The entire process of writing a Type 5 business plan depends upon our general workload and the speed with which you respond to our requests for information about your business. Also, the novelty and newness of the industry you are entering and the market you will be serving are real wild card variables in terms of how much time the business plan will take to complete. We estimate that a Type 5 business plan will take generally 25 to 40 work days to complete (five to eight weeks).
These are the general contents of a business plan that are suggested by the experts, but these contents may vary from business to business. A good business plan should be comprehensive enough to provide a complete picture and understanding of the venture regarding its present status and future growth potential to the prospective investors and other interest groups.
Market analysis should help in the development of strategic market focus, which means selecting the key target markets. This is considered the critical foundation of strategy. We speak on this as market positioning and segmentation.
- Current and Expected Levels of Taxation. High tax rates can affect the decisions of entrepreneurs to engage in business activities or reduce the ability of companies to reinvest profits in expansion. But often the most important effect of taxes are not the levels of taxation, but the different effective tax rates for different activities. For example, the oil and gas industry, ecommerce businesses and the video game industry get significant tax breaks that reduces their effective tax rate. This can raise or lower the attractiveness of getting into certain industries.
- Import/Export Quotas and Tariffs. Tariffs and import/export quotas affect the costs of value propositions imported into a country and those exported to other countries. Raising or lowering tariffs or trade quotas can cause demand for the value propositions of the industries affected to increase or decrease. An example of a broad change in trade quotas and tariffs was the implementation of the North American Free Trade Agreement (NAFTA).
- Government Grants. Government grants are programs that can provide nascent industries with seed capital and resources. Governments (state, local and national) often provide businesses with financial support if the business pursues profit opportunities that align with a government’s policy goals. An example of a significant government grant program is the U.S. government’s Small Business Innovation Research grant (SBIR).
- War/Terrorism. War and terrorism can increase regulations and transaction costs associated with global travel or insurance. Wars can also saddle nations with large medical costs to society. Wars and anti-terrorism efforts can also increase military related contracting opportunities.
- Quid Pro Quo. Many industries try (and often succeed) in influencing politicians to enact laws that are favorable to their bottom line and create barriers of entry against potential competitors. A recent example of this was the influence the health care and pharmaceutical industries exerted upon the U.S. Congress during the passage of the Affordable Care Act in 2009.
- The Regulatory State. In the U.S., most of the regulations that affect business and the general public are promulgated through various government agencies. Often, small changes in regulations can lead to desired or unintended consequences for a number of industries. Here is a small sample of legal and regulatory issues that are managed by various state and federal agencies: environmental protection, corporate governance, intellectual property rights, employment law, criminal law, tort law, food & drug regulation, public health… In the United States (and most other industrialized countries), virtually every area of commerce is affected by government regulations and laws. For any given industry, changes in these regulations and laws can be either threats or opportunities.
Type 5 Business Plan
Type 5 business plans are written in five distinct units. Each unit reflects a progressive step in putting the business plan together. Before we can begin writing each unit, we must receive feedback to specific questions that we will send you concerning the topics covered in each specific unit. After we complete each of the first four units, we will send you a draft of that unit in a Microsoft Word document. You will then have the opportunity to review unit draft and critique or clarify it. We will make any necessary changes needed for each unit draft. The fifth and final unit will be integrating the information in each of the previous four units into a final, complete business plan. You will then have the opportunity to review and critique that completed business plan draft. We will then correct any and all discrepancies in that final complete draft.
[1] Charles W. L. Hill and Gareth R. Jones, Strategic Management Theory, Eighth Edition, Houghton Mifflin Company, pg. 45, 2008.
Technological change is a primary driver of Schumpeter’s “perennial gale of creative destruction” among business ventures. Technological forces can render established, profitable value propositions obsolete virtually overnight and usher into existence exiting new business ventures. Because of the dual role technological change (both creative and destructive) plays in our society, it can be both an opportunity and a threat.
- Audience Segmentation What key demographics are you going to serve? Where do they live, how old are they, how much money do they make, and what do they value? As you think about your target audience, it is helpful to create “Buyer Personas,” which are separate individual characters representing your various demographic sets. If you’ve sold your product already, discuss who made the purchases and what they purchased.
- Industry Analysis: What does the market look like for your industry overall? Has it grown or changed over the years? Do you anticipate it changing in the future? Are there factors that could impact its growth? You will almost certainly have to do some research for this part. Fortunately, whitepapers and research are abundant on almost any industry, as well as free tools like Google Trends. This is likely to be one of the most difficult portions of your business plan, so check out the examples in the [business plan template].
