Starting a business can be an exciting time filled with possibilities and promise. Creating a business plan allows you to map out the main elements of your company so you and others can get a clear picture of how it will operate. Writing a business plan also helps you to test different scenarios for your business. Essentially, you can “try out” different outcomes and understand the implications before you spend a dime on launching your business.
What to include in your business plan
Here’s more good news: Business plans can be easy to create. The format matters less than the key components. Every business plan should include:
- A thorough description of the business, what it does, and how it was founded (also known as its “origin story”)
- Basic financial information, including projected or current revenue and expenses
- Background about the owners and/or management team
- An explanation of how you’ll sell your product and the market size
- Photos that show your product, service, and location
Those items give a thorough overview of the business purpose, structure, team, operations, and financials to help lenders and others see your vision.
Once you’ve got those basics covered, you may also want to include:
- A description of the market landscape
- Customer profiles to target your customer base’s demographics
- Ideas for marketing and promotion
- Positive media coverage about the management team, company, and product (if available)
- Any other competitive advantages or aspects that set your company apart
In addition, you may want to have your attorney, certified public accountant (CPA), or a knowledgeable friend review the plan and give you feedback.
Help secure financing
In addition to providing an important framework for your business, your plan can also help you secure the financing you need. Financial institutions may require a business plan as part of a loan package. This will help them better understand the business, its finances, and its growth prospects.
Why is a business plan important in this process? Banks consider the creditworthiness of borrowers based on the “5 Cs.” These include:
- Character – the borrower’s performance on previous financial commitments, also known as credit history
- Capacity – the borrower’s ability to pay back the loan, including the debt-to-income ratio
- Capital – the amount of money the borrower has
- Collateral – assets that can be used to secure the loan
- Conditions – the loan’s purpose, as well as the amount and interest rates
A thorough business plan spells out each of those elements for your lender and gives them a thorough understanding of your business.
Stay on track and grow your business
Your business plan also can serve as a touchstone as you launch and grow your company, reminding you of the goals you set to help you stay on course and track the growth of your business. Some businesses use their plans when creating training documents and programs as the company grows. Much of the information included can be useful in various areas of the business.
It’s a good idea to update your plan at least once a year. This can be an informal process that you take on yourself, or you may decide to meet with your accountant to do a more rigorous review of the company’s performance while making plans for the future.
Need help getting started with your plan? There are many free templates and resources online, including from the U.S. Small Business Administration. You may be able to get help developing your plan from your local Small Business Development Center, too.
Visit M&T Bank’s Business Education Center and use our thought leadership assets to help you launch your business.