Guest Column: Business plan builds company framework

Whether a business is a startup or an ongoing concern, whether it’s seeking outside financing, expanding via internal growth, or whether it’s a small sole proprietorship or a large corporation, a business plan will document essential information for a clear understanding of the entire business. This, in turn, will let the business owner and other stakeholders make better, more informed decisions.

One of the greatest challenges for small-business owners is to carve out the time, on a regular basis, to understand the overall business environment and its impact on business performance. Because small-business owners are pulled in so many directions at once, business plans can serve as the framework for gauging the company’s performance, relative to internal goals as well as the outside environment.

A well-written business plan documents all areas of the business in four general categories: description of the business, marketing, management and financial management.

Describing the business

This section of the business plan should answer “What business am I in?” This category includes three primary sections.

The business description provides detailed information of the business: its legal form, business type, what specific product or service is offered, why the business will succeed, operating hours, etc. In this section, emphasis can be placed on any unique aspects of the business and how they will appeal to the customer.

The product/service section is used to describe the details of the products and/or services offered. The section is written from the customer’s perspective in that it tells what the company is selling, how buyers will benefit, which products are in heavy demand and what’s different about the company’s products or services.

The location section describes the particulars about where the business is. Since location is such a strong factor in the success of any business, this section covers more than just the address. Included are such topics as what kind of space will be needed, the desirable characteristics of the location, accessibility and demographic shifts.

Marketing methods

The marketing plan segment of the business plan is important because it gives a detailed description about how the business will be sold to potential customers. While some business owners feel their services or products will sell themselves, most successful ventures require a proactive approach to reaching customers. A good marketing plan will provide all the needed information and guidance for reaching the customers.

This plan should go beyond decisions on advertising. It should identify the customer, the market, the market share held by the business and the general industry economic climates. The marketing plan also should focus on how the business will serve customers and where the business fits in its market. All known information concerning direct and indirect competition should be gathered and summarized. Consideration should also be given to businesses that can provide substitute products and are located in other geographic areas, especially if the Internet can be used to reach customers.

Pricing and sales of the product also are important for marketing. With a well-defined pricing strategy based on good understanding of target customers, a business can effectively improve its competitive stance and profitability. Setting the proper price strategy requires that the business owner understand the full cost of providing the product in addition to what is happening in the market.

Lastly, the marketing plan section should address advertising and public relations. How a business is advertised and promoted can determine its future success. An overall strategy with a consistent message to the customer across multiple promotional avenues will help establish the business in the community. This, in turn, will help drive sales.

Management and finances

The management plan sets the foundation for the success of the business. This category addresses particulars on owners, managers and key employees of the business. It evaluates the relative strengths and weaknesses in existing management.

In general, the financial management plan will include a set of financial statements: balance sheets, income statements and cash flow data. Historical statements for existing firms, as well as future projections, should be included to have a clear understanding of where the firm has been and where it is going. It is not unusual for a comparison to industry standards to be included to determine how well the business is performing relative to similar firms.

Isabel Eisenhauer is a consultant with the Small Business Development Center at Missouri State University. She may be reached at ieisenhauer@missouristate.edu.

Need Help?

The Missouri State Small Business Development Center offers a six-hour business-plan-writing seminar each month.

How to Write a Business Plan will be offered April 2–3; May 7–8; June 13–14 and July 9–10.

For more information call (417) 836-5685 or visit www.sbdc.missouristate.edu.