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Writing your business plan

Why do you need a business plan?

A business plan is a valuable tool for every business owner, whether you are starting up, have been in business for years, or are ready to grow.

Think of your business plan as a sales document. It must convince readers that your venture has the potential to be successful. Your enthusiasm, dedication and confidence in the project should be evident to the reader. Avoid highly technical terms and diagrams that the reader may not be familiar with. You will want to write the plan as if the reader is not familiar with the type of business you are starting.

The most effective business plans are dynamic documents that evolve as your business grows and changes. Your plan should reflect the current reality of your business, the environment in which it operates, and your present and future goals.

If you're starting a business, a business plan can help you:

• Turn your ideas and capital into a viable business
• Secure financing from lenders and investors
• Identify strengths, weaknesses, opportunities, and threats

If you're managing an existing business, a business plan can help you:

• Communicate your vision to your employees and external parties
• Develop accurate financial forecasts
• Compare planned vs. actual performance

If you're growing your business, a business plan can help you:

• Raise capital to expand
• Create a strategy to manage growth
• Take advantage of opportunities and mitigate risks

If you're exiting your business, a business plan can help you:

• Develop a plan to transfer ownership, sell your business, or close your business
• Establish a timeline for the transition process
• Identify financial and regulatory requirements

What should be included in a business plan?

Although business plans vary in terms of length and scope, all successful business plans contain common elements. The plan should take into consideration your particular business and its environment. Here are some sections that you may want to include in your business plan:

Executive Summary

The executive summary is an overview of the key points contained in your business plan and is often considered the most important section. It is usually the first section that a potential investor or lender will read, and may be the only section to be read if it is not prepared properly. This important summary should:

• Include highlights from each of the other sections to explain the basics of your business
• Be sufficiently interesting to motivate the reader to continue reading the rest of your business plan
• Be short and concise - no more than two pages long

You will want to describe your business concept, competitive advantage, legal structure (e.g. sole proprietorship, corporation), the market, and your own experience.

Although the executive summary is the first section of the plan, you should write it last.

Business strategy ↑ top of page

This section should briefly but clearly describe what your business is all about. This segment should include the following elements:

Introduction

This section should give readers a very brief overview of your business - where you've been, where you are now, and where you're going in the future. Include:

• A short history of your business - is it a new business venture, are you purchasing an existing business, or are you expanding an existing business?
• The purpose of your business - discuss your vision and the main objectives of your business.
• A description of your products and services - what will you offer?
• Your business' legal structure - are you a sole proprietorship, a partnership, a corporation, or a cooperative?

Current Position

• Your current position - what stage of the business lifecycle is your organization in?
• Your industry - is it growing, stable, or contracting?
• Your achievements - what have you achieved so far?

Competitive Advantage

• Your competitive advantage - what is your advantage over the competition (e.g. innovative products, strong business model, or appeal to niche markets)?
• Your competitors - who are they and what are their strengths and weaknesses?
• Your business model - why is it effective?

Growth Plan

• Growth timeline - where do you see your business in a year from now? Three to five years down the road?
• Milestones - what objectives have you set for your business and when do you expect to achieve them?
• Goals - what are your short-term (the upcoming year) and long-term (the next 3-5 years) goals?

You should also include the date the business was registered/incorporated, the name of the business, its address, and all contact information.

• Forms of business organization
  
  http://www.canadabusiness.ca/eng/125/141/
  Find out which type of business structure is right for your business.
• Growth
  
  http://www.canadabusiness.ca/eng/145/146/
  Find ways to grow your business and learn about activities that can help you get there.
• Benchmarking
  
  http://www.canadabusiness.ca/eng/87/187/
  How does your business measure up to others that are similar to yours? Benchmarking allows you to evaluate your performance and ensure that your company is operating at an optimum level.

Marketing Strategy ↑ top of page

Describe the activities you will use to promote and sell your product or service. You should touch on each of the “four Ps” of the marketing mix:

• Product - how does your product or service meet the needs of your target market?
• Price - how much will you charge for your product or service and why?
• Place - how are you going to get your product to your customers?
• Promotion - how will you connect with your target market?

