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The four basic parts of formal business plans are: the Introduction, Marketing, Financial Management, and Operations. In order to make the business plan writing process more manageable, we’ll break each section down individually according to the type of information it should contain. Remember also to include a professional-looking cover sheet and a table of contents so your reader can easily find information relevant to their purpose in reviewing your plan.

1. Introduction

This is the section that briefly sums up your business — what you’re selling, who you’re selling it to and what distribution methods you’ll use, how your business is structured, who the principals of your company are, etc. It is structured like this:

Statement of Purpose/Executive Summary:
This a brief statement describing your business and your reason for writing the business plan, and contains an overview of the entire plan. Here you’ll briefly describe your company’s location, target market, products or services offered, your pricing strategy, distribution channels, and other highlights in summary.

Business Description and Company History:
Here you’ll give a detailed description of the business and its goals; its location and whether you own or lease; the ownership of the business and its legal structure; the skills and experience each owner has, and what their financial investment and level of participation in the business is; who your target market is and what advantages your business has over its competitors.

2. Marketing

The Marketing section of business plans describe the “who, what, when, where, how, and why” of your target market. It should include all of the following:

Market Analysis:
In this section you will describe your product or service and list your overall market (what industry your business is in), which will include the size and location of your market (i.e., is your business neighborhood-specific, citywide, nationwide, global).

Your Customers/Your Target Market:
Be specific; by defining the type of customer you expect to serve, you can better determine your market and identify your niche within that market. Here you will describe your customers’ demographics: age, gender, education, spending habits and lifestyle. If your customers are companies rather than the public, describe the segment of industry you’ll be serving and how your product or service will fill their needs, as well as whether yours will be a short-term or long-term relationship. Include any economic, social, technological or legal issues (either positive or negative) that might affect your business.

Competition:
List your competitors and describe for each how your product or service compares in terms of price, location, and services offered, as well as what market share each has, what reputation or image their company has in the market, what marketing techniques they use, and how you will compete to gain market share (what makes your business different).

Marketing Strategy:
Discuss what the demand is for your product or service; how you will sell it or deliver it; and why your customers will buy from you instead of your competitors. This is where you will state the percentage of the market you intend to gain; how you will penetrate the market and maintain your market share; what your pricing strategy is and how it will make a profit; and details on methods of distribution (will you be retailing it from a storefront or online or both, will you employ salespeople or contract with distributors, or will it be a mail order business). Your marketing strategy will also include your plans for promoting your business and building your brand identity.

3. Financial Management

Financial mismanagement is probably the single most common reason many small businesses fail, so getting a handle on your financial situation is critical.

Unfortunately this is the area of business plans that many entrepreneurs have the most difficulty drafting. It requires you to forecast your business income, your projected return on investment, your break-even point, projected cash flow, and anticipated expenses, among other things. Consulting with an accountant to comprehensively address this section is highly recommended, especially if you’re seeking funding for your business. The Financial Management section should cover:

Start-up capital:
Explain your source and the amount of initial equity capital, including the amount and percent invested by each owner.

Operating budget:
Develop a monthly operating budget for the first year. Include all recurring expenses you can think of, including utilities (phone, electric, Internet Service Provider if applicable, etc.); salaries; taxes; insurance; supplies; postage meter; vehicle repair/maintenance; as well as start-up equipment purchases (if you’ve purchased on credit, your monthly credit card or store credit expenses should be listed also).

Cash flow projections and return on investment.
Your cash flow projections should be developed on a month-by-month basis and cover, at a minimum, the first year (some lenders require that your monthly projections cover a three-year period).

Projected income statements and balance sheets.
These should cover a two-year period.

Break-even point.
Discuss how and when your business will start making a profit (when income exceeds expenses).

Personal balance sheet.
Explain your personal balance sheet and method of compensation.

Accounting records.
Discuss who will maintain your accounting records and how and where they will be kept.

Supplemental info.
Provide “what if” statements that address alternative approaches to any problem that may develop.

4. Operations

This is the “how we do business” section of your business plan. It includes information about your key personnel, the day-to-day management of your business, how your product or service is produced and delivered, and supplemental data relevant to your business operations.

Personnel:
List all the key management personnel and list their job title, their responsibility in your organization, their qualifications and experience. Include each person’s resume in this section as well.

Day-to-day management:
Explain how the business will be managed on a day-to-day basis (who does what).

Personnel procedures:
Discuss hiring procedures and personnel policies.

Business-specific information:
Discuss insurance, lease or rent agreements, and issues pertinent to your particular business, including information about equipment necessary to produce your products or services.

Production and delivery:
Explain the production and delivery of products and services.

Conclusions

The last section of your business plan will be the Concluding Statement in which you summarize your business goals and objectives, and express your commitment to the success of your business.

Depending on the goal of your business plan — whether it’s to obtain financing, attract investors, or obtain credit with suppliers — make sure your enthusiasm and passion shine through. The life of your business may depend on it.