Sadly too many business people either don’t write a business plan at all or think that it’s something that they can quickly scribble on the back of an old envelope. If that’s your approach then you’re going to regret it when you’re looking for funding or when your business runs into some challenging times desperately need to remember what your original plans were so that your business can survive.

That doesn’t mean that your business plan needs to be set in stone … or that you can’t make notes on the back of an old envelope because you can. What it does mean though is that you need use those notes to prepare a rather formalized business plan and keep it updated as times change and your business grows and you need to understand that the people who may read are professionals and they will be using it to assess whether or not your business is worth investing in.

So what do you need in a formal business plan?

How to Write a Business Plan

Executive Summary
Get this section right and the people you need to impress will read further … get it wrong and your application for funding will be tossed into the bin along with so many others.

Your executive summary should contain a concise overview of where your company is going and where it has come from. Many experts recommend that it’s the last part of the business plan that you should write even though it’s the first part that investors will read.

First, you will need to include the date the business began and who started it. The number of current employees and the location of the business is also important along with a description of your business premises and details of the products that you produce also go here. Similarly, this is where you would detail your unique selling points and future plans.

Your banking relationships and who is currently investing in your business are also part of the executive summary.

Marketing Analysis
This is the part of your business plan where you talk about the industry that you operate in and what that industry’s outlook might be. You should also clearly define your target market, the way and times that they interact with your business, and the way in which you will target that market both now and in the future.

It can also be important to clearly state the time it takes you to produce your products and get them to the market place. Don’t be afraid to include some pointers on where to find more information about your target market.

You should clearly identify your competitors along with their strengths and weaknesses as well as any government rules or regulations that apply to the industry you’re working in.

Company Description
Here you need to describe what your business does, how the various parts of your business fit together to produce your products, and why your business will be a success. You also need to clearly state how your business will keep your customers happy.

Organization and Management
Investors need to know what the organizational structure of your business is. Who reports to whom, who oversees which parts of the business, and who is ultimately responsible for decision making.

You will also need to list your management team and their qualifications in your business plan, not to mention your advisers if you have people outside of your business that you consult with.

Marketing and Sales
The first thing you need to do is to define your marketing strategy … in other words how you are going to create customers for your business. This section is something that needs to be flexible and constantly under review to ensure that you’re spending your marketing dollars wisely.

When it comes to sales, you need to outline your strategy here too and make it clear who your sales people will be and where they come from. Will they be employees, contractors, or outside sales people?

Service or Product Information
In this section of your business plan, you need to clearly define what you do or what you produce and show how it will benefit customers both new and old. Indicate the areas where your business has an advantage and what your market may be prepared to pay for your service or product.

You should also indicate what you are doing to improve your product or service or even bring new products and services online.

Funding
This is where you ask for the money that you know you will need to either get your business off the ground or keep it growing. You should discuss how much money you need right now, how much money you might need in the future, and how you will use that money to make your business grow.

It’s a good idea to detail your future goals in this section of your business plan, focusing on the financial impact they will have on the business and how much growth you expect from it.

Financials
There are two major financial documents that you should include in your business plan. The first is the historical financial data that pertains to the business. If you’re looking for funding, then be prepared to supply data going back up to five years or more.

That five year span is also important for the second financial document that you will need to provide and that’s the one that looks into the future. You will need to supply figures for your income forecasts, cash flow statements, and expenditure budgets. Years two to five will be on a yearly basis, but you should be prepared to provide figures for the first year on a quarterly basis.

Obviously the figures you provide should match the amount of funding that you are requesting.

Appendix
The amount of information that goes into the appendix of your business plan will depend on what is required by the person who is reading it, but they can include things such as your resume, references, credit history, market studies, product photos, references to reports and documents that you have mentioned in your business plan, permits, contracts, and more.

Now if you thought that writing a business plan was simple task when you started reading this article then you have probably changed your mind. But don’t let this list frighten you. Work through it step by step and you’ll be able to approach investors with confidence.