So why should you write a business plan?
Because writing a business plan can give you:
Most important, writing a business plan is a way to help you succeed. That's because writing a plan forces you to answer tough questions about every aspect of your business, including the close relationship between it and your personal life.
A typical business plan has the following elements:
The Scotia Plan Writer for business™ helps you complete these key elements, while allowing you to customize your finished plan using Microsoft Word to edit and add material.
Before you begin writing, collect relevant materials. These may include:
The first section of your business plan is designed to help you answer these questions.
This section presents basic information about your business. Some information you enter will be used to fill in a cover letter and a cover page, if you decide to print them as part of your final document.
Helpful tips:1. If you’re ever unsure, check out the "help"
As a small business owner, you are your own boss. The plans you make now for your business can help you achieve your personal goals, whatever they may be.
It's essential to keep in mind what's important to you and what you want to achieve in both your business and your personal life when writing your business plan.
Brief, compelling, and easy to grasp, your Business Vision can be a valuable tool for communicating what makes your business tick to advisors, investors, employees, suppliers, and even customers.
Objectives help you track your business' success according to plan. Your objectives might set targets for sales, profitability, even hours of personal time per week - whatever is most relevant to you, your business, and success as you define it.
By thinking carefully about the marketplace in which your business runs, you'll be better prepared to seize opportunities and deal with challenges.
Every industry is shaped by a range of factors that affect how customers behave and businesses operate. As you consider industry factors and trends, pay special attention to those you think present special opportunities or challenges for your business.
Describe factors and trends affecting your industry, and consider their implications for your business. Issues to think about include:
Demographic: These refer to the basic characteristics your customers tend to have in common, like age, income level, geography or gender. (open dialog window to learn more about Demographic Factors and Trends) Learn More
Social: These are fads or shifts in popular opinion. If you sell desktop calendars, the fact that electronic business organizers are sweeping the nation is an important social trend. (open dialog window to learn more about Social Factors and Trends) Learn More
Economic: These indicate the state of the economy, on both a local and national level. Is the national economy booming? Is your community suffering through a recession, according to your local Chamber of Commerce and the local press? Does your industry tend to cycle between booms and busts, rising and falling with certain economic conditions? (open dialog window to learn more about Economic Factors and Trends) Learn More
Technological: These demonstrate how technology is affecting your industry. For instance, how is the Internet changing who you compete with? How is it changing the way customers research their purchases? Are your suppliers automating their processes? Has your industry been characterized by the same processes for many years, displaying a low rate of technological change? (open dialog window to learn more about Technological Factors and Trends) Learn More
Regulatory: These describe the role government or other rule-making bodies play in your industry. Rules about how businesses must operate often mean that not everyone who wants to can be your competitor. (open dialog window to learn more about Regulatory Factors and Trends) Learn More
Environmental: Many industries have a unique relationship to the environment. Some are seasonal, like patio furniture retailers that do most of their business in the spring and summer. Others like farmers or tourism businesses, can be especially dependent on the right weather conditions. (open dialog window to learn more about Environmental Factors and Trends) Learn More
Every dollar a customer spends is a choice made between you and your competitors. That's why your competitors' weaknesses can translate into opportunities for your business. Likewise, their strengths can be challenges your business will have to defend itself against.
If you're starting up or run an established business, understanding your competitors can help you spot the most under-served customers and the greatest opportunities for success.
If you’re winding down, identifying competitors may help you find potential buyers for your business.
Your business' success depends on your ability to attract customers and keep them satisfied. In fact, satisfied customers are one of the most effective marketing tools you can have, since they refer more customers to your doorstep. In this section, put yourself in your customers' shoes.
In this section, you'll outline your strategies for attracting and satisfying customers.
Your positioning is your business' answer to the question every customer asks when considering whether or not to buy: "What's in it for me?"
Happy customers are the key to any business' success. That's why it's important to think carefully about the processes, people, and customer service that surround every sale.
In this section, you'll discuss how your business operates.
We've done our best to make financial statements understandable. That said, if accounting is not your area of expertise, you may want to work with an accredited accountant or bookkeeper to complete this section.
Especially if you aren't familiar with financial statements, it's a good idea to have your Financial Information section reviewed by a reputable accountant or bookkeeper before you share it with others.
There are a number of great accounting software programs on the market that can help you complete your Financial Information. If you currently use accounting software to prepare your financial statements, you may use it instead of the templates included here to prepare this section of your business plan.
Many owners improve their business' chances of success by contributing personal resources in the form of loans and open definition dialog window:cash contributions.
