Introduction

In the previous lesson, you learned about many resources that are available to you as you build, maintain, manage, and grow your business. You were asked to build a resource plan for your future entrepreneurial venture.

This lesson introduces you to the concept of business planning for your new or existing business venture. A business plan has many sections that you will explore throughout this lesson. As you have completed the lessons in this course, you've been introduced to many of the parts of the business plan; therefore, many of the business planning concepts will be familiar to you.

Learning Sequence
Required Readings
Read the following:
  • Online Lesson Material
Resources
View the following:
  • None
Assignments
Complete the following:
  • Short Essay
 

Check Prior Knowledge

In this activity, you will explore the U.S. Small Business Administration (SBA) Web site in an effort to discover how much you already know about business planning for your entrepreneurial venture or your small business.

Recommendation: Capture your responses to the "Check Prior Knowledge" activities and other various exercises presented in this course in a journal or notebook. Since many of these activities and exercises will not be turned in to your instructor, you should capture the information in one place. By writing this information down and reviewing it, you will begin to see themes emerge that will help you as you complete the course.

Focusing Your Learning

Official Course Competencies

By the end of this course, you should be able to:

Lesson Objectives
By the end of this lesson, you will be able to:
  1. Identify the components of a business plan.
  2. Discuss how the business plan can be used in an entrepreneurial venture.

Key Terms

As you read your assignment for this lesson, pay close attention to the key terms and phrases that are listed throughout the lesson. These terms and concepts are important to your understanding of the information provided in the lesson.

 

Instruction

By now, you may be a little overwhelmed with starting, managing, and/or growing your business. You have a tremendous amount of information to gather, interpret, and learn. All of this information must be housed in one location, and that location is in your business plan. A business plan is like a blueprint for your business. Without the blueprint, your business has little chance of meeting its goals. In addition, without a business plan, almost all investors and banks will refuse to finance your business. Through your business plan, investors and bankers want to see that you have thought through the dynamics of your business. In addition, the more complete and well written the business plan, the higher the likelihood that you can attract the right people to your business.

A common question about business plans is – How long should a business plan be? The final document will depend on the complexity of your business and whether you are seeking outside funding. A business plan for a home-based business might be 8-10 pages long whereas an average business plan for a small business could be 20-30 pages in length, including appendix information. A complex business plan could be 50-75 pages in length. The length is important; however, even more important is that you type the document and include a table of contents. You may want to hire an editor to ensure that you used correct grammar, spelling, and punctuation. Before presenting your business plan, you will want to have it professionally bound. Presentation is everything in the business planning process. Next, you'll look at the sections of the business plan.

Business Plan Graphic Organizer
  1. Executive Summary: Although the executive summary appears first in this list, it should be the last section completed. The executive summary contains a synopsis of your business plan. Therefore, you can't complete it first. One page is an ideal length. More writing is not better in this section. Extending into two or three pages might bore the readers and cause them to skip through this section. A well-written executive summary will summarize the business plan and entice the reader to keep reading.
  2. The Company: In this section, you will outline the type of business and, depending on that type, will list any history related to the business including an overview of the products or services being sold. You can break this section up into several subsections to include:
    1. An overview of the business, which includes a full business description, the marketplace it fits into, and all business history.
    2. Corporate structure of the company with a list of shareholders or partners and incorporation information.
    3. Location description, amenities, and customer information: This section includes the advantages and disadvantages of using this location, demographics and psychographics about the location, and any renovations that need to be completed.
    4. Key personnel to include profiles or bios for each person, the role each of these individuals fill in the business, and resumes that include their history, education, and qualifications.
    5. Business goals and objectives, both long and short-term. The goals and objectives should include as many details as possible.
    6. Identified strengths and weaknesses. Be sure to list your strengths; however, of more importance to an investor is that you know and understand your weaknesses. The weaknesses should have a corresponding strategy for how you will overcome your weakness. If your plan does not include weaknesses, you may not get any financial assistance.
    7. Vision and mission statements describing your company's philosophy in just a few sentences. Your vision describes your company in the future. You mission statement or purpose statement describes your commitment to your customer, business, and stakeholders.
  3. Products and Services: This section describes what you are offering and how you plan to be profitable.
    1. Your products or services and the space they fill in the marketplace. In addition, you should include how you plan to be different from your competitors. List any kind of current or future contract opportunities too. If you are a start-up company, you may want to include letters of intent from prospective clients, which should be compiled in the appendix.
    2. Cost of sales to show the difference between what the product sells for and the cost of the materials to make the product. This section also includes manufacturing and distribution information.
    3. Future projections to describe expansion, development, and research. This section also includes any opportunities or threats to your business.
    4. Legal concerns including any types of patents, copyrights, special licenses, or trademarks.
  4. The Market Strategies section includes what you discovered in your market research and how you plan to market your business. This section should be detailed, thorough, and discuss product, price, promotion, and place.
    1. Market analysis includes the following market trends:
      • Industry, consumer and global trends
      • Ideal customer profile
      • Market share projections
      • Location, boundaries, and seasonal trends
      • Customer service description and policies
      • Focus group or market survey results
    2. The competition analysis includes the strengths of any competitors.
      • Competition description and market share
      • Future and possibly unseen competition
      • Competition strengths/weaknesses
      • Description of your edge over the competition
    3. Marketing and sales strategies include a marketing plan that describes how future customers will be attracted to your business.
      • Target market strategies
      • Promotional and media methods
      • How often different strategies will be used
      • Incentives/sales bonus plan
  5. Operational Information includes how you plan to operate the business. It also includes distribution channels and costs.
    1. Discussion about overhead costs, suppliers, and quality control
    2. Descriptions of distribution methods, employee positioning, assets and equipment, and licenses and permits
  6. Financial Information demonstrates how your new business venture would make money. This includes projections of income, cash flow, and expenses. Projections and cash flow information are required when borrowing money from a bank or other lending institution.
    1. Projections can be defined as a month-by-month estimate of expenses and sales.
      • Projections also include start-up costs, monthly revenue, and costs.
      • Projections should be prepared for monthly, quarterly, and annual figures for 2 to 5 years.
      • In the last portion of the projection section, include a bottom line that indicates a profit or loss.
    2. Cash flow forecasts, financial statement, capital expenses, and net worth statements are included in this section.
  7. Funding Requirements describe the amount of money you need to borrow, how you expect to repay the money, and over what time you expect to pay the money back. Section 6 demonstrates how much you can afford to repay.
    1. This section outlines when you need money, the type of financing you are seeking, the terms of repayment, a description of how you will use the funds, and any future funding requirements.
  8. The Appendix section includes copies of all documents that strengthen your business plan explanations.
    1. This section might include financial statements, statements of personal net worth, letters of reference, resumes, pictures of products, relevant articles and other relevant information.

