A Business Plan Template for Writing a Great Business Plan

Writing a sound business plan does not have to be difficult. Too often writing a business plan is made out to be an arduous and lengthy process. While it is important to put sufficient time into the writing of the plan to ensure that is of high quality and that it conveys what is intended, the number of pages is less important than what is written and how it is written. This workbook is designed to walk the user through the process of developing a business plan in a logical, straightforward manner.

A business plan is a living document. That simply means that the words that are put on paper must mean something and they must be defensible.  Business plans are most often written for the purpose of obtaining some type of financing. However, business plans are sometimes written as a document that helps define corporate or business structure, markets and marketing plans, product offerings, risks, financial strength and sources of funds and other important facets of the business.

It is important to note that a business plan is not a just a document. The actual words on paper represent what the business will do to be a success. This is the critical aspect of business planning and the final document that is produced merely conveys to the reader how the business will achieve that success.

All businesses are or should be engaged in some form of business planning. We loosely distinguish between strategic planning and business planning based on the fact that a strategic plan tends to be long-range in nature while a business plan tends to have a shorter planning horizon. And while a business plan should provide an overview of the goals and strategies defined in the strategic plan, the business plan is derived from the results of the strategic planning process. In other words, without a strategic plan in place, it is difficult to develop a meaningful business plan. The business plan is the operating plan that will be utilized to achieve the goals and employ the strategies defined by the strategic plan. 

Undoubtedly the number one reason for writing a business plan is to elicit the support of investors, bankers and/or a guarantor for moving a new or existing business forward by infusing money into it. That implies that the business plan must sell the business concept, the approach to conducting business and those who will manage it in manner that instills confidence in the reader that the business has more than a fighting chance of being successful. This is the challenge that you face in writing your business plan.

A solid business plan is achieved by including the following in its development:

  1. Details about the product or service that will be marketed.
  2. A strong understanding of the market(s) involved and the competition you will face (is there a reason for someone to buy from you rather than the competition?).
  3. A thorough analysis addressing the resources that will be needed to develop the product or service and then get it to market.
  4. Input from friends, business professionals, financial experts and others about your plan to ensure that it is understandable, conveys clearly what it is your business will be doing and whether they understand the value proposition of your product and business.

The following pages provide background on avoiding common mistakes when writing a business plan, descriptions of the various elements that should be included in the business plan, worksheets and templates for your use in structuring the plan and other important information that will assist you in creating a business plan that will get attention and instill the confidence necessary in those you are trying to reach.

This manual is written in the order in which your business plan should be written. Follow this manual and use the information as you deem appropriate given your particular situation. There is no one size fits all format or approach to business planning. However, this manual presents information and a format that is time-tested and should provide you with a good foundation from which to work. Certainly feel free to ignore information you believe is not applicable and add things that may not be present in this manual as you deem necessary.

The Internet is a good resource for business planners as well. There are some sample business plans available for free on the World Wide Web. But be careful not to oversimplify your plan as many examples on the Internet portray. A business plan must be thorough and contain sufficient information and data to give readers a sound basis for making decisions. It appears that many of the free examples on the internet are not as thorough and comprehensive as necessary.

Good luck and enjoy your journey through the process of building your business plan. While it will take time to create a sound plan, you will likely feel a real sense of accomplishment when it is completed.


There are more than a few mistakes that seem to be made in writing business plans. Based on reading a wide variety of plans, we have identified a number of common mistakes made in writing the plans. Those common mistakes and a brief description of each are listed below.

  1. Failure to understand or define the business concept fully. Too often, entrepreneurs and business owners have a basic understanding of the business concept, but have not really thought through the concept thoroughly enough to sell it to someone else. It is imperative that you have a very thorough understanding of what business you will be in and how you will go to market. If you cannot explain your concept thoroughly and concisely in the business plan, the reader will immediately be turned off and will likely not read further.
  2. Leaving important pieces of information out. It is amazing how often we read plans that have omitted critical information. We strongly recommend that once you have completed your initial draft of the document to read it and have 3 to 5 other people who know nothing about the business read it as well. Solicit their feedback and ask them if it is clear and if it provides sufficient information. Use their feedback as well as your own observations about the document to add information that will clarify or further explain important points.
  3. Including too much information and being redundant. Most readers do not want to read a long document that includes information that is essentially irrelevant to the business. And they do not want to read the same information over and over again. Be concise, be clear and be pertinent. Avoid being overly wordy.
  4. Failure to be realistic. It is absolutely mind boggling the fantasies that an entrepreneur or business owner can dream up when thinking about their business concept. In defining the business concept, estimating market share, and creating the underlying assumptions around which the important financial projections are created, it is imperative that a sense of reality be present. Thinking with one’s heart rather than their head can have an adverse affect on whether the business plan is grounded in reality or fantasy. Any astute reader will see though a plan based on anything other than realistic assumptions and concepts.
  5. Assuming that your concept is so good that the business plan can be sloppily formatted. We have seen some business plans that stood no chance of being read simply because they were so poorly laid out and formatted. While looks aren’t everything, having a professional looking business plan is important.
  6. Assuming that looks are everything. Some people believe they can make a business plan look so appealing in terms of format and design that they can have a poorly written document. Nothing could be further from the truth. We have seen business plans that looked beautiful, but quite frankly stunk in terms of content and concept. The reader is most interested in what you say and, to some extent, how you say it.
  7. Taking shortcuts. Some people believe that they can leave out important sections of the business plan entirely and simply address those sections verbally. The problem with that line of reasoning is that leaving important information out will probably sink any chance of getting an invitation to present the plan verbally. Stay focused on the reader and what he/she wants to know. If important information is left out, the reader will likely stop reading or determine that the writer does not understand the business well enough to describe it or is too lazy to write a complete business plan. In all cases, the plan is probably doomed.
  8. Underselling or overselling. Too many writers of business plans attempt to either oversell their business concept or they undersell it. It is important to remember that you will be trying to get the reader(s) excited about your business. But overselling it by writing too much hype will be met with disdain by the astute reader or financing source. Keep in mind that most of the people who will be reading your business plan document have read many of them and they are keenly aware when they are being oversold. Try to sell your business concept by creating a feeling with the reader that the underlying assumptions used to arrive at market and financial projections are sound and reasonable and use language that creates excitement without overly hyping the concept. Keep the verbiage professional, but weave a sense of enthusiasm into the document.


While there really is not one universal standard that is followed for developing a business plan, most business plans contain a core set of elements that are key in conveying critical and relevant information. The following pages contain a recommended format for a business plan. We have arrived at this recommended format based on years of experience in writing business plans, reading business plans, and in discussing the pluses and minuses of various business plans with top level executives, bankers, investors, and others involved in providing funding to businesses.

Certainly, there are other formats that can be utilized and our recommended format can be modified. However, we believe that by using the format outlined in this workbook, you will end up with a document that is meaningful, concise and one that will include most or all of the necessary elements demanded by astute readers of the plan.

This workbook is designed for ease of use and each section provides a brief description of the information required as well as a worksheet and/or template that is useful in developing the verbiage that best conveys your thoughts and plans.

The checklist on the following pages is provided as a tool for ensuring that all or most of the critical elements of a business plan are included your final document.  This checklist provides only a final accounting of the elements that should be included in your business plan. Each element is described in detail in this workbook. The detailed description provides additional information about what is specifically to be included under each element within the plan.