That's why it's crucial to develop a personal financial plan that you periodically review in conjunction with your business plan, planning your personal finances and goals with your business'.
There are a number of elements to a personal financial plan, from how you manage your open definition dialog window:investments and finance your mortgage, to education, retirement, and will and estate planning.
Scotiabank offers a range of tools to help you develop and implement a personal financial plan that will help you achieve your goals—and, in turn, help your business succeed. You can learn more about these tools at Get Growing for Business or speak to your Financial Advisor at your local Scotiabank branch.
3 financial statements complete the picture of your company:
Whatever life stage your business is in, projected financial statements - or "Pro Forma" statements - can help you work through various "what if" scenarios for your business, and allow you to plan where you want your business to go.
Note: If you are seeking financing for your business, some lenders or investors may require Audited or open definition dialog window:Review Engagement statements prepared by an accredited accountant.
Whether you're starting up or you run an established business, create projected Balance Sheets that reflect your business plan. That means estimating your assets, liabilities, and equity for coming years.
A Balance Sheet is divided into 3 sections:
If you run an established business, include past Balance Sheets for your business, ideally for the last three years.
If you're starting up, create a Balance Sheet by detailing assets and liabilities your business already has.
If you run an established business, include Income Statements for your business, ideally for the last three years.
Whether you're starting up or you run an established business, create Pro Forma, or projected, Income Statements that reflects your business plan.
That means estimating your sales, cost of goods of sold (for non-service businesses), expenses - including depreciation, interest, and income taxes - and profit for coming years. (open dialog window to learn more about Projected Income) Learn More
Financial ratios - calculations that relate one item in your financial statements to another - can be valuable tools for assessing your business' financial well-being. We've included some of the more common ones below.
In most cases, the usefulness of financial ratios depends on a clear understanding of the relationship between the numbers used and their implications for your day-to-day business.
That's why, unless you have a strong understanding of accounting principles, you may want to ask your accountant or bookkeeper to help you interpret your financial statements and financial ratios.
open definition dialog window: Current Ratio = open definition dialog window: Current Assets / open definition dialog window: Current Liabilities
The Current Ratio is a measure of liquidity. Liquidity describes your business' ability to meet current obligations, like paying supplier invoices or making upcoming loan payments, from assets that can be quickly turned into open definition dialog window: cash. Generally, the higher the Current Ratio, the more confident you can be of your business' ability to pay short-term obligations. A current ratio of less than 1:1 may mean your business does not have sufficient resources to meet its commitments in the near future and needs additional financing.
open definition dialog window: Return on Equity Ratio = Net Profit / Total Equity
The Return on Equity Ratio measures the return your business generates for owners who have invested in it. By measuring the percentage return to owners on their cash equity contributions, it is a general indicator of how efficiently your business makes use of owners' money.
open definition dialog window: Gross Profit Margin = Gross Profit / open definition dialog window: Sales
For non-service businesses, Gross Profit Margin captures the relationship between sales and open definition dialog window: cost of goods sold. A low Gross Profit Margin may indicate that your business is selling goods at too low a price, that demand for your product is weak, or that direct material, direct labour, or manufacturing overhead costs can be better controlled.
open definition dialog window: Net Profit Margin = Gross Profit / Sales
The Net Profit Margin is the percentage of each dollar of sales that remains after all expenses have been deducted. When compared to your Gross Profit Margin, Net Profit Margin can be an important indication of how your business manages its expenses.
open definition dialog window: Debt to Equity Ratio = Total Liabilities / Total Equity
The Debt to Equity Ratio describes the relationship between liabilities and equity. It compares the level of financing provided by creditors like suppliers and banks to the amount that owners have invested in the business.
Now that the key components of your business plan are in place, you're ready ti transform them into a finished document.
In Executive Summary, you'll provide an essential quick reference for readers (including yourself) by summarizing the key findings of your plan.
In Presentation, you'll have the opportunity to add a customized cover letter, cover page, and table of contents to your plan.
Remember, different circumstances and different audiences require different things from your business plan.
In presenting your business plan to a new employee, for instance, your Executive Summary might be more focused on your Business Vision, and you may choose not to share your Financial Information.
That's why the Scotia Plan Writer for business™ is designed for flexibility once you publish your plan.
Using Microsoft Word, you can:
By reading below, you can find ideas about which sections of your plan will be relevant to different people, plus materials you should consider including in an appendix to appeal to them. In each case, you'll want to tailor the Executive Summary to your audience.
Most readers of your plan will appreciate you keeping your plan as short as possible, even as you include the key facts they need.
