Key Points in Writing a Business Plan
Revised August 2009
Co-director, Ag Marketing Resource Center
Iowa State University Extension
Below are key points to remember when preparing your business plan. The information is presented as a series of points that can be used as a “checklist” of important aspects of your plan. A more thorough discussion of preparing a business plan is available. A more comprehensive outline for creating your business plan is also available.
You may want to review the points below when you start preparing your plan. It will help you focus your energies on the important aspects of the plan. You may also want to review the points when you are finishing the plan. It may identify important areas in your business plan that you have missed.
The points are presented in three categories. The first focuses on getting prepared for writing your business plan. The second identifies the broad sections that should be included in the plan (other sections can be added as needed). The third deals with the actual writing of the plan.
- Assign Responsibility -- Place one person in charge of preparing the plan. You may divide the responsibility of outlining various sections of the plan among the other members of your committee. However, one person needs to be responsible for integrating the various sections into one comprehensive document.
- Get Help – Although it is important that you are responsible for creating the plan, you may want to hire someone to help you with the plan. He/she can do most of the actual writing. In addition, he/she can challenge your assumptions and conclusions.
- Target Your Reader – If you are preparing your business plan for a specific purpose such as obtaining financing, consider the viewpoint of the type of person for whom you are writing the plan. This may be bankers, investors, customers, or other persons. If bankers are your target reader, provide them with an understanding of your business and how you will use their loan.
- Know Your Business -- Represent your company’s image and convince the reader you understand all aspects of the business. The reader will ask you to clarify aspects of the plan. If you cannot answer these questions, the reader will doubt your ability to lead the business venture, for good reason.
- Promote Your Business Concept -- The business plan may be used as a document to promote your business concept. The content and quality of the plan should be representative of your company.
- Be Honest – Although you may be using the business plan to promote your business concept, be honest. Do not be overly optimistic or try to hide limitations or weaknesses. It may come back to haunt you later.
- Prepare to Use the Plan – You are the primary reason for writing the plan. It is to help you think through all aspects of the project and provide you with a blueprint for creating the business venture.
- Just Getting Started – Remember, when you have prepared your business plan you are just getting started. The success of your business ventures rests on how well you implement your plan.
Elements of the Plan
- Describe Your Role as Leader – Convince the reader that you and your team can provide the leadership skills needed to implement the business plan, create the business and turn it over to the managers. Disclose how you and your team will be rewarded for starting the business.
- Outline the Business Model – Explain how the business will be organized. How will the business make money? Why will the business make money?
- Describe Your Product –If you are producing a differentiated product, what are its attributes (quality, distribution, service, etc.) and how do they differ from those of your competitor’s products. If you are producing a commodity, why can you produce it cheaper than your competitors.
- Define Your Market – Explain who your customers are and why they will buy your product. Quantify your market, sales, production, and cost data. Do not generalize. Be specific. Use data to help tell the story.
- Describe Your Product Distribution Plan – Describe the channels you will use to get your product to your customers. Explain how your product be positioned conveniently for your customers.
- Outline Your Promotion Plan – Your promotion plan needs to get your customer’s attention. How will your customers learn about the unique aspects of your product. Explain how you will convince them to buy your product.
- Identify Your Competition – Describe your competitors and how they differ from you. Explain why customers will buy your product rather than those of your competitors. Discuss any competitive advantage you have over your competitors.
- Describe the Managers -- Describe the team that will manage the company once the business is up and running. Convince the reader that they will be successful in managing this business.
- Describe the Technology – If your business concept focuses on processing, manufacturing or some other transformation of raw materials into a product, describe the technology used in this transformation. Is the technology cutting-edge or traditional? Is it experimental or proven? Can competitors adopt the technology?
- Describe the Business Financing – Explain how much equity is needed and how you will attract investors. Are credit sources in place?
- Outline the Business Structure – Describe the business structure. Have it been created? Describe the governance of the business.
- Discuss Investor Issues – Will profits be distributed to shareholders or kept within the business for expansion? Explain how investors can exit the business if they invest. Are there specific exit strategies outlined for investors? What is the expected liquidity of equity shares?
- Focus on Strategy -- Answer the three strategic planning questions:
- Where are we now?
- Where do we want to be?
- How do we get there?
- Project Revenue, Costs and Returns – This will convert all of the previously discussed elements into a financial projection or outcome. It is your indicator of success. However, its value is based on how accurately it represents the economic assumptions made in the previous sections of the plan. The accuracy of the numbers coming out of the financial projection is based on the accuracy of the number going into the projection. You may want to project returns under best-case and worst-case scenarios of price, production and sales.
- Include Supporting Evidence -- This includes statistics, studies, documents and other evidence to support the goals and claims you make in the business plan.
- Summarize Your Plan – Include an Executive Summary of your plan. This is a stand-alone piece that provides an overview of why you business concept will be successful. Although the Executive Summary is placed at the beginning of the plan, it is usually prepared last.
Writing the Plan
- Follow a Framework – It helps to use an outline when you are writing your business plan. Include only those sections of the outline that area relevant to your business concept. Begin each major section on a new page with the appropriate title; for example, Markets, Finances, etc. .
- Customize Your Plan -- The actual content of the business plan will vary depending on the nature and complexity of the business, the stage of business development and the type of financing needed.
- Write Clearly and Concisely -- Write in easy to understand terms. Avoid jargon and terms that are unfamiliar to people outside of your industry.
- Be Flexible -- Be open to making changes if warranted. As you write your business plan you may see changes that need to be made in your plan, your business model or your business strategy. Flexibility will be even more important when you are implementing your plan.
- Refine the Plan -- Review, revise and rewrite. It is extremely rare to achieve the finished version of a plan in the first draft. It may need to be re-written several times. However, the purpose of rewriting the plan is to fill in gaps, solidify the logic and make the plan easier to understand by the reader. It is not to add extraneous materials. So if you find the length of the plan expanding greatly after each rewrite, your efforts are probably counterproductive. At some point in time you need to declare that the plan finished – for now – remembering that the plan will need to be updated as conditions change.
- Proofread the Plan – Ask an outsider who is knowledgeable of business plans to review your plan.