- Competitive Analysis: Provide an overview of who your main competition is in the general sense (ie, “ecommerce shops that sell novelty print dresses and individual Etsy vendors who make dresses to order”) and then list out a few competitors. Identify your competitors’ key strengths and weaknesses, focusing specifically on where you can outshine the competition or add value to the offering. You can also take a quick dive into their presence online: Is their SEO performance stellar? Do they have a huge social media following? Are they neglecting their PPC ads? This section segues nicely into your Marketing Strategy section.
- Current Assets: Make sure you have enough to cover at least the fixed costs, if not the variable costs. If you’re running your business full-time, you’ll also need enough to accommodate the fact that you won’t have a salary for awhile. Set aside enough money to cover you (and/or your family’s) expenses for six months to a year.
- Projected Profit and Loss: This is the “meat and potatoes” part of your financial section, if not your entire business plan. Bust out the ol’ Excel sheet and enter the amount of money you’ll lose with each product (you can average this or itemize individual products), including raw product cost, shipping and payment processing. Then add your expected revenue (assuming you listed your costs as a negative number). You now have the expected profit of each product in the ballpark sense, and it’s time to start relying on research, goals and market assumptions to determine longer-term profit. You can play around with numbers, using a couple of scenarios as starting points and changing items like the price of the product or the cost of customer acquisition. You’ll also want to factor in variables like sales, promotions (“free shipping on orders of $50 or more”) and the possibility that you won’t be able to sell a particular product at all.
- Cost of Customer Acquisition: Given all your data, how much can you afford to spend on acquiring each customer? If each customer spends an average of $75 at your shop but you spend $500 to acquire them, it’s time to rethink your acquisition strategy. That said, many marketing tactics will naturally be pricier up front than the profits you’ll make, but over time it will balance out when a large fan base develops due to your efforts.
- Break Even Point: Using your profits and loss sheet, determine how much you’ll need to sell before you can break even – and now we’re including the raw operational costs, too. Is this a reasonable number? How long do you think it will take to achieve that goal?
- Scalability: How will you scale up as you acquire more customers?
If You’re Just Starting Out: A business plan will help you set clear goals and create an action plan to achieve them. It will also help you realistically estimate and budget for the costs of your new business.
If You’re Seeking Outside Funding: A business plan is a standard way to show potential investors why it’s worth betting on your business. Most financing options require a business plan before moving forward.
If You’re Considering Going All In: If you’re considering making your ecommerce business a full-time job, a business plan can help you determine if its a viable option.
Bust out the ol’ Excel sheet and enter the amount of money you’ll lose with each product, including raw product cost, shipping and payment processing.
2. Products
All of your other planning is useless if you can't attract any customers.
- First sale
- First 100/500/1,000 “likes” or follows on your social platform of choice
- First positive review
- First write-up on a blog or in the press
- First sale from organic/social/paid traffic
- First 50/500/1,000 sales
- Breaking even!
- First part-time/full-time employee
- Moving to a bigger office
If you’re applying for a business loan or seeking funding from an investor, the U.S. Small Business Administration recommends a 30-50 page plan. If you’re not looking for outside funding, we suggest starting small, with a goal of a few paragraphs per bullet point. You can always expand as you see fit. Business plans should feel manageable, helpful and creative, so don’t turn them into a daunting project if you don’t have to!
If you made it this far, congratulations. Creating your own business plan won't be easy - but success comes to those willing to put in the work. Creating your business plan will let you identify and avoid common problems, and give you a quick and easy source to review the most important information about what your business is and how it operates. You should refer to it often as you create your website, social profiles, and set up your marketing campaign - it's a living document, so don't hesitate to make changes as your store evolves. Or, if you're feeling like you're in over your head, don't feel like you have to do everything yourself - there are experts who can help you plan your business. The most important thing is that you keep moving forward and working to improve your business - success will come with time.
But say you decide to open a clothing store. You could focus on high fashion, or children's clothes, or outdoor wear, or casual--you could segment the market in a number of ways. If that's the case, provide detail on segmentation that supports your plan.
Our location is also a key disadvantage where non-park rentals are concerned. We will overcome that issue by establishing a satellite location in Harrisonburg for enthusiasts who wish to rent bicycles to use in town or on other local trails.
3. Skilled employees. When you need to attract talent, you need something to show prospective employees since you're still in the startup phase. Early on, your business is more of an idea than a reality, so your business plan can help prospective employees understand your goals--and, more important, their place in helping you achieve those goals.
