Royal Credit Union Business Banker Jack Livingston knows that a good business plan sets the stage for future success. “New entrepreneurs might not realize it, but having a good business plan can make a huge difference,” shares Jack. “Business plans are more than a way to show a lender information about your business. They’re also perfect for deciding how to build your business brand, laying out a long-term business strategy, and even hiring employees for your business.” A good business plan outlines your vision for the business and explains how you’ll reach your business goals.
Whether you’re just starting a business or looking to expand, creating a business plan is an essential part of every business owner’s journey. This article will explore the key features of a good business plan with insights from Jack. It will also provide helpful steps that you can put into action today.
What Should Your Business Plan Include?
Business plans are typically categorized as either a “traditional” business plan, which is a longer document sharing in-depth details, or a “lean” business plan, which is often just one page with only high-level details. Lean business plans are good for the very early phases of starting a business, but when it comes to setting the stage for future success, a traditional business plan is likely to be the most helpful for most businesses. The information below describes the most common sections of a traditional business plan.
1. Executive Summary
The executive summary is the first section of your business plan, but it's often written last. It’s a concise overview of the entire plan, providing readers with a snapshot of your business, its goals, and how you plan to achieve them. It should capture the essence of your business in a few paragraphs, making it compelling and engaging to potential investors, partners, and other stakeholders.
Jack’s take:
“The executive summary is the first thing everyone looks at! It should provide a brief but thorough understanding of your business. Think of it as your elevator pitch on paper.”
2. Business Description
This section dives into the specifics of your business. It should cover the nature of your business, your mission statement, and your unique value proposition. Discuss the industry you’re entering, its current state, and any relevant trends. Be sure to highlight what sets your business apart from competitors.
Jack’s take:
“We need to understand your business at a glance. What is your mission, and how does it align with your industry? What’s your unique selling point for your customers? This section sets the stage for your business.”
3. Market Analysis
A good business plan includes a thorough market analysis. Research and provide data on your target market, including its size, demographics, and behavior. Identify your competitors and analyze their strengths and weaknesses. Include information about any regulations or licenses that will apply to your business. Understanding your market helps you tailor your strategies and products to meet its needs effectively.
Jack’s take:
“A market analysis shows your knowledge of the playing field. It tells me that you’ve done your homework and know where you fit in. It’s crucial for risk assessment.”
4. Marketing & Sales Strategy
Your business plan should outline how you intend to market and sell your products or services. Discuss your marketing channels, pricing strategy, and sales tactics. Explain how you will reach your target audience and persuade them to become customers. A strong marketing and sales strategy is essential for sustainable growth.
Jack’s take:
“We’re interested in how you plan to reach and engage your customers. This section helps us gauge your marketing and sales acumen and how it aligns with your market analysis.”
5. Organizational Structure & Management
This section describes your company’s organizational structure and management team. Detail the roles and responsibilities of key personnel, their qualifications, and their contributions to the business. Potential investors want to know that you have a capable team in place to execute the plan. You should also describe the legal structure of your business in this section.
Jack’s take:
“Your team and your business structure are integral to your success. We want to know who’s driving the ship and why they’re the right people for the job. Their expertise and experience matter.”
6. Product Or Service Descriptions
Clearly explain what you’re offering in terms of products or services. Highlight their unique features and benefits. If applicable, discuss your development process, intellectual property, or any technological advantages. Investors need to understand what sets your offerings apart and why customers will choose yours instead of your competitor’s.
Jack’s take:
“Your product or service description should make it crystal clear what you’re offering and why it’s better than the rest. We want to see how it fulfills a need in the market.”
7. Funding Requirements
Whether you’re seeking investment or not, it’s important to outline your financial needs in your business plan. Clearly state how much capital you require to start and operate your business, and specify how you intend to use the funds. If you’re seeking investment, provide a detailed breakdown of how the funds will be used. You should explain if you need funds for equipment, materials, salaries, or other specific bills while revenue increases.
Jack’s take:
“From a financial perspective, transparency is key. We need to know how much funding you need and what you’ll use it for. This is where the practical aspects of your plan come into play.”
8. Financial Projections
Your business plan should include financial projections for the next three to five years. For an established business, this typically involves income statements, balance sheets, and cash flow statements. For a new business, include forecasted income statements, balance sheets, cash flow statements, and capital expenditure budgets. Consider providing more specific quarterly or even monthly projections for the first year. Include a description of any collateral that you could put against a loan. Investors want to see a realistic portrayal of your financial expectations, including revenue, expenses, and profitability that align with any funding requests.
Jack’s take:
“Financial projections show us your vision for the future. They should be grounded in reality, reflecting your market analysis and business strategies.”
9. Risk Assessment
No business is without risks. Acknowledge potential challenges, both internal and external, and outline your strategy for mitigating them. This shows investors that you’ve thought critically about the obstacles your business may face and have a plan to overcome them.
Jack’s take:
“Risk assessment demonstrates your preparedness. It’s a sign that you’re aware of the hurdles ahead and have contingency plans in place.”
10. Milestones & Goals
Set clear, achievable milestones and goals in your business plan. These provide a roadmap for measuring your progress and success. Whether it’s achieving a specific revenue target, expanding to new markets, or launching a new product, milestones help you stay focused and motivated.
Jack’s take:
“Milestones and goals are like checkpoints on your journey. They show us your strategic thinking and how you plan to track your progress.”
11. Appendix
The appendix is where you can include additional information to support your business plan. This may include market research data, resumes of key team members, product images, legal documents, or any other relevant information. While the core of your plan should be concise, the appendix allows for in-depth details.
Jack’s take:
“The appendix is a great place to add any extra information that you feel would be helpful to others.”
Do You Really Need A Business Plan?
“I often hear that a business plan is all in someone’s head,” says Jack. “But getting that plan onto paper is really helpful. When I’m discussing financial needs with a potential business Member, having that plan to refer to is a huge benefit for both of us.”
While Royal Credit Union does not require a business plan, Jack confirms it’s always a good idea to share your business plan with us. If you’re requesting a loan, you can submit your business plan with your loan application and paperwork.
“We look at the business plan and make sure that we’re structuring the loan in a way that works best for the borrower now and into the future,” explains Jack. “A good business plan also answers many of the questions that we ask during underwriting and processing – questions about business structure, ownership, and history – which saves time for both Royal and the borrower.” While loan approvals are based on many factors, your plan’s projections play a key role in making loan decisions.
Jack sums up the value of a business plan: “In my experience, taking the time to create your business plan is well worth it.”
Want to learn more about starting or growing a business? Check out the following resources:
- Start A Business: Tips & Advice
- Money Donuts® Podcast: Getting Down To (Starting A) Business
- Money Donuts® Podcast: Business Banking Questions & Answers
- Tony's Top Tips When Planning For Business Growth
- How Small Business Loan Decisions Are Made At Royal
- Learn About Resources For Starting A Business
Have questions for Jack? Reach out to Jack directly or find a business banker near you.
Looking for more resources to help you start or grow a business?
Check out Enrich Online Learning, our free financial education platform with personalized tools, courses, and more!
