How To Write A Small Business Plan

by Tom Egelhoff

Author Tom Egelhoff

If you are a regular of this site then you know my feelings about business plans. I don't believe you can have a successful business without one.

The business plan keeps your small business on track and forces you to look at aspects of the business that may not be your area of expertise.

For example: You are probably not an accountant nor have you kept a set of business books before.

You probably don't know how to project what your business will be like in the next two to five years.

These are things that the business plan will show you and give you goals to work toward.

Don't worry for the moment if you don't know how to do the things I mentioned above. I'll show you where to find free help to do those later on in this article.

The plan will also help you overcome bumps in the business road because you will have a course of action already defined to deal with those situations.

The most important part of the plan is that is will set goals for your business. If you don't know where you want to take your business how can you hope to make decisions to keep your business on track to reach those goals.

But, before you begin to construct your plan there are some things I should point out that will help you along the way.

This Is Your Small Business Plan — Not A Bank Plan

The first time many businesses find they need a business plan is when they show up at the bank looking for financing for their new small business.

Then they rush out and write what they think the bank wants to hear.

As a result they may get the money and get the business started but the plan may not be the best plan for the business.

I'm sure Bill Gates didn't explain the Microsoft® he saw to the bankers because they would never have believed him but I'm equally sure he had a very exact plan for where he wanted to take Microsoft®.

You are going to need more than just the business plan to sell your idea to the money boys. They're going to look at the plan make no mistake but they are also going to take a look at you and decide if you are the kind of person that can carry the plan out.

Before presenting the plan know it inside out.

New Ideas Are Not Necessarily Good

Can you imagine the uphill battle for the first salesman to go out and peddle "sour cream?" "You put in on baked potatoes and it tastes great?" "Oh, yeah what's it called?"

Would "sour cream" sound really appetizing if you were unfamiliar with it. Yet it's as common today as birds in the trees.

New ideas require education. Don't forget to include the cost of additional advertising to educate the public about your product and how and when to use it.

Where Can I Get Free Help If I Need It?

If you want to start a woodworking business there probably isn't a lot of things I can tell you about wood. That knowledge is the strength that you bring to the business.

But you will need some help with the areas you are weak in.

For most people that is the part called the financial. Cash flow, sales forecasting, profit and loss statements and income statements to name just a few.

Where do you find out how to do and understand these.

Here are a couple to start with:

S.C.O.R.E. (Service Corp of Retired Executives - Usually tied to your local chamber of commerce. These are retired successful business owners and executives who give free business advice.

They can also help you create your plan. If you are going national or international contact a chapter in the nearest major city. They will usually have more experienced people.

For small town retail or home based business a small town chapter would be better. Click the link above for the chapter nearest you.

Small Business Development Center - Many small towns and cities have a SBDC office that offers courses in business planing and other business information. They also have free consultation available.

Other sources of information can be found at your local public or university library. For more on this see: "How And Where To Find Small Business Information."

Your Small Business Plan Will Have Many Parts

I don't think I've ever read a book that wasn't divided into chapters or sections. You business plan will be similar. Here are some of the things that will be contained in a basic business plan.

Business Plan

  • Statement of Purpose - Why are you starting this business?
  • Business Information - Who, why, where, when, how?
  • Personal Financial Statement - Are you responsible and reliable?
  • Description of Business
  • Personnel - Who will work there and what is there expertise?
  • Organizational chart
  • Job descriptions
  • Resume

Marketing Plan - Roughly 30% of your total plan will explain how you plan to market the business.

  • Market Analysis
  • Market Research-Product
  • Environment and Industry Analysis
  • Competitors
  • Consumer Markets
  • Business Markets
  • Characteristics of Your Target Market or Customer
  • Marketing Mix Strategy
  • Suppliers

Financial Plans and forms - How you plan to handle your money.

  • Financial
  • Uses of Proceeds - How will the money be spent
  • Start Up Costs Worksheets - S.C.O.R.E. can help with this and the ones below.
  • Projected Profit and Loss Statements (3 years)
  • Proforma Cash Flows (3 years)
  • Projected Balance Sheets (2 years)
  • Break-even point

Keep Your Plan Up To Date - for the first five years you may revised your plan every few months.

Business Checklist - Some other things you should look for before going into business.

Executive Summary - Your vision of the business.

The above is a plan outline for a small business start-up. For more detail on how to do each topic; click here.

The Last Word On What You Should Know
Before You Write A Small Business Plan

You're excited about your business. It's ready to take off. The best advice I can give you is to be optimistic but not overly optimistic.

You're going to have to be able to present this plan and defend it if necessary. So don't embellish any facts that you aren't prepared to back up.

I can't overly stress how very important a business plan (any form of plan) is to the success of your business. A pilot flying from New York to London can't see the destination for 99% of the trip.

He relies on a flight plan. A business plan will get you where you want to go if you prepare it correctly and follow it to the letter.

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