We project first-year revenue of $720,000 and a 10 percent growth rate for the next two years. Direct cost of sales is projected to average 60 percent of gross sales, including 50 percent for the purchase of equipment and 10 percent for the purchase of ancillary items. Net income is projected to reach $105,000 in year three as sales increase and operations become more efficient.
Overview and Objectives
Or you might realize the fundamental idea for your business is sound, but how you implement that idea should change. Maybe establishing a storefront for your operation isn't as cost-effective as taking your products directly to customers--not only will your operating costs be lower, but you can charge a premium since you provide additional customer convenience.
Again, if you run a clothing store, you also compete with online retailers, but there is relatively little you can do about that type of competition other than to work hard to distinguish yourself in other ways: great service, friendly salespeople, convenient hours, truly understanding your customers, etc.
While you may use your business plan to attract investors, partners, suppliers, etc., never forget that the goal of your business plan is to convince you that your idea makes sense.
If you plan to sell a commodity item and the key to your success lies in, say, competitive pricing, you probably don't need to provide significant product detail. Or if you plan to sell a commodity readily available in a variety of outlets, the key to your business may not be the commodity itself but your ability to market in a more cost-effective way than your competition.
This free business plan template includes the following sections:
It’s tempting to dive right into execution when you’re excited about a new business or side project, but taking the time to write a business plan and get your thoughts on paper allows you to do a number of beneficial things:
Business plans often are used to secure funding, but plenty of businesses find writing a plan valuable, even if they never work with an investor. That’s why we put together a free business plan template to help you get started.
A business plan can be as informal or formal as your situation calls for, but even if you’re a fan of the back-of-the-napkin approach to planning, there are some key benefits to starting your plan from an existing outline or template.
Get the business plan template delivered right to your inbox.
Business planning is often used to secure funding, but plenty of business owners find writing a plan valuable, even if they never work with an investor. That’s why we put together a free business plan template to help you get started.
- Know your audience. If you’re writing a business plan for yourself in order to get clarity on your ideas and your industry as a whole, you may not need to include the same level of detail or polish you would with a business plan you want to send to potential investors. Knowing who will read your plan will help you decide how much time to spend on it.
- Know your goals. Understanding the goals of your plan can help you set the right scope. If your goal is to use the plan as a roadmap for growth, you may invest more time in it than if your goal is to understand the competitive landscape of a new industry.
- Take it step by step. Writing a 10- to 15-page document can feel daunting, so try to tackle one section at a time. Select a couple of sections you feel most confident writing and start there—you can start on the next few sections once those are complete. Jot down bullet-point notes in each section before you start writing to organize your thoughts and streamline the writing process.
Although even the best-crafted plan may not survive its first contact with reality, the act of planning is still invaluable for any business owner.
That said, it may not include the specific details or structure preferred by a potential investor or lender. If your goal with a business plan is to secure funding, check with your target organizations—typically banks or investors—to see if they have a template you can follow to maximize your chances of success.
Because your executive summary is such a critical component of your business plan, you’ll want to make sure that it’s as clear and concise as possible. Cover the key highlights of your business, but don’t into too much detail. Ideally, your executive summary will be one to two pages at most, designed to be a quick read that sparks interest and makes your investors feel eager to hear more.
For example, if your company is developing a complex scientific process, but your prospective investors aren’t scientists, avoid jargon, or acronyms that won’t be familiar.
A common mistake novice entrepreneurs make in describing the management team is giving everyone on the team a C-level title (CEO, CMO, COO, and so on). While this might be good for egos, it’s often not realistic. As a company grows, you may require different types of experience and knowledge. It’s often better to allow for the future growth of titles rather than to start everyone at the top with no room for future growth or change.
Often the biggest decisions you’ll make for your business are amidst volatile periods of growth, decline, or even external crises. This requires you to make highly consequential decisions far more quickly than you may like. Without up-to-date planning and forecast information, these decisions may be less certain or strategic than they need to be.
6. Appendix
And you don’t have to start with the full, detailed business plan that I’m going to describe here. In fact, it can be much easier to start with a simple, one-page business plan—what we call a Lean Plan—and then come back and build a slightly longer, more detailed business plan later.
With pricing and positioning taken care of, it’s time to look at your promotion strategy. A promotion plan details how you plan on communicating with your prospects and customers. Remember, it’s important that you’ll want to measure how much your promotions cost and how many sales they deliver. Promotional programs that aren’t profitable are hard to maintain in the long term.
How is your target market solving their problem today? Are there alternatives or substitutes in the market?