How to Write a Traditional Business Plan

Step 1: Write an Executive Summary

Step 2: Write a Business Description
Step 3: Market and Competitive Analysis.
Step 4: Operational Structure.
Step 5: Product Description.
Step 6: Raise Capital.
Step 7: Financial Analysis and Projections.
Step 8: Appendix.

Step 1
The executive summary should be no more than two pages long, with brief summaries of other sections
of the plan.
a. Mission

B. The Company and Management (How did you conceptualize the business name, the location of the
business, Forms of business ownership)

C. Your product and services

D. The Market (Your competitive advantage)

C. Financing Projections (Sales projection, salaries and wages, financing)

D. Start up financing requirements

Step 2: Write a Business Description

The business description usually begins with a short description of the industry. When describing the
industry, discuss the present outlook as well as future possibilities. You should also provide information
on all the various markets within the industry, including any new products or developments that will
benefit or adversely affect your business. This is important if you're seeking funding; the investor will
want to know just how dependable your information is, and won't risk money on assumptions

Step 3: Market and Competitive Analysis

Your goal in this section is to describe how you'll attract and retain customers. You'll also describe how a sale
will actually happen. You'll refer to this section later when you make financial projections, so make sure to
thoroughly describe your complete marketing and sales strategies.
Step 4: Operational Structure
The operations section of your business plan is where you explain – in detail – you company's objectives,
goals, procedures, and timeline. An operations plan is helpful for investors, but it's also helpful for you and
employees because it pushes you to think about tactics and deadlines.
Step 5: Product or Service Description
Your product and services section should include: A description of the products or services you are
offering or plan to offer. How your products and services will be priced. A comparison of
the products or services your competitors offer in relation to yours. A product description is the marketing
copy that explains what a product is and why it's worth purchasing. The purpose of a product
description is to supply customers with important information about the features and benefits of
the product so they're compelled to buy.
Step 6: Raise Capital

If you're asking for funding, this is where you'll outline your funding requirements. Your goal is to clearly explain
how much funding you’ll need over the next five years and what you'll use it for.

Specify whether you want debt or equity, the terms you'd like applied, and the length of time your request will
cover. Give a detailed description of how you'll use your funds. Specify if you need funds to buy equipment or
materials, pay salaries, or cover specific bills until revenue increases. Always include a description of your future
strategic financial plans, like paying off debt or selling your business.

Step 7: Financial Analysis and Projections

The financial section of your business plan determines whether or not your business idea is viable and
will be the focus of any investors who may be attracted to your business idea. The financial section is
composed of three financial statements: the income statement, the cash flow projection, and the balance
sheet. It also should include a brief explanation and analysis of these three statements.

Business expenses

Think of your business expenses as two cost categories: your start-up expenses and your operating
expenses. All the costs of getting your business up and running should be considered start-up expenses.
These may include:

 Business registration fees
 Business licensing and permits
 Starting inventory
 Rent deposits
 Down payments on a property
 Down payments on equipment
 Utility setup fees

Your own list will expand as soon as you start to itemize them.
Operating expenses are the costs of keeping your business running. Think of these as your monthly
expenses. Your list of operating expenses may include:

 Salaries (including your own)

 Rent or mortgage payments
 Telecommunication expenses
 Utilities
 Raw materials
 Storage
 Distribution
 Promotion
 Loan payments
 Office supplies
 Maintenance

The Cash Flow Projection

The cash flow projection shows how cash is expected to flow in and out of your business. It is an
important tool for cash flow management because it indicates when your expenditures are too high or if
you might need a short-term investment to deal with a cash flow surplus. As part of your business plan,
the cash flow projection will show how much capital investment your business idea needs.

For investors, the cash flow projection shows whether your business is a good credit risk and if there is
enough cash on hand to make your business a good candidate for a line of credit, a short-term loan, or a
longer-term investment. You should include cash flow projections for each month over one year in the
financial section of your business plan.

The Balance Sheet

The balance sheet reports your business's net worth at a particular point in time. It summarizes all the
financial data about your business in three categories:

 Assets: Tangible objects of financial value that are owned by the company.

 Liabilities: Debt owed to a creditor of the company.
 Equity: The net difference when the total liabilities are subtracted from the total assets.

The relationship between these elements of financial data is expressed with the equation: Assets =
Liabilities + Equity.

For your business plan, you should create a pro forma balance sheet that summarizes the information in
the income statement and cash flow projections. A business typically prepares a balance sheet once a
year.
What is Income Statement?

The income statement is one of a company’s core financial statement that shows their profit and loss over
a period of time. The profit or loss is determined by taking all revenues and subtracting all expenses from
both operating and non-operating activities. The statement displays the company’s revenue, costs, gross
profit, selling and administrative expenses, other expenses and income, taxes paid, and net profit, in a
coherent and logical manner.

Components of an Income Statement

Revenue/Sales is the comapnay’s revenue from sals or services, displayed at the very top of the statement.
This value will be the gross of the costs associated with creating the goods sold or in providing services.

Cost of Goods Sold (COGS)

Is a line-item that aggregates the direct costs associated with selling products to generate revenues. This
line can also be called Cost of Sales if the company is a service business. Direct costs can include labor,
parts, materials and an allocation of other expenses such as depreciation.

Gross Profit

Gross profit is calculated by subtracting Cost of Goods Sold (or Cost of Sales) from Sales Revenue.

Marketing, Advertising, and Promotion Expenses

Most businesses have some expenses related to selling goods and/or services. Marketing, advertising, and
promotion expenses are often grouped together as they are similar expenses, all related to selling.

General and Administrative (G&A) Expenses

SG&A Expenses include the selling, general and the administrative section that contains all other indirect
costs associated with running the business. This includes salaries and wages, rent and office expenses,
insurance, travel expenses, and sometimes depreciation and amortization, along with other operational
expenses.

EBITDA

EBITDA, while not present in all income statements, stands for Earnings before Interest, Tax,
Depreciation, and Amortization. It is calculated by subtracting SG&A expenses (excluding amortization
and depreciation) from gross profit

Depreciation & Amortization Expense

Depreciation and amortization are non-cash expenses that are created by accountants to spread out the
cost of capital assets such as Property, Plant and Equipment (PP&E)
Operating Income (or EBIT)

Operating Income represents what’s earned from regular business operations. In other words, it’s profit
before any non-operating income, non-operating expenses, interest, or taxes are subtracted from revnues.
EBIT is a term commonly used in finance and stands for Earnings Before Interest and Taxes.

Interest

Interest Expense. It is common for companies to split out interest expense and interest income as a
separate line item in the income statement.

EBT stands for Earnings Before Tax, also known as pre-tax income, and is found by subtracting interest
expense from Operating Income. This is the final subtotal before arriving at net income.

Income Taxes

Income taxes refer to the relevant taxes charged on pre-tax income. The total tax expense can consist of
both current taxes and future taxes.

Net Income

Net Income is calculated by deducting income taxes from pre-tax income. This is the amount that flows
into retained earnings on balance sheet, after deductions for any dividends.

ABC Company
Income Statements for the year ended____
Net product/service sales xxx
Cost of goods/sales xxx
Gross Profit xxx
Less: Operating Expenses
Marketing xxx
General and Administrative xxx
Depreciation xxx
Interest xxx
Total Operating Expenses xxx
Earnings Before Tax xxx
Taxes xxx
Net Earnings xxx