Plan Element:                                                          Check if Included

Cover Page                                                                          [ ]

Table of Contents                                                                [ ]

Executive Summary                                                           [ ]

            Discussion of products/services                       [ ]

            Overview of the business concept                   [ ]

            Brief discussion of the market                           [ ]

            Overview of the industry and competition  [ ]

            Marketing approach and strategy                    [ ]

            Management structure and top personnel  [ ]

            Risk overview                                                           [ ]

            Financial projections                                             [ ]

            Financing required                                                 [ ]         

Goals and Strategies                                                          [ ]

            General discussion of primary goals               [ ]

            List goals                                                                   [ ]

            General discussion of primary strategies      [ ]

            List strategies                                                           [ ]

The Company and its History                                          [ ]

            Description of the company                                 [ ]

            Brief discussion of its history                               [ ]

The Industry and Competition                                        [ ]

            Detailed description of the industry                 [ ]

            General discussion of competition                    [ ]

            Detailed discussion about competition           [ ]

Products (or Services)                                                        [ ]

            Overview of product(s)/service(s)                      [ ]

            Patents, trademarks, copyrights                         [ ]

            Detailed description of product(s)/service(s)  [ ]

            Discuss competitive advantage/differentiation  [ ]

The Market                                                                            [ ]

            Description of the market                                     [ ]

            Size of the market                                                    [ ]

            Market location(s)                                                    [ ]

            Current and projected market trends              [ ]

Checklist (Continued)

Plan Element:                                                          Check if Included

Marketing                                                                              [ ]

            Review of market/marketing strategies               [ ]

            Discussion of branding/image development     [ ]

            Discussion of forecasted market share               [ ]

            Pricing strategies and price schedules               [ ]

            Selling approach                                                     [ ]

            Distribution strategies and approach                  [ ]

            Service and warranty plans                                   [ ]

            Promotional Plan Summary                                   [ ]

Operations                                                                            [ ]

            Manufacturing/service delivery method            [ ]

            Labor requirement breakdown                             [ ]

            Discussion of product/service cost(s)                  [ ]

            Administrative/Technology Overview                  [ ]

Management and Organization Structure                        [ ]

            Overview of management structure                     [ ]

            Organization chart                                                   [ ]

            Summary of individual backgrounds                   [ ]

            Resumes of key management personnel               [ ]

Critical Risks                                                                        [ ]

            Presentation of potential risks to the business  [ ]

            Discussion of risk mitigation strategies               [ ]

Financial Information                                                          [ ]

            Funding required                                                     [ ]

            Current capitalization                                             [ ]

            How funds will be used                                          [ ]

            Income statements – three years                         [ ]

            Balance sheets – three years                               [ ]

            Cash flow statements – three years                     [ ]

            List of assumptions used in projections              [ ]


The cover page is simply an entry page that will provide the full name of the business, the city in which it is located, the time frame the business plan covers and the date the plan document was prepared. The cover page must stand alone and not include other information. The following page provides a sample cover page.

A Business Plan For:


New York, New York

Covering Years One through Three

Business plan prepared: July 2020


The table of contents follows the cover page. The table of contents provides a listing and beginning page number of each of the major element headings in the document. Bear in mind that the headings in your table of contents will depend strictly on what you choose to include in your plan. Some writers choose to include elements in addition to those suggested in this workbook in their plans and those will be included in the table of contents.

Also, any exhibits and appendices should be included as well. A sample table of contents is shown on the next page.


Executive Summary                                                                                   1                                                                                                                                 

Goals and Strategies                                                                                  4                                                                                                                     

The Company and its History                                                                 6                                                                                                                     

The Industry and Competition                                                               9

Our Product                                                                                                  13

Our Market                                                                                                    16

Marketing                                                                                                      20

Operations                                                                                                    28

Management and Organization Structure                                      33

Critical Risks                                                                                                41

Financial Information                                                                              44      

Exhibit A – Market Data                                                                            55

Exhibit B – Reprint of USA Today Article                                           56


The Executive Summary is intended to provide the reader with a quick summary of the business and its major components as well as an indication of the projected financial needs and performance. Most readers of business plans want to gain a basic understanding of the business and its chances of succeeding from the Executive Summary. This section is where you will have an opportunity to capture the reader’s attention. Some people who read business plans routinely tell us that if the Executive Summary does not get their attention, the likelihood of them reading the entire document is low.

Our general rule of thumb is to keep the Executive Summary to between 3 and 5 pages. For very complex businesses, it is possible to exceed this limit, but keep the reader in mind. A very lengthy Executive Summary will turn most readers off and your chances of getting the attention you desire will be limited. At the same time, too short an Executive Summary will not provide enough information and will similarly turn the reader away. Bear in mind that you will need to limit the space devoted to each component of the Executive Summary since the overall Executive Summary will be limited to 3 to 5 pages. This implies that you will need to write in a very succinct and clear manner.

The Executive Summary should not include sub-headings. It should flow from paragraph to paragraph addressing each of the components below.

Discussion/Description of Product(s)/Service(s):

It is critical to convey to the reader exactly what your business will be selling. In this part of the Executive Summary, you must clearly describe what it is you will be offering. If the reader is left guessing about the product(s) or service(s) offered, the likelihood of the plan being read further is greatly diminished.

Overview of the Business Concept:

Define succinctly the overall concept of the business. That means that, in addition to describing products or services, it is fundamental to a business plan to delineate what your vision of the business is. The most important question to answer here is, conceptually, what business will you be in/are you in? The reader should come away with a decent idea as to what the business is.

Brief Description of the Market(s):

The market(s) that your business will be selling to must be described in a manner that allows the reader to envision exactly who will be targeted. If, for example, the business will be a business-to-consumer company, a definition of the demographic makeup of the most likely buying segment(s) must be included. Additionally, the reader will want to know how large this market is and what share of the market your business will be expected to capture.

Overview of the Industry and Competition:

Any astute reader of a business plan will want to know something about the industry your business will operate within. And the reader will want to know that you know something about that industry. Address name and the nature of the industry and describe the number of competitors. Briefly address the competitive advantage your business will take to the market(s).

Marketing Approach and Strategy:

Too many business plans are weak in addressing this particular element. A weak marketing plan is a surefire way to kill a business. And anyone who is a prospective financing source for the business will quickly put the plan down if he/she senses a weakness in this area. The Executive Summary should include a brief discussion of the specific marketing strategy that will be employed as well as an overview of the promotional efforts that will be undertaken. While simplistic in nature, briefly addressing the 4 p’s of marketing (price, product, promotion and place) is a sound way of communicating the important aspects of your marketing approach. Since your product(s)/service(s) should have already been addressed, there is no need to replicate that information here.

Management Structure and Top Personnel:

The reader wants to know that sound management will be in place to run the business. A discussion of the management structure in terms of key positions and reporting relationships at the top of the organization is in order here. Also, a brief introduction to the key members of top management and their qualifications should be included.

Risk Overview:

One of the first questions out of the mouths of prospective financiers of your business will likely be about the potential risks to the business. Unfortunately if you don’t address this honestly and completely, the readers will make their own assumptions that may or may not be accurate. Clearly address the risks the business will face. If there are, for example, potential regulatory changes that could negatively impact your business, discuss it.

Financial Projections:

This is not the place to go into elaborate detail about the financial outlook for the business. That will come later. But it is important to convey to the reader the expected profitability of the business and the timeline for achieving the various levels of profitability. Bear in mind that these must be realistic.

Financing Required:

If this is going to be a business plan that will act as a financing “prospectus” of sorts, the Executive Summary must include a brief paragraph describing the amount of financing sought and how the money will be used.

On the following page is a guide for creating a basic outline of your executive summary and to help you formulate your thoughts.  Try to organize your thoughts carefully and be as thorough as possible when addressing each element.

Executive Summary Guide


What is the name of your business?  
In what year was the business founded?  
Where will the business be located?  

Discussion/Description of Product(s)/Service(s)

What do you call your product/service?
Describe the product/service.          
What makes your product/service unique?        