As you can see, completing a business plan can be a daunting task. In some cases, entrepreneurs hire a business plan consultant, financial experts, accountants, and editors to assist them with their business plan writing. Consider your business plan as a legal document for your business.

Wait Icon

If you would like to invest another 30 minutes in your learning about business plan writing, the U.S. Small Business Administration has a mini course available on how to write a business plan.

How to Write a Business Plan

This lesson introduced you to the components of a business plan and expressed the importance of business planning for your entrepreneurial venture. In this lesson's assignment, you will have an opportunity to discuss which parts of the business plan that you believe will be the most difficult to write.

Having a well-designed business plan tells others that you are serious about your business or your potential business. This important document becomes the face of your business. Although writing a business plan might seem daunting, make a commitment to do it well.

Summary

In this lesson, you learned the information and details to include in your business plan. You also learned the importance of writing a quality business plan and engaging the right people to help you. Remember, your business plan is a direct reflection of you and your business, so be sure to give yourself enough time to produce a business plan of which you can be proud.

The next lesson, which is the last lesson in this course, contains your final project for this class. You will design a feasibility study. Feasibility studies help you to identify whether an idea is viable to pursue, before you invest in the business or opportunity. The feasibility study will allow you to see if the business venture you identified early on in the course is feasible to pursue.

Assignments

Non-Graded Activities

The following activities will help you practice the concepts from this lesson. They will help you prepare for your exams/final projects lesson. You are not required to submit them to your instructor.

  1. Read the online lesson material.
  2. Complete the "Check Prior Knowledge" activity.

Graded Assignments

The following is a required assignment for this lesson.

  1. Short Essay, Business Plan, worth 50 points

Media Attributions

Creative Commons License

This work is created by the National Information Security and Geospatial Technologies Consortium (NISGTC), and except where otherwise noted, is licensed under the Creative Commons Attribution 3.0 Unported License.

Authoring Organization: Rio Salado College
Written by: Lori Wieters
Copyright © National Information Security, Geospatial Technologies Consortium (NISGTC)

Development was funded by the Department of Labor (DOL) Trade Adjustment Assistance Community College and Career Training (TAACCCT) Grant No. TC-22525-11-60-A-48; The National Information Security, Geospatial Technologies Consortium (NISGTC) is an entity of Collin College of Texas, Bellevue College of Washington, Bunker Hill Community College of Massachusetts, Del Mar College of Texas, Moraine Valley Community College of Illinois, Rio Salado College of Arizona, and Salt Lake Community College of Utah.

This workforce solution was funded by a grant awarded by the U.S. Department of Labor's Employment and Training Administration. The solution was created by the grantee and does not necessarily reflect the official position of the U.S. Department of Labor. The Department of Labor makes no guarantees, warranties or assurances of any kind, express or implied, with respect to such information, including any information on linked sites, and including, but not limited to accuracy of the information or its completeness, timeliness, usefulness, adequacy, continued availability or ownership.