The cover sheet of a business plan is like the cover of a book; it provides the first impression of your plan and your business. This component is crucial, but many business planners don’t include the right information on the cover sheet, turning off potential investors. As shown in Figure M2.3, the cover sheet should include the following:

Figure M2.3

Sample Business Plan Cover Sheet

• Basic company information (name, address, phone number, and web address)

• The company logo (if applicable)

• Contact information of the owner(s) and any officers (name, titles, addresses, phone numbers, and e-mail addresses)

• The month and year the business plan was created

• The name(s) of those who prepared the plan

• A unique record number so that you can track who received which copy so you can easily follow up with him or her

The table of contents follows the cover sheet. It should be well organized so that the reader can quickly find information on any aspect of the business. It should also include the page number of the first page of each section, and all pages in the document should be numbered.

An executive summary is a clear and concise (abbreviated) form of the entire business plan, generally no more than two or three pages long. After reading the executive summary, a person should understand the business’s purpose, value, operating methods, and profitability outlook. An executive summary should contain information about the company’s unique competitive advantage and projections for future sales, growth, and profits. If the business plan is to be presented to potential investors, the executive summary should also include a statement regarding the amount of and uses for capital as well as plans and a timetable for repaying investors.

Ultimately, the executive summary should convey excitement and entice the reader to want to read more. Because this is often the only part of a business plan that is read completely, it is the most critical and, as a result, requires more of your time, thought, and attention than the rest of the business plan. Executive summaries are especially important when presenting your business plan to potential investors. If investors don’t get excited about your business and the prospects of success after reading the executive summary, they’ll stop reading and most likely file your plan in the trash. Because the executive summary is meant to condense the entire plan into a few pages, many people often write the summary as the last step in the business plan process. Writing your summary after completing the rest of your plan ensures that you’ve worked out all the kinks and made sure the other sections of the plan are sound.

The next section of the business plan presents the “big picture” and defines the company and its purpose. The company section should include the following elements:

• Mission and vision statements. As discussed in Chapter 7, the mission and vision statements should spell out what the founder ultimately envisions the business to be with respect to growth, values, and contributions to society. They may also offer the company’s business strategy that defines the business, identifies the intended customer, and explains how the business will benefit them.

• Industry profile. The industry profile describes the context in which the business will operate. This section discusses economic trends that affect the business and provides background on the industry, the current outlook for the industry, and future growth potential.

• Company profile and strategy. The company profile provides details regarding how the business works and why it has a unique chance to impact the industry. The company strategy summarizes the company’s plans for growth and profits. It is important to be optimistic while also being realistic in discussing goals and strategy. It is even more important to back up the strategy with details of the company’s past and present conditions so that the strategy is convincing.

• Anticipated challenges and planned responses. This section discusses ­potential vulnerabilities from competition, suppliers, resources, industry, or economic situations. It also discusses legal factors that might affect the business—either positively or negatively—including changes to legal restrictions, pending lawsuits, expiring patents, copyrights, and the like. This section should also state possible resources the company could make available should the need arise. Finally, the section should mention any protection from copyrights, trademarks, or patents.

• Management team. This section should list the members of the management team—­finance, marketing, and production specialists—and the pertinent experience, knowledge, or creative ability that each member brings to the team. If your company is large enough to have a board of directors, those members should be listed in this section as well. Because résumés of key personnel will be attached to the back of the business plan, keep this section brief and dedicate only a paragraph or two to each individual.

The market analysis section identifies who your customers are and explains how you will reach them. The main purpose of this section is to explain the benefits of your product. It should answer the question “What is it about your product that creates a competitive advantage?” For example, your product might be homemade pasta. Your customers might benefit from an authentic Italian taste at a price that is lower than the competition’s price. Or, your product could be made with all organic ingredients, which benefits health-conscious consumers. Consumer benefits are those things that do something better for the customer. They affect a person’s feelings, pocketbook, or both. The market analysis section should include an assessment of the general market and, more specifically, the competition, as follows:

• Market research. This section should contain an analysis of the market to determine whether enough customers exist and will continue to exist to make your business profitable now and in the future. First, you need to describe exactly what you see as the target market for your product—that is, identify your customer. For example, is your ideal customer teenagers heading off to college, owners of pets with little time to walk them, or those needing a great meal in a relaxing location? Once you’ve identified and described your customer, you need to determine whether the market is growing or shrinking. Your analysis should reach the conclusion that the market is big enough for your business to enter with adequate growth potential to make your time and investment worthwhile.