Overview of the Business Concept

Describe your vision of the business.          
What business are you or will you be in?            

Brief Description of the Market(s)

What is/are your target market(s)?        
Describe the market(s) (who, where, size, demographic makeup).                    
What is the anticipated market share in each of the first 5 years of operation? 1. 2. 3. 4. 5.

Overview of the Industry and Competition

What is the name of your industry?  
Describe the industry in brief detail.          
How many competitors are there in this industry and who is/are the leader(s)?  
What competitive advantage will/does your business offer?    

Marketing Approach and Strategy

What marketing strategy will be employed (e.g. penetration strategy with a low price market entry)?          
How will you price your product(s)/service(s) and briefly describe how your pricing compares with the competition overall?            
If product distribution is a part of the plan, briefly describe how the product will be distributed to the market?            
Briefly describe your approach to promoting your product/service (avoid details at this point).                

Management Structure and Top Personnel

Briefly discuss who will be the key management personnel involved in the business. Indicate who they are and why they are qualified.          
Briefly identify the reporting structure at the top of the organization.            

Risk Overview

Briefly address the potential business risks.          

Financial Projections

Discuss briefly the projected profit picture of the business over the period of time covered by the plan. (Avoid too much detail here. That will be addressed in the actual financial projection section of the plan.)          

Financing Required

In a sentence or two, indicate what level of financing is being sought and how it generally will be used.    


Businesses that are well managed have well defined goals and strategies. And business plans that are well prepared include those well defined goals and strategies. Even businesses that have not yet started operations should have goals and strategies in place.

The development of goals and strategies is not difficult, but does require sound business logic and reasonability as their basis. Presenting the goals for your business is important because readers of your business plan must gain a clear understanding of what you believe is reasonably attainable over a 2 to 5 year planning horizon. 

The following are basic guidelines for developing credible goals that readers of the business plan will not dismiss as unreasonable:

  1. All goals must be attainable. A big mistake made by many who write business plans is that they develop goals that simply cannot be realistically achieved. Readers will detect attempts to “oversell” when they read goals that do not appear reasonable.
  2. Avoid setting goals that are too easy to achieve. Readers will want to know that you and your business are willing to stretch to achieve difficult, but reasonable goals.
  3. The goals should be easily understood. If the goals need to be explained, they are not acceptable.
  4. Goals should address critical aspects of your business. If your goals address trivial or immaterial aspects of the business, they simply will not be meaningful or actionable.
  5. Avoid developing too few or too many goals. One goal is not enough to adequately focus on the critical elements of the business. By the same token, having ten goals, for example, will likely dilute the focus needed. Generally, three to seven goals are sufficient to provide the proper focus on what is important to achieve over a reasonable planning horizon.
  6. Develop goals that have meat to them. In other words, create focus by developing goals that address the things you want to accomplish. Avoid developing goals that sound impressive, but are irrelevant to the outcomes desired.

Keep in mind that goals indicate future positions the business is to achieve. As mentioned, goals must address critical aspects of the business. In general, the broad areas around which goals are created include, but are not limited to:

  1. Market share
  2. Growth
  3. Diversification
  4. Customer service
  5. Market positioning
  6. Image
  7. Product/service development
  8. Geographic coverage or expansion
  9. Innovation
  10. Productivity
  11. Return on Investment
  12. Social Responsibility
  13. Technology
  14. People
  15. Facilities/Locations
  16. Capitalization
  17. Ownership
  18. Management and administration
  19. Marketing

Listed below are several examples of goals:

  • Achieve a minimum 8 percent pre-tax net income each year.
  • Achieve annual growth in revenues of at least 15% per year.
  • Differentiate the company from its competition by delivering outstanding customer service on a consistent basis.
  • Position the company as the leader in the industry in terms of service, quality and people.

Strategies are associated with the “how to”. Goals delineate what is hoped to be accomplished in a general sense and strategies indicate how those goals will be achieved. A sound business plan includes a well developed discussion of the basic strategies that will be employed to help achieve the goals that have been established.

Strategies equate with decision making. For the business, decisions about growth, diversification, divestiture, expansion, pricing, markets, products and services and other important areas represent strategic decisions. Strategies are maneuvering mechanisms and readers of your business plan will want to know how your business will outmaneuver its competition.

Risk is an important part of business and the development of strategies should consider the level of risk associated with them. When established businesses evaluate risk from a strategic perspective, it is often wise to view the level of risk in terms of their product/service offerings and markets. For example, making the strategic decision to sell an existing product into a new market generally carries less risk than attempting to sell a new product into a new market. As you develop or modify strategies, do as much risk assessment as possible and account for risk before finalizing your strategies. Assuming too much risk can be disastrous for a business while not taking enough risk can reduce rewards. While these do not always hold true, there generally is some association between risk and reward. However, it is important to note that there is no rule of thumb for defining the exact risk/reward ratio of a particular strategic decision.

Well managed businesses understand how to manage risk. They analyze available data and seek out customer feedback. Failure to seek out and analyze available information and data and to solicit customer feedback is dangerous at best.

Remember that strategies support goals. As a way of explaining how goals and strategies are related, an example is in order. Using the goal, “”Differentiate the company from its competition by delivering outstanding customer service on a consistent basis”, a few examples of supporting strategies for an audio sales and installation business are:

  • We will locate service locations so that all customers will have no more than a 50 mile drive to receive service.
  • We will carry a wider range of audio equipment with various price points than our competition.
  • We will provide remote installation service with extended hours.
  • We will hire only experienced technicians, train them aggressively on delivering outstanding service and hold them accountable for doing so.

It is not difficult to understand why a reader of a business plan would be interested in knowing what goals are in place and how they are to be achieved. This section of the business plan helps the reader determine to what extent sufficient thought has gone into building a business that has a chance to succeed and is sustainable.

On the following pages are worksheets that will assist in the development of goals and strategies.

Developing Goals Worksheet 1

For each of the areas listed below, indicate whether each should be a source of focus for the business and then prioritize those that you check as “Yes” using a simple numerical rating such as 1 for most important, 2 for next most important and so on. This will help identify the goals that will ultimately be chosen.


                                                                        Yes                 No                   Priority

Market Share                                              []                     []                     ______

Growth                                                          []                     []                     ______

Diversification                                            []                     []                     ______

Customer Service                                     []                     []                     ______

Market Position                                          []                     []                     ______

Image                                                            []                     []                     ______

Product/Service Development               []                     []                     ______

Geographic Coverage/Expansion         []                     []                     ______

Innovation                                                    []                     []                     ______

Productivity                                                 []                     []                     ______

Return on Investment                               []                     []                     ______

Return on Assets                                       []                     []                     ______

Return on Equity                                        []                     []                     ______

Net Profit                                                      []                     []                     ______

Social Responsibility                                []                     []                     ______

Technology                                                  []                     []                     ______

People/Employees                                     []                     []                     ______

Facilities                                                       []                     []                     ______

Capitalization                                              []                     []                     ______“

Ownership                                                    []                     []                     ______

Management and Administration          []                     []                     ______

Marketing                                                     []                     []                     ______

Other (List):

___________________________         []                     []                     ______

___________________________         []                     []                     ______

___________________________         []                     []                     ______

___________________________         []                     []                     ______

___________________________         []                     []                     ______

___________________________         []                     []                     ______

Developing Goals Worksheet 2

When developing goals, begin by developing as many potential and relevant goals as possible. Based on your responses in worksheet 1 above, write out goals for each of the focus areas that you believe warrant a goal for the business. Once you have developed a fairly exhaustive list of relevant goals, narrow the list down to the 3 to 7 most critical to the business.