Your marketing strategy should also include information about your budget - how much money have you budgeted for marketing and sales costs?

You may also want to include a profile of your “ideal customers”. You can create profiles based on customer type - consumers, retailers, or wholesalers - or base your segments on demographic information such as age, location, or income level.

Keep in mind that solid market research is the backbone of an effective marketing strategy. You will want to back up your statements with facts - explain how you reached your conclusions and include statistics from reliable sources.

• Marketing basics
  
  http://www.canadabusiness.ca/eng/89/897/
  Brush up on key marketing concepts, learn how to develop a marketing plan, and assess strategic marketing options for your company.
• Guide to market research and analysis
  
  http://www.canadabusiness.ca/eng/guide/2428/
  Discover how market research can help your business succeed and learn how to conduct a variety of market research activities.

Operational plan ↑ top of page

Your business plan should outline your current operational requirements as well as your projected requirements for the next three to five years. Your inventory management and accounting systems should have the ability to produce up-to-date reports.

You can include:

• Day-to-day operations - provide a general description of the day-to-day operations of the business, such as hours of operation, seasonality of business, suppliers and their credit terms, and so on.
• Facility requirements - identify your requirements in terms of size and location. Include any related documents in the appendix of your business plan, such as lease agreements or supplier quotations. Detail any special requirements associated with the facility and include any licensing documentation in your appendix.
• Management information systems - indicate how you plan to control stock, manage accounts, control quality and track your customers.
• Information technology (IT) requirements - identify the IT systems you will be using for your business. As this is a key factor for most businesses, indicate if you are using a consultant or IT support service and outline any planned IT developments.

You may also want to include your operations manual as an appendix to your business plan.

• Management and Operations
  
  http://www.canadabusiness.ca/eng/87/
  Find out how you can structure your business, manage production processes and avoid risks.

Strengths, weaknesses, opportunities and threats analysis ↑ top of page

Conducting a SWOT analysis is an important part of business planning. A properly prepared SWOT analysis shows investors that you have realistically and objectively considered these elements.

Banks and other lenders understand that businesses will encounter difficulties at some point, and want to know how you will deal with these challenges. Remember that overestimating strengths and opportunities or ignoring potential problems will undermine your credibility.

Putting time and effort into conducting a comprehensive SWOT analysis can help you:

• Make sound decisions and future plans
• Anticipate problems and make the necessary changes
• Set aside resources to take advantage of potential opportunities

• Assessing your business' health
  
  http://www.canadabusiness.ca/eng/guide/6177/
  A periodic business health assessment should be a staple of your ongoing business planning cycle.
• Identify opportunities arising from your current business
  
  http://www.canadabusiness.ca/eng/guide/4501/
  Are you sitting on a golden opportunity for growth? Your current operations may be more fruitful than you think.

Human resources plan ↑ top of page

This section addresses how you plan to manage your employees and human resources processes. You should also discuss your short and long-term plans for employee recruitment, training, and retention. If appropriate, discuss any advisors, mentors, consultants that offer you support.

You may want to include:

• A brief organizational layout or chart of the business
• Who does what, with a brief job description of each position
• The essential skills required for each position
• Information on your employee training program
• Any other relevant information related to personnel (e.g. gaps in your team, training budget)

Don't underestimate the importance of this part of your plan. Investors need to know that you and your staff have the necessary balance of skills, drive and experience to enable your business to succeed. It is also advisable to outline any recruitment or training plans, including timelines and costs.

• Hiring and Managing Staff
  
  http://www.canadabusiness.ca/eng/85/
  Employees are the lifeblood of your business. Learn how to recruit and manage your staff to maintain organizational vitality.
• Business support organizations
  
  http://www.canadabusiness.ca/eng/87/921/
  You don't become an expert business manager overnight. Seeking the advice of peers, professional business counsellors and coaches can help your transition from new business owner to experienced entrepreneur.
• Develop your management team
  
  http://www.infoentrepreneurs.org/en/trouver-nos-guides-de-gestion/-/asset_publisher/wXA6/content/view_maximized/creer-votre-equipe-de-gestion?redirect=%2Fen%2Ftrouver-nos-guides-de-gestion
  Find out the processes and methods you will need to set up your management team.

