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Elements of a Business Plan

Summary  -  Business Description  -  Product or Service -  Market  -  Marketing Strategy  -  Management  -  Use of Funds  -  Collateral

Summary – one to two pages

Opening:

Briefly summarize the highlights and most significant issues. Allow the reader to consider and evaluate the whole document and persuade them to continue reading. Include brief statements about the company, type of business and its products and services, the market, the management, financial performance and projections.

Highlight the following:

• Date

• Name and location of the business

• Type of ownership (e.g. sole proprietor, partnership, corporation, LLC)

•  Purpose of the loan

• Amount of financing required

• Length of time for repayment and frequency of payment

• Use of funds

• Collateral offered to secure the loan (e.g. real estate, equipment, etc…)

• Source of repayment (products, sale of assets, etc…) Be prepared to suggest both a primary and secondary source of repayment.

• Names of persons who will give a personal guarantee

Business Description

This section briefly describes what your company is about.

• Type of business (retail, service, manufacturing, etc…)

• Date established and how long you have owned or managed it

• Reasons you are going/went into business (e.g. the need/want that your business fulfills)

• Goal(s) of the business and strategy for achieving them

• Founders and other key people involved

• Location--Description of the facility occupied by the business, any special features it might have and lease terms, if applicable

• Overall strengths and weaknesses

Product or Service

This section briefly describes the products/services, special features, benefits and future development plans. Include:

• Products/services offered—if unique in any way, be sure the reader understands what the product or service is and what its use or application is. Include photographs, drawings, brochures, etc…, when they will be helpful to the reader.

• State of development—idea, model, working prototype etc…

• Method of production—capital, labor, materials, etc…

• Regulatory or approval requirements, potential liabilities

• Comparison of similar products/services of competitors

• Production and sales mix for product(s) or service(s)

• Costs of sales and profit by product or service

• Customers and end users

• Patents and proprietary features

• Strategic opportunities and plans for expanding/redesigning

• Projected changes in sales mix, costs and profits and reasons for changes

Market

This is one of the most challenging and important sections of the proposal. A large amount of research is often needed, although it is possible that a major supplier or a trade association can provide much of the needed data. Be sure not to overlook the resources available in libraries, yellow pages, etc… Include:

• Target market—individuals, companies, industrial/commercial, government etc..

• Segments of the market—geography, industry, etc…

• Target customer profile—demographics like age, sex, profession, income, geographic location, location, school needs, etc… (if your product/services only appeals to a specific type of user)  

• Size and growth of the target market in terms of geography, population and dollar and/or unit sales for your type of goods.

• Trends in the target market—and a comparison of your company’s sales

• Identify your customers—their product/service preferences and reasons for purchasing

• Your company’s current and projected market share

• Sales and profits by market segment and customer

• Competitors—(that you will face in each product/service) name, location, size, market share, competitive advantages and disadvantages    

• Your competitive strategy (or basis you will compete on) – price, service, location, any promotions etc…

• Comparisons to competitors (strengths and weaknesses) – length of time in business, sales volume, size and number of location, employees, product/market niches, etc..

• Competition you might create by being successful

• Your business image

• Any test market results

  Identify and document sources of the above information if possible

Market Strategy

This section describes how you will enter the market, obtain a niche, maintain a market share and make the necessary sales to achieve the financial projections.

• Product/service sales appeal – uniqueness, specialty, quality

• Method to attract and maintain your market – image, customer service, quality, etc…

• Method to identify/attract prospective customers

• Advertising message and promotional strategies

• Geographic areas to be covered

• Location advantages and disadvantages

• Method of distribution—direct, dealer network, other

• Sales personnel

• Service and warranty policies

• Pricing and credit policies

• Cost of marketing and product/service

Management

This section should demonstrate that management and leadership are capable and given every incentive to be successful. Most leaders consider strong management to be a critical factor in the success of any business. Frequently, proposals that are otherwise sound are rejected solely on the basis of what is perceived to be weak or inadequate management. Include:

• Key managers and owners

• Personal history of each person on your management team—emphasize the talents, skills, abilities, etc… what they bring to the business that will make it successful

• Position, role, responsibilities and compensation of managers and employees

• Primary objective of current owners

• Members of your professional team—lawyer, accountant, banker, etc…

Use of Funds

Include a complete breakdown and explanation of the proposed use of the requested funds and the expected benefits that the business and the community will realize. Expenditure for the purchase of real estate or for the construction or remodeling should be described in sufficient detail that the reader will have a good understanding of the project. For purchase of machinery and equipment, include a listing of make, model, functional description and unit cost. If available, include a sales brochure that describes the equipment.

Collateral

Although the summary briefly mentions the types of collateral available, it is helpful to provide a detailed list. Identify equipment by make, model, model year, if applicable, and serial number. For all presently owned collateral, show costs, book value, and estimated market value.