Your business plan is the document that will explain all the steps you will take to start and grow your business.  Part of your business plan is narrative – a written explanation of the business.  The other part of your business plan is the financial analysis – a numbers-driven look at how your business will work, how it will generate profit.

The goal of a business plan is to outline for yourself and possible investors how you intend to succeed.  The process of developing the plan forces you to think about your business in a systematic way.  You will outline facts, look at ideas with a critical eye, and, ultimately, construct a plan for a business that will remain in the black for years to come.

Because there are many fine and free business plan templates available through SBA, SCORE, Bplans and others, here we look at an overview of the parts of a business plan and in other articles, we highlight important components for your consideration.

The Narrative

The body of your business plan consists of the narrative.  In a sense, this is the chronological “story” of the growth of your business.  The narrative describes the steps you will take to first, bring your business to life and, after that, operate your business successfully over time.

Elements of the narrative include:

Executive Summary:  Though this is the start of the business plan, it will be the last section you write.  Here you will summarize all of the rest of the plan as if you were presenting the entire plan in a brief interview.  It is here you will present your firm’s mission.

General Company Description:  What does your business do?  This section describes your goals as well as your business philosophy/perspective.  Here you will assess your industry, the strengths of your company and its legal form of ownership.

Product(s) and/or Services:  Here you will offer an in-depth description of your products and services.

Market Assessment and Strategic Plan:  Market research and competitive analysis are crucial components in your plan.  In this section, you will present the results of your assessment of the business climate for your specific business category, an analysis of your product(s) and/or services in the market, an analysis of your targeted customer base and an analysis of your competition.  Following your market and business assessment, you will lay out your strategic plan including your value proposition, positioning, pricing, marketing plan, distribution plan and more.

Operating Plan:  With this section, you will fully explain the daily operation of your business, including location, equipment, people, processes, and legal environment.  Areas such as inventory, credit policies, and accounting are covered.

Management and Organization:  Who will manage your business on a daily basis?  What competencies does he or she bring?  Who will work should a vital person become incapacitated?  Board of directors, attorneys, accounts, insurance agents, bankers, and other consultants are all discussed in this section.

Financial Analysis

Financial planning is crucial.  Many businesses fail in the first year because they run-out of the cash flow needed to maintain operations.  Proper planning can help you predict where you will be in one year and further into the future.

Startup expenses and capitalization:  Here is your plan for the capital you will need to get your business started and estimate early expenses.

Profit/loss projections:  Using your monthly forecast of sales, cost of goods sold, expenses, and profits, this is the centerpiece of your initial financial analysis.  You will project profit/loss for your first year and for a longer time horizon whether three, four or five years out.

Projected cash flow:  Here is the plan for paying your bills.  Cash flow is essential to the life of a business.  Predict what you need for startup, preliminary expenses, operating expenses, and reserves.

Breakeven analysis.  Here you will calculate the point at which revenue covers all costs before making a profit.  It’s important to understand the costs of your business and what sales volume is needed to cover those costs.  A breakeven analysis will shed light on whether your firm is financially viable.  The breakeven analysis may show that costs may need to be reworked. 

Projected balance sheet:  Create a balance sheet that shows your assets and liabilities when you open for business.

A complete business plan with narrative and finical analysis will explain why you are in business and how your will organize your resources for success.  It will take some time to prepare, but when you complete it you can move forward with greater certainty that you are in the right business and have what it takes to be a success. Once you have your business plan, you’ll have a roadmap from which to build your firm.