money?
Can you really describe what customers buy from you? A great business plan will have specific products and pricing, but if you aren’t there yet at least describe the categories of products or services you will sell. For example, it’s fair to say that a garden center sells “Ornamental Plants”, and skip the detail like “Mexican Orange Blossom shrubs (Choisya ternate)”.
TIP: Besides what you are selling, describe the pricing and margin of each category or item. Need some help? Start with the pricing charged by competitors.
3. Marketing: Who is the customer and how will you reach them?
The most important thing in this section is to know the “scale” of your opportunity, and to match your promotions to the same scale. If you have a local auto repair shop, it does not make sense to talk about the $200 billion auto repair market. Likewise, a TV ad during the Super Bowl would not be appropriate. If you’re launching the next Facebook, however, maybe a Super Bowl ad is just what you need to make a splash.
TIP: Describe the market as the number of customers you can reach and serve based on your geography, ad budget, and operating capacity. Find creative ways to reach your audience on a small budget. And remember, marketing is a waste of money if you can’t describe how you will turn prospects into paying customers!
4. Management: Who believes in you?
The management section should include a discussion of your advisors and/or directors as well as the top two layers of management. It’s easy enough to stick a few resumes together and call that your Management section, but a better idea is to describe only the strongest, most relevant accomplishments of each team member. If you don’t have all the right people in place yet, at least identify the role and title for each. Know when you will need to hire them and what qualifications they will need to do the job.
TIP: Put extra effort into recruiting. A great management team gives you instant credibility with customers and investors.
5. Financial Information: Can you really make money at this?
Keep it simple and don’t worry if you include assumptions. No one knows the future, so all financial projections are technically wrong. It's more important to be complete than it is perfect. Just be sure you know how much investment it will take to (a) get up and running, and (b) reach profitability. A simple monthly or quarterly income statement is enough. Keep going until you can describe all the expenses and how many customers it will take to break even.
Business plan templates and tools (like enloop) are great ways to organize and present this information, but they can’t do all the thinking for you. Consider your business from each of these five angles and be ready to write plans for each.
When you do, you’ll have a stronger idea and a stronger overall business plan.