Goal: _____________________________________________________________________________________________________________________________________________________________________________________________













Developing Strategies Worksheet

Remember that strategies support specific goals and express how your business will achieve its goals. On this worksheet, list a goal and then each supporting strategy below it.














In this section of the business plan, it is essential to convey to the reader when the business was founded, by whom it was founded, how the concept was formulated, how the business was or will be funded and what it is that the company sells or will be selling. If your business has been actively marketing a product or service for several months or more, it is important to discuss what has occurred over that period of time in terms of growth, profits, market penetration, product or service development, staffing as well as other pertinent facts.

The reader is going to be interested in gaining an understanding of the basic concept of the business. In other words, what business are you in? A common mistake made by writers of business plans is providing an unclear picture of just what the business entails. Every business has its nuances and intricacies and as a business owner or manager, you must convey to the readers of your business plan that you fully understand what those are.

If your business has existed for a period of time and has an operating history, a review of that history should be provided. A prospective funding source will be very interested in when the company began operations, what has been put in place to date and how successful early efforts have been. If the company has a longer history, it is important to alert the reader to financial results to date. It is important to be completely honest when discussing results. Business plans are occasionally written in a manner that is misleading. Astute financing sources will perform sufficient due diligence to determine to what extent the business plan accurately represents actual results to date. If there is any sort of material gap between what has been written and what actually occurred, the likelihood of obtaining funding is virtually zero.

On the following pages is a worksheet to help address the essential elements of this section of the business plan. While not all of the information requested in the worksheet may apply to your business, try to be as thorough as possible in addressing those items that do apply.

The Company and Its History Worksheet

1.  What was the exact date the business was incorporated (if a corporation) or when was it registered as a business? If the company has not yet been legally established, this should be stated. ____________________________________

2. When did the business begin operations or when it is expected to do so?


3. Who founded the company?


4. Describe the company briefly. Include what the company sells or will sell and to what markets.


5. How was the business concept developed? This primarily refers to why the business was established, i.e., what was the motivation or logical business reason for starting the business?


6. If the business has been in existence for a period of time and has produced financial results, briefly describe the results. This should be a summary of results including revenues and profits/losses. The reader will be looking for an idea as to how well the business has performed or how promising early results are. It is often wise to include a table that shows revenues and profits/losses by whatever time period makes sense (e.g., if the business has been in business for 6 months, show monthly results for each of the six months)




Readers of your business plan will likely not have a strong understanding of your particular industry. This is your opportunity to educate the reader on the specific attributes and characteristics of the industry your business does or will operate within.

Astute funding sources and others want to know to what extent your business will be able to compete effectively or at least have a chance to compete effectively within your industry. If existing competition is quite strong and the market you expect to compete for is served by several quality competitors, your chances of successfully capturing market share of sufficient quantity could be reduced. On the other hand, if your market is poorly served or underserved, your chances for success could be enhanced. While there are certainly many exceptions to this, readers of your business plan will tend to evaluate the likelihood of success to some extent based on your competitive environment.

It is important to describe the industry your business will operate within in enough detail to provide a clear understanding of at least the following:

  • dominant characteristics of businesses that make up the industry
  • what products/services the industry provides and the various ways in which it is delivered
  • geographically where the various competitors conduct business
  • which companies own the largest share of the market……who are the market leaders?
  • strengths and weaknesses of your competition
  • length of time your various competitors have been in business
  • customer perceptions of the industry and its products/services
  • product or service gaps that might exist (what opportunities exist to do things better?)
  • how the various companies attempt to differentiate themselves from one another including your company
  • which competitors, if any, own competitive advantages and what those might be

Other information that will further describe the industry can certainly be introduced in this section of the plan. The key consideration in writing this section is the importance of conveying to the reader what type of competitive environment your business can be expected to operate in. As previously mentioned, the reader must be made comfortable that your business has a fighting chance to be successful. The worksheet on the following page will help you formulate your thoughts as you attempt to describe your industry and competition.


1. Using terms that can be understood by the average person, describe your industry (what business is the industry engaged in?)


2. What primary product(s)/service(s) is/are offered by the industry?


3. Briefly define the geography in which the industry operates. This can be delineated by company, but should consider where the vast majority of companies currently operate or will operate. If geographical expansion is planned, this should be covered.


4. Which company or companies are considered the leaders in the industry and why? How long have these leaders been in business?


5. What competitive advantages exist within the industry and which companies own them?


6. Do service or performance gaps exist within the industry that could provide opportunities for your business to gain market share? If so, what are they?



7. On what basis do competitors attempt to differentiate themselves from other similar businesses (e.g., price, service levels, etc.)? Briefly discuss how your business will attempt to do so.


8. What are the relative strengths and weaknesses of your primary competitors?


9. What is the “age” of your industry and do you consider it to be in early stage development or is it a mature or declining industry? In other words, describe to what extent the industry is established and where it stands in terms of penetrating the available market.


10. Provide additional information that you believe will be important to addressing your industry and the competition.



A very succinct, but complete description of the product(s) and/or service(s) your business will take to market is critical. After reading your description, the reader should never be left wondering exactly what it is you will market. This is generally not difficult. But it is important to remember a few key points as you write your description(s):

  1. Avoid using overly technical terms. Keep in mind that most readers of your business plan will not have a technical background and will not have intimate knowledge of your product/service.
    1. Avoid using industry accepted acronyms or terminology that the average person would not understand. If you will be using acronyms, spell each out and define what they mean.
    1. Try hard to not be too vague or general. For example, if your business was going to market nutritional supplements to the over 65 market to improve the overall health of older people, you would need to describe the specific attributes of the supplements, why they work, how they are different from other supplements, how you know they work and what specific benefits are derived by those consuming them.
    1. While you are undoubtedly very proud of what your business markets, avoid rambling on about why it is so wonderful. And avoid using too many superlatives.
    1. Describe the product/service in enough detail to provide a complete understanding for the reader, but stay clear of becoming overly wordy or repetitive.

Stay focused on what the reader will want to know. A reader will want information on the following:

  • The specific attributes/elements of your product or service. In other words, specifically what is it that your consumer will purchase from your business?
  • Whether or not your business holds or will hold a patent, trademark or copyright on the product/service or any portion thereof. If so, what. In the case of a patent, when was it obtained and the number of years left on the patent.
  • Specifically what separates or differentiates your product or service from your competitors’ products or services.
  • What, if any, changes are planned for your product/service over time?
  • What, if any, market research has been conducted or discovered that might help clarify how the product or service has been accepted and perceived as well as the current market share by company?
  • Whether your particular product or service has any limitations relative to the competitors’ products or services. In other words, are there technical or logistical constraints that might prevent your product or service from competing effectively over time?
  • Any other information that is specifically relevant to your product or service and that you feel the reader should be aware of.

Your discussion of your product/service should provide the reader with a comfort level that your business will be able to compete effectively and sustain success over time with it. Be certain that your readers will gain a clear understanding of what it is your business will market.

Use the following worksheet to develop the basic verbiage you will use to write this section of the plan.


1. List the top five attributes or elements of your product or service (these are the things that you would use to describe exactly what you will market).






2. Specifically what patents, copyrights, trademarks or other proprietary rights does your business own?


If a patent has been granted, when will it expire? ________________________

3. If your product or service possesses technology or a conceptual design or feature that is truly unique, describe what those are.


4. Overall, what, if anything, differentiates your product or service from your competitors’ products and/or services?


5. Describe how you anticipate your product or service to change or evolve over the next 3 to 5 years, if at all.


6. Describe any market research or data that would indicate that your product/service will be accepted in the market.


7. Discuss any current or potential limitations that your product or service might possess that could limit your ability to sustain growth or even cause a decline in revenues. Address how you will correct any of these limitations and in what time frame. Another way to look at this is to view your product relative to your competitors’ products and provide an objective assessment of how your product compares.


