OUTLINE FOR A BUSINESS PLAN 


The Business Plan

An outline of a business plan follows. It is adapted with permission from the publisher: Ernst & Young LLP 
(Dallas, Texas). 

I. Executive Summary 

The Executive Summary should not be a mere listing of topics in the body of your business plan, but should emphasize the key issues presented. A critical point that must be communicated in the Executive Summary is your company’s distinctive competence - the factors that will make your business successful in a competitive market. 

A. The Purpose of the Plan 
1. Attract investors 
2. Document an operational plan for controlling the business 

B. Market Analysis 
1. The characteristics of your target market (demographic, geographic, etc.) 
2. The products or services you will offer to satisfy those needs 

C. The Company 
1. The needs your company will satisfy 
2. The products or services you will offer to satisfy those needs 

D. Marketing and Sales Activities 
1. Marketing strategy 
2. Sales strategy 
3. Keys to success in your competitive environment 

E. Product or Service Research and Development 
1. Major milestones 
2. Ongoing efforts 

F. Organization and Personnel 
1. Key managers and owners 
2. Key operations employees 

G. Financial Data 
1. Funds required and their use 
2. Historical financial summary 
3. Prospective financial summary (including a brief justification for prospective sales levels) 

Note: In total, your Executive Summary should be less than three pages in length and provide the reader with a succinct overview of your entire business plan. The Executive Summary should be followed by a brief table of contents designed to assist readers in locating specific sections in the plan. Detailed descriptions of the plan’s contents should be avoided in the table of contents. 


YOUR MARKET ANALYSIS provides the only basis for your prospective sales and pricing estimates. Make sure that
this section clearly demonstrates that there is a market need for your product or service. 

WRITING THIS SECTION is a test of your ability to communicate the essence of your business. You must be certain
that this section concisely and accurately describes the substance of your new business. 

II. Market Analysis 

The Market Analysis section should reflect your knowledge of your industry, and present highlights and analysis of your market research.  Detailed market research studies, however, should be presented as appendices to your plan. 

A. Industry Description and Outlook 
1. Description of your primary industry 
2. Size of the industry 
a. Historically 
b. Currently 
c. In five years 
d. In ten years 
3. Industry characteristics and trends (Where is company in its life cycle?) 
a. Historically 
b. Currently 
c. In the future 
4. Major customer groups 
a. Businesses 
b. Governments 
c. Consumers 

B. Target Markets 
1. Distinguishing characteristics of your primary target markets and market segments. Narrow your target markets to a manageable size.
Efforts to penetrate target markets that are too broad are often ineffective. 
a. Critical needs 
b. Extent to which those needs are currently being met 
c. Demographics 
d. Geographic location 
e. Purchasing decision-makers and influencers 
f. Seasonal/cyclical trends 
2. Primary/target market size. 
a. Number of prospective customers. 
b. Annual purchases of products or services meeting the same or similar needs as your products or services. 
c. Geographic area. 
d. Anticipated market growth. 
3. Market penetration: indicate the extent to which you anticipate penetrating your market and demonstrate why you feel that level of
penetration is achievable based on your market research 
a. Market share 
b. Number of customers 
c. Geographic coverage 
d. Rationale for market penetration estimates 
4. Pricing/gross margin targets 
a. Price levels 
b. Gross margin levels 
c. Discount structure (volume, prompt payment, etc.) 
5. Methods by which specific members of your target market can be identified 
a. Directories 
b. Trade association publications 
c. Government documents 
6. Media through which you can communicate with specific members of your target market 
a. Publications 
b. Radio/television broadcasts 
c. Sources of influence/advice 
7. Purchasing cycle of potential customers 
a. Needs identification 
b. Research for solutions to needs 
c. Solution evaluation process 
d. Final solution selection responsibility and authority (executives purchasing agents, engineers, etc.) 
8. Key trends and anticipated within your primary target markets 
9. Secondary target markets and key attributes 
a. Needs 
b. Demographics 
c. Significant future trends 

C. Market Test Results 
1. Potential customers contacted. 
2. Information/demonstrations given to potential customers. 
3. Reaction of potential customers. 
4. Importance of satisfaction of targeted needs. 
5. Test group’s willingness to purchase products/services at various price levels. 