Your banker will likely be interested in seeing your entire plan, to test your assumptions, ensure you haven't overlooked anything, and make sure any financial solutions he or she offers fit with your personal and business needs.
If you're seeking financing, your banker will likely pay special attention to your estimates for upcoming open definition dialog window: purchases in Planned Changes, and may require your Personal open definition dialog window: Statement of Net Worth.
In addition, he or she will carefully review your Financial Information, and may request Audited or Review Engagement financial statements prepared by an accountant. It's always a good idea to check with your banker to confirm what information they need before presenting them with your plan.
Your accountant may be especially interested in the Business Description section, and your goals and objectives in particular; Business Operations, which will give them insight into the operations behind your financial statements; and Financial Information.
Like your banker, your accountant will be able to serve you better if he or she understands both your personal and business needs.
Potential investors will want to see your entire plan, so they can make an informed decision about whether your business is the best investment for them.
When it comes to Financial Information, they may request Audited or Review Engagement financial statements prepared by an accountant.
While you may choose to withhold your Personal Goals and Personal Finances, consider including an Appendix that includes references for your professional advisors; résumés of your team; photographs of your product or service; and past advertisements and promotional materials.
Business/Personal Advisors may be interested in seeing your entire plan, so they can pose questions and offer insight. You may choose not to share personal sections of the plan - like your Personal Statement of Net Worth - with your business advisors.
To give your advisors the most complete picture possible, consider adding an Appendix that includes references for your banker, lawyer, accountant or bookkeeper, marketing consultant, and insurance agent; résumés of your team; photographs of your product or service; past advertisements and promotional materials; and competitors' advertisements, and other materials about them.
Your marketing consultant may pay special attention to the Business Description section (excluding your Personal Goals), especially your objectives and your description of your product or service; The Marketplace, which offers understanding about the environment in which your business competes; and open definition dialog window: Sales & Marketing, where your marketing consultant may offer suggestions for refining your strategies.
Consider adding an Appendix that includes: photographs of your product or service, past advertisements and other promotional materials, and competitors' advertisements and other materials about them.
Your lawyer may be most interested in Business Description, The Marketplace, and Business Operations, all of which may provide special insight into legal issues. Your lawyer may also want to see Financial Information.
Your existing employees may benefit from reading your entire plan, although you may choose not to share your Personal Goals and Personal Finances.
Prospective employees may be able to get a much better sense of your business if you share Business Description (excluding Personal Goals), Sales and Marketing, and an appendix that includes résumés of your staff, past advertisements and promotional materials, and photographs of your product or service.
Potential buyers of your business may have their interest piqued by the Business Overview and Product or service description in Business Description.
As negotiations progress, you might consider sharing The Marketplace, Sales & Marketing, Business Operations, and your business' Financial Information.
After you complete your business plan, you're in a position to transform what you've learned into action.
Too dependent on a single supplier? It's time to find another. A new customer moved into the neighbourhood? It's time to knock on their door. Take decisive action to seize opportunities and overcome challenges you've identified.
Here are some guidelines to using your plan in the coming weeks, months, and years:
Share your business plan with people you trust - your banker, colleagues in the industry, your advisors, our family. What questions do they have? Do they have suggestions about how you can improve your plan?
open definition dialog window: Cash Flow Projections to get cash in hand before you need it. The earlier you address financing needs, the better positioned you'll be to achieve your goals.
Will you put more money in the business, seek outside investors, or apply for a loan? Talk to your banker about financing options.
How is your actual performance comparing to your projected Income Statements and your Cash Flow Projections? Are you on track to meet your Business Objectives? Are you staying true to your PersonalGoals?
Use your business plan to communicate with suppliers, advisors, professionals, and employees. The better people understand your business, the better they'll be able to work with you.
Review your business plan at least once a year, and consider revising it whenever significant changes occur in your personal life, inside your business, in the marketplace, or in the economy.
Be sure to discuss changes in your plan with key advisors, like your banker, accountant, and lawyer.
If you have finished your business plan or would like to produce a hard copy of your business plan, you can use one of the two options below. By selecting "Copy To Text File" you will have copied all of the business plan into your memory or clipboard. Go to your desired word processor and select "Paste". You will most likely need to format the text and layout for your desired look. Or you can select "Export as Word Document" and you will be prompted for a file name and location. Once complete you can open the file you have just created using word. You now have a finished and formatted business plan.
The next portion of writing your business plan involves creating some detailed financial statements including a balance sheet, cash flow statement and income statement. If you prefer not to complete the financials, feel free to move onto section 7, where you’ll be able to complete your plan.