8. Why do you believe customers will buy your product or service?


9. Provide any other relevant information about your product or service that might be helpful in evaluating it.



Describing your market to the readers of your business plan is one of the most important aspects of your plan. Too often, business plans contain sketchy descriptions of the market(s) the business will be attempting to sell into and doing so simply leaves the reader with too little information. A reader of a business plan must be able to put the document down upon reading it and be able to visualize what it is your business will sell and to whom in a clear and complete manner. If they cannot do that, you will have failed in developing a business plan that can be successful in obtaining funding or acceptance by those who must support it.

Your plan must convey exactly who your buyers will be, where they are located and why they will buy your product. Certainly, many businesses market products or services into multiple markets and yours may do so as well. It is important to put into writing the nature of each of those markets or market segments and what products or services will be sold to each.

If your business will market to the consumer market, it is vital that you fully understand the demographics of the people most likely to buy your product, next most likely to buy and so on. In other words, your product might have particular appeal to people between the ages of 25 and 40 who have at least one child, earn a median household income of $70,000 or more and own their own homes. At the same time, that same product might have secondary appeal to people between the ages of 55 and 65 who own a second home and have incomes of $90,000 or more. It is equally important to discuss why the market segments you identify are viable markets for your product and what leads you to believe those market segments will, in fact, buy your product.

The same principles apply to the business market. If your business will be a business-to-business marketer of a product or service, clearly define what types of businesses are most likely to buy, which are next most likely, etc. Again, a thorough definition of the market and a discussion of why you believe the market(s) selected will be buyers is critical.

Be careful to not identify markets that will be sold to and not support the rationale for selecting those markets with data and pertinent information gleaned from credible sources. Whether this is primary market research that your business has sponsored or secondary research that has been uncovered through various sources does not matter. Or, if your business has been in operation for a reasonable period of time and is having success selling into the defined markets, address that success and support your discussion with real numbers. Readers of your plan will likely dismiss your assumptions about your market without supporting data and information.  Simply choosing a market segment and assuming your product or service will appeal to it is risky for your business and the reader will conclude that you have not done your homework. This is the proverbial kiss of death to your business plan and, more importantly, to your business. Certainly, a number of businesses get lucky and are wildly successful without doing a lot of research up front. And we do not advocate paralyzing yourself with research. What is recommended is a reasonable amount of research that will add credibility to your assumptions and make you and the reader feel better about the probability of success.

Be sure to include information about the size of your market and projected average sales per customer in this section. At the risk of being redundant, an astute reader of your business plan will want to see as much information as necessary to create a mental picture of the size of your prospective market(s). If the market is too small, for example, it will likely render the chances for success minimal. Support your discussion with data and information gathered from reliable and credible sources.

A portion of this section should be devoted to anticipated or current market trends. This is simply a discussion of what changes, either positive or negative, are occurring. Market trends come in a variety of types. Examples include; the size of the market could be shrinking or growing, it could be changing the way it buys, it could be changing how it buys, it could be changing where it buys, the average sale might be going up or down, or attributes of the product or service category sought by the buyer could be changing slightly. Whatever the trends that might be occurring, it is important to discuss them and support that discussion with data and/or information from credible sources.

Any time a source is used to support your assumptions and assertions, be sure to identify the source. This will allow the reader to locate those sources if they so desire.

The worksheet that follows will be helpful in formulating your thoughts and putting this section of your plan in place.


1. Provide a general description of your market.


2. Specifically list the attributes/demographics of your market.


3. What is the size of each market segment you will be marketing to? (There can be one or a number of segments)

Market Segment:                                                         Size:

__________________________________     _________________________

__________________________________     _________________________

__________________________________     _________________________

4. Where are the markets located?


5. What are your estimates of the average sale per customer? Does this average increase or decrease over time?

Average Sale Per Customer                           Increase          Decrease

Units ________________                        []                      []

Dollars_______________                                    []                      []


6. What market share estimates have been generated per market segment?

Market Segment:                                             Market Share Estimates:

____________________________       Year 1____   Year 2____   Year 3____

____________________________       Year 1____   Year 2____   Year 3____

____________________________       Year 1____   Year 2____   Year 3____

7. In the space provided below, discuss the research that has been done on your market(s) and include meaningful data that will be helpful in building confidence that your market assumptions are realistic.


8. What market trends are expected over the next 3 years and 5 years?


9. Provide any other information that could be helpful to the reader.




Marketing and sales will be the lifeblood of your business. Your business plan must include a thorough discussion of exactly how your business will attempt to position and promote itself and its product/service. Many businesses have excellent products and/or services, but do a poor job of achieving a consistently effective marketing effort.

Your business should have a comprehensive marketing plan in place prior to beginning operations. However, your business plan should include a summary of that plan rather than incorporate great detail or include it in its entirety.

Any discussion about marketing should begin with a summary of your marketing strategies. The marketing strategies included in the Strategies section of this manual will be addressed once again in the Marketing section. In this section, the strategies should be listed and discussed in some detail to help broaden the reader’s understanding of the marketing strategies that will be followed.

Marketing strategies define how your business will go to market. This is a broad generalization to be sure, but accurate nonetheless. Your marketing strategies can range from pricing related strategies to distribution strategies. Several examples of marketing strategies follow:

  • Our pricing will be established at levels to achieve immediate penetration and capture market share.
  • We will position our product as a low priced, but high quality alternative to the higher priced models on the market today.
  • Distribution of our product will be through a selective independent network of retail outlets with heavy foot traffic.
  • Advertising will focus on appealing to the fashion-conscious woman who understands and seeks prestigious, high quality accessories.

These are but a few examples of marketing strategies. Your strategies should focus on the key elements of your marketing mix related specifically to your business.

The development of your product’s or service’s image and branding is an important factor in the success or failure of your business. A brief discussion about the type of image and brand awareness you will be attempting to create is meaningful to the reader because he/she wants to know whether you and the rest of your management team understands this important concept. Attempting to market a product or service without a clear direction for branding and image creation is very often a sure path to failure. In general one to three paragraphs should cover this topic and should convey to readers the type of image desired, what is being done to create a brand that will be widely recognized and how you will position your brand through promotional efforts and campaigns.

Establishing forecasts for market share should be part of your planning process. Include in this section a brief overview and a summary by year for at least the first three years of the projected share of market for your business. Because market share can mean a lot of things to different people, think of it in simple terms. If your business will sell to 9,000 people out of 1,000,000 possible in your market in the first year, explain that in your plan and translate the raw numbers into a percentage. This process is important more in terms of creating some of your assumptions for the financial section of your plan than it is anything else. But be well prepared to support your projections in this section of the plan.

Conveying a clear picture of your pricing strategy and pricing structure(s) should be included as part of your discussion on marketing. Readers will want to know how you arrived at your pricing strategy and structure and will want to have some understanding of how they compare with your competitors’ prices. If, for example, your business will follow a penetration pricing strategy whereby you will price at or below your competition, explain clearly what the strategy is and how you arrived at it. Price setting should be supported by research and competitive comparisons. Use the data you have collected thus far to help support your pricing strategy. If you have multiple products or services, insert a table with each product or service listed and the associated price. Include a list of the competitors’ products or services and the associated pricing strategies that they appear to be following along with actual price points.