D. Lead Times (amount of time between customer order placement and product/service delivery) 
1. Initial orders 
2. Reorders 
3. Volume purchases 

E. Competition 
1. Identification (by product line or service and market segment) 
a. Existing 
b. Marketshare 
c. Potential (How long will your “window of opportunity” be open before your initial success breeds new competition? Who will your new competitors likely be?) 
d. Direct 
e. Indirect 
2. Strengths (competitive advantages) 
a. Ability to satisfy customer needs 
b. Market penetration 
c. Track record and reputation 
d. staying power (financial resources) 
e. Key personnel 
3. Weaknesses (competitive disadvantages) 
a. Ability to satisfy customer needs 
b. Market penetration 
c. Track record and reputation 
d. Staying power (financial resources) 
e. Key personnel 
4. Importance of your target market to your competition 
5. Barriers to entry into the market 
a. Cost (investment) 
b. Time 
c. Technology 
d. Key personnel 
e. Customer inertia (brand loyalty, existing relationships, etc.) 
f. Existing patents and trademarks 

F. Regulatory Restrictions 
1. Customer or governmental regulatory requirements 
a. Methods for meeting the requirements 
b. Timing involved 
c. Cost 
2. Anticipated changes in regulatory requirements 

III. Company Description 

The Company Description section must provide an overview of how all of the elements of your company fit together without going into detail, since most of the subjects will be covered in depth elsewhere in the plan. 

A. Nature of Your Business 
1. Marketplace needs to be satisfied 
2. Method(s) of need satisfaction (products and services) 
3. Individuals/organizations with the needs 

B. Your Distinctive Competencies (primary factors that will lead to your factors that will lead to your success) 
1. Superior customer need satisfaction 
2. Production/service delivery efficiencies 
3. Personnel 
4. Geographic location 

IV. Marketing and Sales Activities 

DO NOT UNDERESTIMATE the importance of presenting a well-conceived sales strategy.

Both general and specific information must be included in this part of your plan. Your objective here is to describe the activities that will allow you to meet the sales and margin levels indicated in your prospective financial statements. 

A. Overall Marketing Strategy 
1. Marketing penetration strategy 
2. Growth strategy 
a. Internal 
b. Acquisition 
c. Franchise 
d. Horizontal (providing similar products to different users) 
e. Vertical (providing products at different levels of distribution chain) 
3. Distribution channels (include discount/profitability levels at each stage) 
a. Original equipment manufacturers 
b. Internal sales force 
c. Distributors 
d. Retailers 
4. Communication 
a. Promotion 
b. Advertising business 
c. Public relations 
d. Personal selling 
e. Printed materials (catalogues, brochures, etc.) 

B. Sales Strategies 
1. Sales force 
a. Internal vs. independent representatives (advantages and disadvantages of your strategy) 
b. Size 
c. Recruitment and training 
d. Compensation 
2. Sales activities 
a. Identifying prospects 
b. Prioritizing prospects 
c. Number of sales calls made per period 
d. Average number of sales calls per sale 
e. Average dollar size per sale 
f. Average dollar size per reorder 

V. Products and Services 

Special attention should be paid to the users of your business plan as you develop this section. Too much detail will have a negative impact on most external users of the plan. Avoid turning this section of your business plan into a policies and procedures manual for your employees. 

A. Detailed Product/Service Description 
1. Specific benefits of product/service 
2. Ability to meet needs 
3. Competitive advantages 
4. Present stage (idea, prototype, small production runs, etc.) 