• Assess the competition. It is important to show that you have a clear understanding of your competition. Therefore, you should list your main competitors and their perceived strengths and weaknesses. You should then clearly articulate your plan to take advantage of their weaknesses and respond to their strengths.

In the next section of the business plan, you describe your product and list its important details. Your product’s description should include any testing you’ve conducted and approvals you’ve received as well as trademarks, copyrights, or patents to protect your product. It is also important to discuss ongoing service aspects that are provided with the product, such as warranties and repairs. Your business plan should articulate how the product will be produced. If part of your product is dependent on outside suppliers, you should list those suppliers and verify their reliability. If your business is a service, you should discuss how you intend to find and train personnel who will deliver your service.

Most important, whether for a good or a service, this section should cover your pricing strategy. In your pricing discussion, detail any aspects of the product that require a higher price, such as using premium materials. Additionally, you must conduct a thorough analysis of what the competition is charging for a similar product, noting the differences in their product or your product that justify a price differential. Finally, the section should list what you expect customers will be willing to pay for your product.

The sales and promotion section of the business plan explains how you intend to implement the marketing plan. It should describe the approaches you’ll take to promote the product. This should include promotional avenues beyond basic advertising. Include your social media strategy, such as using blogs, Facebook, Twitter, Instagram, and YouTube. Remember to explain how you are monitoring the feedback derived from your social media strategy.

This section should also describe your selling approach. For example, are you selling the product with a sales force, over the Internet, through direct mail, via retail outlets, or simply by word of mouth? Include evidence of promotional success, such as current newspaper articles, customer referrals, or letters of satisfaction.

This section includes several pages of financial statements: the income statement, the balance sheet, and the cash flow statement. In addition, you should cover the financial history of the company to date and have several different forecasts and scenarios projecting the anticipated performance of the business in the next several years. You should put your financials through a stress test by showing how you expect the business to perform under worst-case, expected-case, and best-case scenarios. If one of the primary purposes of this business plan is to seek outside financing assistance, then another component of this section is a statement of funding requirements indicating information such as the amount of capital needed, the type of funding, the term of loan, and how funds will be used. Investors will also want to see how you intend to pay them back—the timing, the return on investment, and an exit strategy that you might want to suggest to investors.

Don’t underestimate the importance of preparing the financial information or be misled into thinking that developing the financial information will or should be easy. This exercise forces you, as a new business owner, to face up to the reality of your business’s finances beyond daily cash flow. The numbers need to show that you can be successful in the short term as well as over the long term.

Oddly, more is not better in presenting the financials of a company. More important, if you use a software program to generate financials, make sure you understand and can defend and explain every number in every line. It’s not uncommon for someone who is reviewing the financials of a business plan to ask specific questions, such as “What does the figure on line 24 in the income statement mean?” If your answer is “I’m not sure, the software program generated that number,” you are not creating investor confidence in your ability to understand and manage the financial aspects of the business. If necessary, consult an accountant to help you prepare or interpret the financial statements and projections included in the business plan.

Including the actual financial statements, forecasts, and scenarios in the business plan is not enough. You need to explain and summarize the key information from those statements and specifically state how they relate to the marketing, sales, and production plans already discussed.

The final pages of a business plan should be devoted to appendices. Any additional information that adds to the credibility of your business, the management team, or the industry that is not included in the body of the business plan is included in the appendices. Appendices will include information such as the following:

• Résumés of key managers

• Pictures of the product, facilities, production, and so on

• Letters of recommendations, professional references

• Published information

• Contracts and agreements; copies of patents, copyrights, trademarks

• Media, articles

Writing a business plan can seem like a formidable task. But if you have a clear idea and vision of your business venture, your task will become a little easier. It is also important to know that you’re not alone. The SBA and the Service Corps of Retired Executives (SCORE) provide a wealth of information and resources for the potential small business owner.

Remember, your business plan should be exciting, dynamic, and compelling. The plan’s purpose is to make others as excited about your business idea as you are. If you carefully follow the steps for writing a business plan and strongly believe in your idea, you may soon have investors beating down your door to be a part of your project.