How a business attempts to sell its product or service is obviously a critical element of its marketing mix. While defining a selling approach and methodology may seem like a simple process, it is generally far from simple. Perhaps a more appropriate observation is that selling methods change and are tweaked over time. When we talk about selling method, we are really referring to the actual sales process. For example, will your business employ and heavily utilize an outside sales force? If so, will that sales force be supported by some sort of lead generation activity? And if so, what type? Too many businesses struggle with just how to sell (and support) their product or service.  In this section, provide an overview of just how your business will attempt to sell. Include as much detail as necessary to define the process well enough for the reader to gain a clear picture of the various steps that will be involved.

The next segment of your marketing discussion should address how your product will be distributed. This refers to whether you will sell through wholesalers, distributors, retailers, multi-level marketers, franchisees or some other outlet. The reader must be able to identify each layer of the distribution channel and what responsibility each one will have. Describe the distribution process in some detail and provide information about what each point in the process will be responsible for.

Most businesses provide some sort of warranty or guarantee. Generally speaking, even a service-oriented business offers some type of quality assurance or customer satisfaction guarantee. Discuss in this section exactly what your business will offer in the way of a warranty or guarantee.

Your business will need to follow a promotional plan to achieve some degree of consistency in sending appropriate messages to its market(s).  Certainly, your promotional plan should be at least broadly developed at this point, if not fully developed. In this section of the business plan, you should include a summary of that plan. The reader is most interested in knowing that you have given adequate thought to how your business and its product will be promoted to its market(s). Many business plans fail to provide enough evidence if this. Avoid having your plan fall into that category by staying focused on the reader. Think in terms of what you would want to know about how the product or service will be promoted if you were reading your plan for the first time.


1. What image will you attempt to create for your product/service?


2. How will your business attempt to position its product/service and what approach will be undertaken to create a “brand” that can be easily and consistently recognized?


3. List each of your marketing related strategies below. At a minimum, pricing, promotional distribution and product positioning strategies should be included.


4. What market share will your business capture in each of its first three years?

Market Segment           Market Size      Estimated Number That Will Be Sold To                       Share

____________        __________             ____________                                ____

____________        __________             ____________                                ____

____________        __________             ____________                                ____


5. If you are offering one or only several products or services, provide the price for each below. If your business will sell many products or services, provide a range of prices by product or service category (the reader will want an idea as to specific prices that will be charged, but does not need to know prices for all products/services).

For One or Several Products:

Product/Service                      Price                           Describe Any Discounts Offered

___________________    _________               _________________________

___________________    _________               _________________________

___________________    _________               _________________________

For many products:

Product/Service Category      Price Range                Describe Any Discount Programs

___________________    _________               _________________________

___________________    _________               _________________________

___________________    _________               _________________________

6. Describe the basic selling approach your business will employ. This includes any plans for lead generation, makeup of the sales force, telemarketing efforts and sales support. The objective is to provide an overview of the primary sales techniques and “sales infrastructure” that will be in place.


7. Describe how you will distribute your product. The focus here is on defining the outlets, franchises and/or distribution points through which your product will be sold. In other words, what entities or groups will be involved in handling and selling your product?




8. Discuss below how your business will service its product(s) if service will be necessary. Also, provide information on what, if any, product or service warranties or guarantees will be offered.


9. Summarize how you will promote your business and its products/services. Provide a list of the basic elements that will be used as part of your overall promotional mix along with a brief explanation of each.



10. Provide any additional information regarding your marketing efforts that might be useful to the reader.



All businesses have operational, administrative, and manufacturing/service delivery mechanisms that are specific and unique to them.  In this section, you will describe how your business will operate on a day-to-day basis. Presenting this information is necessary to illustrate that you have a well thought out and structured operating environment planned for your business.

If your business will produce a tangible product, it is critical to provide information on how the product will be manufactured. If the product(s) will be purchased, it will be necessary to describe the sources of those products and the details of arrangements for purchasing and receiving them. In terms of a manufactured product, you will need to address whether your business will set up manufacturing facilities and produce them on-site or if the product(s) will be produced or assembled by a contract manufacturing partner.

If your business will produce products on-site, a thorough description of the facilities and equipment required is in order. Also, describe in some detail the manufacturing process that will be in place. In other words, paint a picture for the reader of how the product is produced. If, for example, the product will be produced via an assembly line by assembling pre-manufactured components, give the reader an overview of how the major steps in the process are accomplished. Be careful not to get into a deep technical discussion about the process, however. Give enough information to help the reader understand the process, but not so much as to overwhelm them. Some discussion about any quality control measures that will be in place is recommended as well.

If your business will be using a contract manufacturing firm, define the relationship, where the manufacturer is located, whether they will assemble all or part of the product, the credentials of the manufacturer that lend credibility to their ability to assemble or manufacture your product(s) and any other information that might be beneficial. Provide any information that is available regarding ISO certifications or other professional quality assurance certifications.

Obviously, many businesses do not produce a proprietary product. Many purchase products and resell them and if your business will be doing so, identify the source of the products, address whether your business has any sort of supply agreement, describe alternative sources for your product and provide a summary of why you chose the specific supplier.

It is important to delineate the costs associated with producing or purchasing your product(s) or delivering the service(s) to be provided. In this section it is wise to provide details about these costs to give the reader a basic understanding of cost versus price. If the cost of your product or service is too high, it will be difficult to sustain adequate margins. If your cost of production or service delivery is relatively low, the opportunities early on and perhaps on a sustained basis for large margins are much better. It is not necessary to provide a thorough cost analysis, but it is necessary to provide the costs, the primary components involved and an overview of anticipated gross margins. It is suggested that direct and indirect costs be discussed and major ones identified.

Labor and personnel are both items of importance. The reader will want to know the labor requirements associated with running your business on a daily basis. A brief description of your personnel requirements by type of position or job is recommended along with a range of unburdened hourly rates or annual salaries. A good way to present this information is in a simple table. An abbreviated example of such a table looks like this:

Summary of Labor/Personnel Requirements and Costs

Position/JobNumber RequiredHourly Rate or Salary/YrComments
Lathe Operator3$14.50 – $18.00/hr2 hired within 3 months and 1 within 9 months
Assembly Tech5$11.00 – $15.00/hrAll hired month 1
Shipping Clerk2$9.50 – $12.50/hr 

Well run businesses in today’s world utilize technology and effective administrative software to assist in the day-to-day operations. Also, these businesses have a strong administrative infrastructure such as accounting and customer service in place to ensure that costs, product, etc. are accounted for and that customers are well cared for. Discuss in this section your plans for utilizing technology and software to help your business operate more effectively. And include information about your administrative functions, how they will be staffed, how you intend to ensure that proper controls are in place to track and minimize costs, track product, etc. and how accountability for results will be instilled across the company.

The worksheet that follows will help you formulate and organize your thoughts regarding operations.


1. Describe your production or product acquisition process. In other words, how will your product be produced if your company will be conducting manufacturing operations? If it will be manufactured by another firm, describe that relationship and specifically what role the contract manufacturer will play. If your product will be purchased from a supplier, define that relationship and include the name(s) of the supplier(s). If you will be offering a service, skip to number 2 below.


2. If your business will be providing a service, describe the process involved with delivering it. Included some verbiage about how you will ensure a high level of service quality.


3. Describe the facilities necessary to operate your business. Include locations, size of facilities, whether they will be leased or owned, special fixtures or equipment necessary to manufacture or provide the service and any other important distinguishing information that describes your facilities.



4. Define the cost of producing your product or delivering your service.

Product/Service                                Cost                Anticipated Gross Margin (%)

_______________________      _______        _________________________

_______________________      _______        _________________________

_______________________      _______        _________________________

5. Detail your personnel and labor needs below. Exclude management unless it will be involved directly with production or support activities.