B. Product Life Cycle 
1. Description of the product/service’s current position in its life cycle 
2. Factors that might change the anticipated life cycle 
a. Lengthen it 
b. Shorten it 

C. Copyrights, Patents, and Trade Secrets 
1. Existing or pending copyrights or patents 
2. Anticipated copyright and patent filings 
3. Key aspects of your products or services that cannot be patented or copyrighted 
4. Key aspects of your products or services that qualify as trade secrets 
5. Existing legal agreements with owners and employees 
a. Nondisclosure agreements 
b. Incomplete agreements 

D. Research and Development Activities 
1. Activities in process 
2. Future activities (include milestones) 
3. Anticipated results of future research and 
development activities 
a. New products or services 
b. New generations of existing products 
or services 
c. Complementary products or services 
d. Replacement products or services 
4. Research and development activities of 
others in your industry 
a. Direct competitors 
5. Indirect competitors 
a. Suppliers 
b. Customers 

THE EMPHASIS in this section should be on your company’s unique ability to satisfy the needs of the marketplace. 
Concentrate on your product or service’s ability to meet existing market needs. 

VI. Operations 

Here again, too much detail can detract from the rest of your plan. Be certain that the level of detail included fits the specific needs of the plan’s users. 

A. Production and Service Delivery Procedures 
1. Internal 
2. External (subcontractors) 

B. Production and Service Delivery Capability 
1. Internal 
2. External (subcontractors) 
3. Anticipated increases in capacity 
a. Investment 
b. New cost factors (direct and indirect) 
c. Timing 

C. Operating Competitive Advantages 
1. Techniques 
2. Experience 
3. Economies of scale 
4. Lower direct costs 

D. Suppliers 
1. Identification of the suppliers of critical 
elements of production 
a. Primary 
b. Secondary 
2. Lead-time requirements 
3. Evaluation of the risks of critical element shortages 
4. Description of the existing and anticipated contractual relationships with suppliers. 

YOUR MANAGEMENT TEAM IS UNIQUE -- make sure that you stress their backgrounds and skills, and how they will
contribute to the success of the business. 

VII. Management and Ownership 

Your management team’s talents and skills are some of the few truly unique aspects of your company. If you hope to use your plan to attract investors, this section must emphasize your management’s talents and skills, and indicate why they are a part of your company’s distinctive competence that cannot easily be replicated by your competition. Remember that individuals invest in people, not ideas. 

A. Management Staff Structure 
1. Management staff organizational chart 
2. Narrative description of the chart 

B. Key Managers (complete resumes should be presented in an appendix to the business plan) 
1. Name 
2. Position 
3. Brief position description, including primary duties 
4. Primary responsibilities and authority 
5. Unique skills and experiences that add to your company’s distinctive competencies 
6. Compensation basis and levels (be sure they are reasonable - not too high and not too low) 

C. Planned Additions to the Current 
Management Team 
1. Position 
2. Primary responsibilities and authority 
3. Requisite skills and experience 
4. Recruitment process 
5. Timing of employment 
6. Anticipated contribution to the company’s success 
7. Compensation basis and levels (be sure they are in line with the market) 

VIII. Funds Required and Their Uses 

Any new or additional findings reflected in your prospective financial statements should be discussed here. Alternative funding scenarios can be presented if appropriate, and corresponding prospective financial statements are presented in subsequent sections of your plan. 

A. Current Funding Requirements 
1. Amount 
2. Timing 

B. Funding Requirements over the Next Five Years 
1. Amount 
2. Timing 
3. Type 
a. Equity 
b. Debt 
c. Mezzanine 
4. Terms 

C. Use of Funds 
1. Capital expenditures 
2. Working capital 
3. Debt retirement 
4. Acquisitions 

THE FINANCIAL DATA SECTION of your business plan is another area where specialized knowledge can be
invaluable. If you do not have someone with sufficient financial expertise on your steering committee or management
team, you will probably need to utilize an outside advisor.

IX. Financial Data 

The Financial Data section contains the financial representations of all the information presented in the other sections. Various prospective scenarios can be included, if appropriate. 

