by| Featured Contributor
Amid the COVID-19 pandemic, small businesses are gaining in popularity — and formation. The Kauffman Foundation’s Trends in Entrepreneurship Series notes that Google Trends reported an increase in searches related to new business opportunities. By March 23, 2020, interest peaked in searches for “open a business,” “new self-employed,” and “new small business.”
Meanwhile, more individuals are filing for employer identification numbers (EINs) with the IRS. This nine-digit tax ID number allows entrepreneurs to hire employees. They may also open business bank accounts. EIN applications, by the week of May 16, 2020, rose 1% over a similar period in 2019.
A startup’s journey is made up of many parts. In the early stages in business, it is critical that you understand the viability of your business idea. You must be able to establish a unique selling proposition (USP) and choose your business model. Once you have laid out this groundwork, it’s time to create a business plan.
What is a business plan?
A business plan acts as a blueprint for your startup. This document provides you with a glimpse into the future of your small business. A business plan helps evaluate the feasibility of the startup from an objective and critical standpoint. You may outline goals and milestones for the startup to work towards reaching and achieving. Additional details, including information about your products and a snapshot of the startup’s finances, may be noted in a business plan.
What happens by the time you’re done drafting a business plan? You should have a document that guides you towards a common vision for the startup. It should also set the stage for attracting investors. More details about that in a bit.
What goes in a business plan?
Drafting a business plan, if you have never done it before, may feel like a complicated, time-consuming process. However, it is actually quite simple. Business plans follow a formula that includes the following eight sections:
- Executive summary
- Business description, concept, and strategy
- Industry analysis
- Market Analysis
- Organization and management
- Financial projections
- Financing request
Here’s what to expect in each section of a business plan.
1. Executive summary
This is where you introduce and pitch your small business. An executive summary is brief, often no longer than two pages. It answers the following questions.
- Who are you?
- What is your business and what does it do?
- What industry is your business in?
- Where are you located or plan to be located?
- When will you start conducting business? (If you are already conducting business, please note your start date.)
- How will the business make money?
- Why will consumers pay for your products and/or services?
2. Business description, concept, and strategy
Once you have a brief overview of the startup, you may begin to dig into the details surrounding your products and services. In this section, you may share where the idea for your business came from.
Talk about what your product and/or service does. What makes it unique and distinctive from similar offerings? If you are still developing the product, where are you at in the development stages? Finally, what are some of your goals? Do you have a timeline for reaching these goals? What do the steps look like towards achieving certain milestones?
3. Industry analysis
This section takes a deep dive into your industry. Who are your competitors, both direct and indirect? You should be able to study, and know, everything you can about the competition. This includes what their offerings are, their company background, and why consumers may choose your offerings instead of theirs. Consider competitor price points, for example, as part of an industry analysis.
4. Market Analysis
Moving on from your competition, it’s time to look at your target audience. Who makes up your audience? You may develop personas to better understand the demographics you are trying to reach as well as their needs.
In addition to understanding your audience, you will need to analyze a specific strategy for this market. How will you attract, capture, and retain your target audience? Further, is this a growing market? Are there additional opportunities for growth?
5. Organization and management
Here you will share the roles of each employee in your business. If you are running your business as a solopreneur, you may share just your biography.
However, if you have hired employees — or plan to hire soon — you will need to share staff information. This includes names, titles, responsibilities, and their previous work backgrounds.
6. Financial projections
Let’s talk about money. More specifically, the current cash flow of your business. This section of your business plan will likely consist of tables and charts. These will detail financial aspects of your startup including the following.
- Cash flow statement
- Projected profits and losses
- Expenses budget
- Sales forecast
- Break-even analysis
- Balance sheet — for the next three years out, if possible
7. Financing request
Earlier I mentioned that a detailed business plan may attract investors to your business. Those that are interested in financing your startup will want to review your business plan.
Do you need funding from investors? You will need to include a section — a financing request — that outlines the amount of necessary capital. Be specific in the amount you need from an investor. Additionally, share the manner in which you intend to spend the money.
As you’re wrapping up your business plan, you may find you have leftover odds and ends. Where do you mention that you have letters of incorporation? What about a written partnership agreement? Where does that go?
The appendix is a handy space to keep these materials. You may also include additional items, like trademark registrations and industry studies, in an appendix.
Is it ever okay to go back and edit your business plan once you have a draft? Absolutely! Remember that you may always return to your business plan over time and make edits. Note the dates you were able to reach your goals. Set new milestones to reach and refer back to your business plan for extra guidance and support over time.
Deborah Sweeney is the CEO of MyCorporation.com which provides online legal filing services for entrepreneurs and businesses, startup bundles that include corporation and LLC formation, registered agent services, DBAs, and trademark and copyright filing services. You can find MyCorporation on Twitter at @MyCorporation.