Position/Job                          Wage/Salary   Number          Comments


___________________    _____            ____               ____________________

___________________    _____            ____               ____________________

___________________    _____            ____               ____________________

___________________    _____            ____               ____________________

___________________    _____            ____               ____________________

___________________    _____            ____               ____________________

6. Describe any administrative, production or other software that will be purchased or developed to assist in running your business. Include costs and features of the software. Be certain to describe how it will benefit the business.





7. Discuss your administrative and accounting functions and how they will be structured. Include a discussion of the controls that will be in place to ensure accurate reporting and minimized errors and omissions.




8. Briefly describe your management approach and how you intend to develop and instill accountability for results within the organization.



9. Relative to the operations and administration of your business, provide any additional information that will be relevant and important for the reader to know.



It goes without saying that the management of any business is a key ingredient in its success. The people who will be managing the business and its various functions must be competent as well as strong leaders. And your business plan must convey to its readers a strong message that both competence and effective leadership will be in place. A prospective financing source will be very interested in the strength of the management team.

Your plan will have to provide enough information to instill at least some confidence that management will be able to develop strategic plans and execute them effectively. This section will provide basic information about the way the management team will be structured, the backgrounds of each key member of management and detailed resumes of each key management team member.

Begin this section with some verbiage addressing the experience and strengths of the management team. Include limited, but important details about the backgrounds of each key member of the team. Keep in mind that resumes for each manager/executive will be included in this section so avoid going into too much detail. However, this is your opportunity to sing the praises of your management team. Without being flowery or using too much hyperbole, use positive and flattering verbiage to address backgrounds and skills that the key members of management will bring to the company. Be careful not to mislead the reader about any manager’s background or skill level.

How you will structure the management of your business is important and should be discussed next.  Structure really refers to reporting relationships and who will serve in which capacity. Your discussion of management structure should begin with a general overview of the management levels (top and mid level), specific titles/positions and the reporting relationships. Once you have generally described the structure, insert an organization chart to depict what you have attempted to describe. On the next page is an example of an organization chart. If you are using Microsoft Word to build your plan, simply click on “Insert”, then go to “Picture” and then down to “Organization Chart”. A basic chart will be placed on the page and you can then modify it as necessary. This is only an example and your chart should reflect your specific structure.

Because readers will want to examine backgrounds of each member of management in more detail, it is recommended that a resume for each member of top management be included in this section. Some business plan writers choose to include resumes for members of middle management as well. This is certainly acceptable and, in some cases, desirable. It will depend heavily on the breadth of your top management team. If it is limited in terms of numbers and experience, it is recommended that mid-level management resumes be included. If you aren’t sure, include resumes for those members of middle management who will play key operational roles in your business.


All businesses face risks. Those businesses that understand those risks and have plans in place to offset or mitigate them will tend to fare better over time. Many businesses fail or falter because they did not understand potential risks and/or had no risk mitigation strategies in place to minimize the impact of those risks.

This section will include a discussion of the critical risks your business faces today and will face in the future. Define each risk and discuss why they are important to pay attention to. Readers will want to know that you have a good understanding of what potential pitfalls your business could encounter and that you are equipped to deal with them effectively.

In order to complete this section, simply provide a brief overview of your understanding of the risks presented and to be presented to your business. Then present a strategy for diminishing or mitigating each risk.

An example of a risk and associated mitigation strategy follows:

Risk: Competitors could develop advanced technology that will render our product obsolete or less desirable.

Mitigation Strategy: Take a leadership position within the industry and invest in research and develop to bring new technologies to market before the competition can do so.


Unfortunately, many financing sources will often skip over the rest of your business plan and jump straight to this section before going back to read more. The reason is simple. The financial projections and funding request represent the heart of your plan for those who will make decisions about funding, expansion, etc.

If your business plan is being developed primarily to obtain funding, begin your discussion with a brief statement indicating the amount of funding being sought and include justification for this amount. This justification is a simple explanation of why the amount being requested is appropriate given your business concept and operational requirements. Then move into a deeper discussion detailing how the money will be used. The obvious answer is simply to “run our business”, but that will not suffice. You will need to provide a breakdown of the uses of the funds. This should not be a formal “sources and uses of cash” statement. While that will be included, your breakdown will resemble the following example:

Use of Funds

                                                Year One      Year Two      Year Three

Marketing                              $65,000         $25,000         $10,000

Production Equipment        $80,000         $0                   $0

Working Capital                   $50,000         $35,000         $0

Deposits                                $10,000         $0                   $0

Totals                                     $205,000       $60,000         $10,000

Note that we included the first three years in this breakdown. Your breakdown might include only the first year if you expect positive cash flow that will cover expenses that might be otherwise funded from outside sources if the business had negative cash flow. In the example above, cash flow is not sufficient to fund certain activities in years two and three. Therefore, we had to project out to year three how much of the initial funding would be needed.

Another important consideration for most funding sources is how much money has been invested in the business by its principals. Explain the extent of initial capitalization by those who have ownership in the company. Indicate who those individuals are, how much has been or will be invested and what percentage of ownership each individual will have.

The heart of this section will be your financial projections. All sound business plans include projections for three years. And they include income statements, balance sheets and cash flow projections.

Before explaining specifically what needs to be included here, a brief summary of some basic financial terms is in order:

Income Statement – An income statement is merely a detailed snapshot of a businesses’ sales and expense activity for a given time frame. They are generally assembled each month after activity for the given month has ceased. And a year-end statement is always prepared. An income statement provides a summary of sales, cost of goods sold, gross profit, operating expenses and net income for a particular time frame.

Cost of Goods – Essentially includes all costs associated with producing the product. When a product goes into inventory, a cost is assigned to it. That is the cost of goods. For services, it is the total of all costs associated directly with delivering the service.

Gross Profit Margin (gross profit) – This is an expression of the difference between the sale price of the product (or cumulative sales total) and the cost of goods. It can be expressed in dollar and percentage terms. Percentage gross margin is arrived at by dividing this difference by total sales.

Operating Expenses – Includes all overhead, labor (except that directly related to production or service delivery), marketing and sales expenses.

Net Profit Before Interest and Taxes – This is derived by subtracting total operating expenses from gross profit margin.

Net Profit After Interest and Taxes –Derived by subtracting interest expense and tax liability from Net Profit Before Interest and Taxes.

Depreciation – Capital assets such as equipment and computers lose value over time. Depreciation is nothing more than a value placed on that reduction in value. It is usually included as an operating expense, but is considered a non-cash expense.

Interest – Includes all interest expense associated with bank debt or other debt instruments that have an interest charge tied to them.

Balance Sheet – An annual statement summarizing the assets, liabilities and equity of the business. The statement is divided into these three distinct areas.

Assets – Broken down into short-term or current assets and long-term or fixed assets.

Current Assets – Includes cash, accounts receivable and inventory at year end.

Long-term (fixed) Assets – Generally assets that will last longer than one year. They include plant and equipment, long-term investments and any other long-term assets that cannot be converted to cash over the short-term (less than one year).

Liabilities – Broken down into current (short-term) and long-term liabilities.

Current Liabilities – Includes short-term items that must be paid within roughly a one-year period, specifically accounts payable, accrued liabilities (generally expenses that have been incurred but not yet paid), and taxes that are still due and payable at the time the year ends.

Long-Term Liabilities – These are items that are generally paid out over more than a one year period of time and include any mortgages payable, notes payable, bonds payable.

Owner’s or Stockholder’s Equity – Essentially the difference between Total Assets and Total Liabilities. Not unlike equity in a home, it shows the difference between what is owned and what is owed.

Cash Flow – Much like any household, businesses have incoming cash from and they have outgoing cash. The incoming cash is usually generated from sales and outgoing cash is “lost” to paying bills. Cash flow for any given period must also include any investment in or loans to the business. Essentially, cash flow is calculated by subtracting outgoing cash from incoming cash.

