Structuring Your Business Plan

In simplest terms, a business plan must tell a compelling story. Your audience consists of potential investors. Your goal is to obtain financing. So your story must explain how investing in your business will make your audience a lot of money.

 

CREATING A LOGICAL PROGRESSION

Information should be organized in broad categories and ordered in a manner in which the information follows a logical progression. Business plans that seem to “jump around” between topics will create a disjointed narrative in your story and confuse your audience.

For example, if you reduced a business plan to a series of extremely simplified statements, it might look something like this:

“I identified this problem.”
SO
“I devised this solution to the problem.
AND
“This is how to make money from the solution.
AND
“This is how many people could potentially use the solution.
THUS
“The overall market is this big in dollar figures, and company could capture this much market share.”
BUT
“There are some competitors and a few barriers to entry that we need to overcome. We fortunately have this unique competitive advantage over the current competition thanks to our patent.
THUS
“Based on all the information, we project our company will be able to generate these revenues over the next few years.”
AND
“We need this much money from you to accomplish these goals.”
AND
“If you provide the money, you will own this much of the company.”
SO
“In a few years, you will make a lot of money.”

The above example provides a simplified way to think about the structure of your business plan, but it is by no means the definitive pattern. An excellent business plan can be laid out in a variety of ways, and relay information in several different orders. The important goal to keep in mind when structuring your business plan is that the audience must walk away with a clear understanding of the market opportunity, the business model, and how they will make money from their investment.

 

IMPORTANT TOPICS TO COVER

A good business plan will cover a number of important topics:

Value proposition The problem or issue you have identified.
The solution to the problem.
The business model for making money from the solution.
Market analysis Details about the overall market your business occupies.
A profile of your target customer.
The size of your target market.
Industry analysis Details on your direct and indirect competition.
Barriers to entry for your business.
Important industry trends that may affect your business.
Development strategy Initial market entry strategy.
Long-term market development strategy.
Specific goals and the projected timeline to accomplish them.
Financial projections Projected cash flows.
Projected income statements.
Projected balance sheets.
Investment opportunity Start-up capital required and level of ownership.
Investor exit strategies (harvest options).
Return on investments.

 

UTILIZING A NUMBERING SYSTEM

A certain degree of uniformity in how the business plan’s information is structured will significantly increase how easy it is to read your document, and the utilization of a numbering system can help lend that appearance of uniform structure. Numbering systems usually utilize a single number for important topics, and continue to add numbers for subsections. For example:

1. First Important Topic
1.1. Sub-Topic One
1.2. Sub-Topic Two
2. Next Important Topic
2.1. Sub-Topic One
2.2. Sub-Topic Two
2.2.1. More detail
2.2.2. Yet more detail
2.3. Sub-Topic Three
3. Third Important Topic
3.1. Sub-Topic One
3.2. Sub-Topic Two

Like everything else when it comes to writing a business plan, there is no single specific method for using a numbering system. You do not even have to use a numbering (or lettering) system at all. It is however bly suggested that you do use some kind of easily understandable structure so that your audience can clearly delineate the end of one topic and the start of another.

 

EXAMPLES OF A FORMALIZED STRUCTURE

There are many different ways to structure a business plan, and there is no one “right” way. Below are some examples of formalized layouts for a business plan. Please keep in mind this is for instructional purposes only, and you should develop your business plan in a way that makes sense to you:

Title Page
Executive Summary
Table of Contents
1. Value Proposition
1.1. Market Opportunity
1.2. Solution
1.3. Business Model
2. Market Analysis
2.1. Overview of Market
2.2. Target Customer Profile
2.3. Target Market Size
2.4. Market Segmentation
3. Industry Analysis
3.1. Overview of Direct Competition
3.2. Overview of Indirect Competition
3.3. Competitive Advantage
3.3.a. Intellectual Property
3.3.b. Sustainability of Competitive Advantage
3.4. Barriers to Entry
3.5. Key Emerging Industry Trends
4. Development Strategy
4.1. Market Entry Strategy
4.1.a. Overcoming the barriers to entry
4.1.b. Initial marketing campaign
4.2. Long-term Market Development Strategy
4.3. Development Timeline
5. Financial Projections
5.1. Projected Income Statements
5.2. Projected Cash Flows
5.3. Projected Balance Sheets
6. Investment Opportunity
6.1. Required Start-Up Capital
6.2. Additional Capital Requirements
6.3. Structure of Investment Rounds
6.4. Investor Participation Rates
6.5. Exit Strategy
6.6. Return on Investment
7. Appendices of Supporting Information

Another example is:

Executive Summary
Table of Contents
1. Market Opportunity
1.1. Customer Problem
1.2. Problem Solution
1.3. Business Model
1.4. Target Customer Profile
1.5. Target Market Size
2. Competitive Analysis
2.1. Overview of Current Competition
– Direct Competition
– Indirect Competition
2.2. Competitive Advantage
– Intellectual Property
– Sustainability
2.3. Barriers to Entry
2.4. Important Emerging Trends
3. Market Development
3.1. Overview of Market Entry Strategy
3.2. Marketing Campaign Details
3.3. Development Timeline
4. Financial Projections
4.1. Projected Cash Flows
4.2. Projected Income Statements
4.3. Projected Balance Sheets
4.4. Required Financing
4.5. Harvest Options
4.6. Return on Investment
5. Appendices

IF YOU REMEMBER ANYTHING, REMEMBER THIS…

Everything you find here is designed to help you write a better business plan. Take what you like, ignore what you do not. The most important thing to remember is that there is no single “right way” to write a business plan.

Johns Hopkins University Business Plan Competition