Social responsibility strategy ↑ top of page

Implementing good environmental and social practices is good business - it can give you a competitive advantage and help foster goodwill toward your business. In this section you should discuss ways in which your business honours ethical values and respects people, your community, and the environment.

You may want to include information about:

• Your company's environmental policies and initiatives
• Your company's contributions to your community
• Relevant certifications, such as fair-trade certification, organic certification, or Leadership in Energy and Environmental Design (LEED) certification

• Environment and Business
  
  http://www.canadabusiness.ca/eng/92/
  Find environmental programs and resources that could impact your business, from greening your business to finding funding to become environmentally efficient.
• Corporate social responsibility
  
  http://www.canadabusiness.ca/eng/guide/4553/
  In order to stay competitive in today's market, you might want to consider where corporate social responsibility fits into your operations.

E-business strategy ↑ top of page

Effectively using information technology is an important part of managing a business. In this section, you should outline how you plan to use internet technologies to reach customers, manage your business, and reduce costs. You should include information about:

• E-commerce activities (selling your product or service online)
• Website development
• Hardware and software requirements
• Relationships with external information technology specialists

Keep in mind that implementing e-business strategies can save money - if this is the case for you, you may want to highlight potential savings in this section.

• Planning for e-business
  
  http://www.canadabusiness.ca/eng/145/148/4327/
  The first step in any project is planning. Look at what you want to get out of e-business and the different ways for making that happen.
• What is e-business?
  
  http://www.canadabusiness.ca/eng/145/148/4325/
  Discover what e-business is.

Financial forecasts and other information ↑ top of page

This section of your business plan essentially turns your plans into numbers. As part of any business plan, you will need to provide financial projections for your business. Your forecasts should run for the next three to five years. However, the first 12 months' forecasts should have the most detail, including assumptions both in terms of costs and revenues, so investors can clearly see your thinking behind the numbers.

As you put your plans down on paper, remember the importance of thinking objectively. Analyzing your venture from three points of view - optimistic, pessimistic, and realistic - can give you a solid idea of what to expect as you move forward.

Your financial forecasts should include:

• Cash flow statements – this is a cash balance and monthly cash flow pattern for the first 12-18 months. Include working capital, salaries and sales.
• Profit and loss forecast – this is the level of profit you expect to make, given your projected sales, the costs of providing goods and services, and your overhead costs.
• Sales forecast – this is the amount of money you expect from sales of your product and/or service.

Things to consider:

• How much capital do you need, if you are seeking external funding?
• What security can you offer to lenders?
• How do you plan to repay any borrowings?
• What are your sources of revenue and income?

Your forecasts should cover a range of scenarios, and you should include the contingency plans you've developed to offset any risks. You can also review benchmarks and averages for your type of business and discuss your business' position.

• SME Benchmarking Tool
  
  http://www.ic.gc.ca/eic/site/pp-pp.nsf/eng/h_pm00000.html
  Find out how your firm measures up to comparable small businesses within your industry.

Additional Resources ↑ top of page

You'll want to thoroughly review your plan once it's done. Try to avoid using jargon - the person reading your plan may not understand your businesses as well as you do. You can ask friends, family, associates, and mentors to review it. Don't be afraid to seek advice from professionals such as lawyers and accountants. You may also want to consider hiring a professional proof-reader to check for errors.

Remember, your business plan represents you business, so you want it to be as professional as possible.

To get answers to frequently asked questions and see sample business plans and templates, visit the resources below.

• Business plans - templates and samples
  
  http://www.canadabusiness.ca/eng/86/4878/
  The organizations listed here provide free templates, writing guides and sample plans to help you develop a professional business plan.
• Business planning frequently asked questions
  
  http://www.canadabusiness.ca/eng/86/4879/
  Find the answers to questions often asked about preparing a business plan.