Cash Flow Projection – A statement that portrays the difference in cash income and cash outlays. It includes three parts; 1) revenues (incoming cash), 2) disbursements (payments) and 3) reconciliation which is the sum of the ending cash balance from the previous period plus revenue for the current period minus disbursements for the current period.

This list of terms is intended to provide an understanding of the basic elements in each of the three statements/projections you will prepare or have someone prepare as part of your business plan. If you have a strong understanding of financial statements and their preparation, you will probably be able to develop the projections yourself. If not, it is recommended that a person, firm or non-profit small business consultant be retained to prepare them. Keep in mind that this section will be heavily scrutinized by the readers of the plan.

Financial projections are only as good as the assumptions that underlie them. Whether you prepare the projections yourself or retain help in their preparation, you will be responsible for developing the basic assumptions. Developing assumptions really means developing a realistic basis for some or all of the elements for each of the projections. Simply putting numbers into a projection without having some well reasoned basis behind them makes no sense. Before you begin developing any projections, sit down and think about the following:

  • What will you base your sales numbers on? They should be aggressive to some extent, but they must be realistic. Have you examined the market closely and do you know what the potential is for your product or service? If so, what is a realistic piece of that market that can be captured on a month-to-month basis by your business?
  • Do you know what your true product or service delivery cost will be? If not, you need to find out. This will form the basis for your cost of goods projections.
  • Have you done your homework on expenses including but not limited to, wages and salaries, insurance, facilities (including common area maintenance, property taxes and insurance), transportation, equipment rentals, supplies, bank charges, interest, utilities, telephone, credit card fees, advertising and promotion and accounting and legal fees.
  • Do you know what equipment and other capital assets you will purchase? What is the expected life of those assets?
  • Do you know when you will add personnel?
  • Will you need to borrow money over the next three years? If so, when and how much?
  • Do you expect any sort of expansion that will need to be funded?

These are but a sampling of the questions you will need to answer in order to develop your base assumptions. Think carefully about your business and how it will progress in terms of sales, expenses and growth. Use that information to begin developing your assumptions. An example of an assumption follows:

Assumption: Growth will dictate that we add people over the first three years. We expect to add 2 new lathe operators at $15/hour in year one with one of those coming on in the fourth month and the other coming on in month eleven. Another lathe operator is expected to be added in year three in the sixth month. Wage increases of roughly 5% per person will be used in our projections.

Some business plans place a list of the assumptions in a section prior to the financial projections. Others place them as an appendix to the plan. Either method is acceptable and a matter of personal preference, but our recommendation is to place them in an appendix and let the reader refer to them as needed.

Projected Income Statements:

Income statements are essentially formatted as follows:


Cost of Goods Sold

Gross Profit


Net Profit Before Interest and Taxes


Net Profit Before Taxes


Net Profit

Your business plan will include three income statement projections. One for the first year of operation, one for the second and one for the third. Each should be separated on individual pages. On the following page is an example of a partial income statement for the period ending December 31, 2006. If your business will operate with a fiscal year other than a calendar year-end, use the appropriate month ending date.

ABC Company

Income Statement – For the year ending December 31, 2020

                                    Jan      Feb      Mar      April………..    Dec      Total

Sales                            $9,000   $9,300   $10,000 $11,400             $24,300 $127,350

Cost of Goods Sold $6,000   $6,300   $7,100 $7,400             $14,000 $96,100

Gross Profit                   $3,000   $3,000   $2,900 $4,000           $10,300     $73,500

Operating Expenses

Salaries                         $1,300   $1,300   $  1,300 $1,300             $1,300 $15,600

Bonuses                               $0           0            0                      0                       0       $0

Other Wages                  $1,000   $1,050   $1,200 $1,450             $1,500 $12,200

Advertising and Promotion $500 $   500  $     750 $     800            $  1,050 $    9,600

Insurance                      $   300  $   300  $     300 $     300            $     300 $    3,600

Telephone                      $   400  $   450  $     475 $     525            $     550 $    4,760

Utilities                          $   275  $   250  $     225 $     260            $     375 $    3,125

Rent                              $   650  $   650  $     650 $     650            $     650 $    7,800      

Equipment leases                        $       0  $       0  $         0            $     200                        $     200 $    1,800

Depreciation                   $   200  $   200  $     200 $     250            $     250 $    2,150

Total Expenses               $4,625   $4,700   $  5,100 $  5,735             $  6,175 $  60,635

Operating Income (loss)   (1,625)  (1,700)    (2,200)   (1,735)            $  4,125 $  12,865          

Interest                         $   125  $   125  $     125 $     125            $     125 $    1,500

Net Income Before Taxes (1,750)  (4,825)    (5,225)   (5,860)            $  4,000 $  11,365

Income taxes                 $       0  $       0  $         0            $         0                        $         0            $           0

Net Income                    (1,750)  (4,825)  (5,225)   (5,860)            $  4,000 $ 11,365

Cash Flow Projections:

A cash flow projection is important to both you and the reader. You will need to know how much cash is available from month-to-month.

The basic format of a cash flow statement is:



Increase (decrease) in cash

Beginning cash

Ending cash

As with income statement projections, your business plan will include three years worth of cash flow projections. A partial cash flow statement example follows on the next page.

ABC Company

Cash Flow Statement – For the year ending December 31, 2020

                                                            Jan      Feb      Mar…………     Dec      Total


Collection of Accounts Receivable             $3,200   $9,150   $14,200             $17,400 $132,000

Owner’s initial investment                         $5,000   $0  $0                        $0            $5,000

Total Inflows                                           $8,200   $9,150   $14,200             $17,400 $137,000


Start up expenses                                   $3,000   $0  $0                        $0            $3,000

Purchase of fixed assets                         $9,500   $2,000   $1,400             $0            $12,900

Repayment of loan                                  $850  $850  $850            $850 $10,200

Accounts payable payments                     $2,250   $4,100   $4,900             $5,600 $58,800

Monthly expenses                                   $4,625   $4,700   $5,100             $6,175 $60,635

Total Outflows                                        $20,225 $11,650 $12,250             $12,625 $149,000

Increase (decrease) in cash                     (12,025) (2,500)  $  1,950             $4,775 $16,250

Beginning Cash                                       $0 (12,025) (14,525)             $6,350 $ 8,500           

Ending Cash                                           (12,025) (14,525) (12,575)             $8,500 $8,500

Projected Balance Sheets:

The final part of your financial section will be your balance sheet projections. You will provide balance sheets for the first three years. The balance sheet is intended to provide a snapshot of the net worth of the business at any given point in time. As mentioned above, a balance sheet considers all activity of your business and provides information about assets, liabilities, and equity. See the definitions above for more information on each of these categories.

On the following page is an example of a balance sheet for the first year of a fictitious business.

ABC Company

Balance Sheet – As of December 31, 2020


Current Assets

Cash                                                                                       $5,400

Accounts receivable                                                         $17,400

Inventory                                                                                $4,900

Total Current Assets                                                          $27,700

Fixed Assets

Equipment                                                         $12,900

Leasehold Improvements                                 $19,000


Less: Accumulated Depreciation                      $(6,000)


Total Assets                                                                          $53,600


Current Liabilities

Accounts payable                                                               $17,400

Income taxes payable                                                            $0

Total Current Liabilities                                                    $17,400

Long-Term Liabilities

Long-term Note (XYZ Bank)                                             $24,335

Stockholder’s Equity

Capital Stock                                                                             $500

Retained Earnings                                                                $11,365

Net Income                                                                              $11,365

Ending Balance                                                                      $11,865

Total Liabilities and Stockholder’s Equity               $53,600

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