A. Historical Financial Data 
(past three to five years, if applicable) 
1. Annual statements 
a. Income 
b. Balance sheet 
c. cash flow 
2. Level of CPA involvement (and name of firm) 
a. Audit 
b. Review 
c. compilation 

B. Prospective Financial Data (next five years) 
1. Next year (by month or quarter) 
a. Income 
b. Balance sheet 
c. Cash flows 
d. Capital expenditure budget 
2. Final four years (by quarter and/or year) 
a. Income 
b. Balance sheet 
c. Cash flows 
d. Capital expenditure budget 

The financial data section of your business plan is another area where specialized knowledge can be invaluable. If you do not have someone with sufficient financial expertise on your steering committee or management team, you will probably need to utilize an outside advisor. 

2. Final four years (by quarter and/or year) 
a. Income 
b. Balance sheet 
c. Cash flows 
d. Capital expenditure budget 
3. Summary of significant assumptions 
4. Type of prospective financial data 
a. Forecast (managements best estimate) 
b. Projection (“what-if “ scenarios) 
5. Level of CPA involvement 
a. Assembly 
b. Agreed-upon procedures 
c. Review 
d. Examination 

C. Historical financial statements 
1. Ratio analysis 
2. Trend analysis with graphic presentation 

D. Prospective financial statements 
1. Ratio analysis 
2. Trend analysis with graphic presentation 

Appendices or Exhibits 

Any additional detailed information that could he useful to the readers of the business plan but is not appropriate for the body of the plan can be presented here. 

A. Resumes of Key Managers 
B. Pictures of Products 
C. Professional References 
D. Market Studies 
E. Pertinent Published Information 
1. Magazine articles 
2. References to books 
F. Patents 
G. Significant Contracts 
1. Leases 
2. Sales contracts 
3. Purchase contracts 
4. Partnership/ownership agreements 
5. Stock option agreements 
6. Employment/compensation agreements 
7. Incomplete agreements 
8. Insurance 
a. Product liability 
b. Officers’ and directors’ liability 
c. General liability 

SUCCESSFUL BUSINESS PLANS 

The American Bankers Association recommends that all of the following questions be directly addressed in the business plan: 

How much money is needed? 

What are the loan funds to be used for? 

How will the loan affect the financial position of the borrower(s)? 

What will be pledged as collateral? 

How will the loan be repaid? 

When is the money needed? 

When will the loan be repaid? 

Are projections for the business reasonable and supported by historical information? 

If projections are not realized, can the loan still be repaid? For example, are there any sources of other income? 

How much can the business afford afford to lose and still remain viable? 

How will the business manage risk? 

For an existing business, how has the business performed to date, and is the financial position of the business improving or
declining? 


FIVE “C’s” 

When evaluating a loan request, financial institutions look at the so-called Five C’s: character, cash flow, collateral, capital, and conditions. 

1. Character 
Borrowers should present themselves as upstanding, responsible members of the community, and be able to back up this claim with references. Their background and track record must demonstrate a high level of honesty and integrity. In addition, if the management and board can show that they have the experience to operate the business, they are more likely to get the loan. 

2. Cash Flow 
The most important issue that lenders look at here is whether or not the business will generate enough cash flow to make the loan payments.  They will also examine the financial projections to ensure that they are realistic. 

3. Collateral 
The lender wants protection in case the borrower defaults on the loan, so often takes a lien on the property being purchased with the loan.  Personal guarantees by the business principles as well as additional collateral may be required. 

4. Capital 
Lenders require that the business owners invest their personal assets in the business. In cooperatives, this is known as member equity (see Chapter III.E). Most lending institutions require the owners to invest 30% - 50% of the total capital needed. 

5. Conditions 
The final criteria is the general economic conditions at the time of the loan request (and the projected state of the economy for the coming several years). The state of the industry in which the borrower will operate is also of interest to lenders. 

Information obtained from the University of Wisconsin Center for Cooperatives

Last Revised: August 29, 2001

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