My business plan cheat code

There are two main purposes for writing a business plan.

A plan can serve as a guide to capture how the business should operate and help in decision-making. This is useful for managers and employees. Another purpose is to seek funding from lenders, and sometimes investors.

When applying for an SBA loan, a business plan is often part of the required documentation. This is particularly true if your business is new.

Requiring a business plan allows the SBA and the lender to get a better understanding of how well you understand your industry and how you plan to successfully run your business.

While the SBA does have a recommended template for writing a business plan, that we are going to cover today, it’s more important that your plan is well-written and covers the most important aspects of your business model. You don’t have to follow this format to the letter. To that point, you can add other sections to your plan. The key is telling the story of your business in a compelling way.

Remember - lenders are looking for evidence that you will be able to pay your loan back.

The sections of an SBA-approved business plan

The following recommended sections come directly from the SBA’s website (as of October 2023). The key points in each section are based on my time leading a top SBA lender, as well as writing business plans that have led to over $800M in funding.

Executive Summary

Your executive summary should be no longer than one to two pages in length.

The goal of this section is to summarize the plan into a cohesive, concise message. I recommend writing the summary in such a way that the reader could simply read just that section and they would know everything they need to know about your business.

The idea is to roll up all of the most important points from the other sections of the plan.

One trick I like to use is to bold the value proposition statement so that it stands out.

Using the early days of Facebook as an example, a paragraph in the executive summary might look like this.

"Facebook is an expanding online directory that connects students, alumni, faculty, and staff through social networks. Facebook was launched on February 4, 2004, at Harvard University. Our app allows for deeper user connections on the basis of multiple factors such as friendship, courses, and social networks, through our built-in messaging system. As of April 10, 2004, the expansion of the Facebook network has grown to include every major Ivy League college."

By the way, this came off of Facebook’s original pitch deck they used with investors.

Company Description

This section is your opportunity to introduce the reader to your business. It should include things such as the name of the business and how it is structured.

Key points to make in this section:

• Is the company legally incorporated? If so, what structure was used? Ex. LLC, C-corp. Which state laws was it incorporated under?
• Who owns the company? How is the equity ownership split up? You can provide this in the Organization and Team section, but I like to see it earlier. Why? Because this determines who will have to sign for the loan.
• Where is the business located? What state is its headquarters in? Is it a virtual business or are there physical locations?
• While I don’t like to talk in detail about the company’s services or product, that comes later, I do like to briefly mention what the company does in this section.

Market Analysis

There are two main components to a thorough market analysis - a review of the industry your business competes in and the competition.

Be sure to cover:

• Industry analysis
  • How large the industry is, i.e. its total addressable market (TAM).
  • How quickly the industry is growing, i.e. its Cumulative Aggregate Growth Rate (CAGR).
  • Is the market trending up, down, or flat in terms of popularity? (consider using Google Trends)
  • Are there particular geographies that make sense to attack first based on market conditions and/or demand?
• Competitor analysis
  • Who are the main competitors?
  • Are they indirect/direct competitors?
  • How much market share do they have?
  • What other solutions do they offer?
  • How do they price their solution(s)? (this is usually one of the toughest things to find)
  • How will competitors respond to the introduction of your business into the market?

For the competitor analysis, I always recommend using a matrix to provide a visual of what each competitor offers and what they don’t. It might look like the quick example below.

Organization and Team

While the Company section is the business itself, this section focuses on the people running it. Here you want to focus on how the team is structured, who fills each role, and what they bring to the table.

• Organization
  • Who are the owners? What is their professional background? What roles and responsibilities will they have? A nice touch is to include a headshot and links to a LinkedIn profile.
  • Will the company have a Board of Directors? If so, who are they and what is their background? Will they be compensated?
  • Will the company have a Board of Advisors? This is common for early-stage companies. If so, who are they and what is their background?
• Team
  • Who are the key employees, their experience, and their role?
  • What roles will the company outsource early on to keep payroll down?

Service or Product

Now you get to talk about the fun stuff! Whenever possible, provide visuals when answering the following questions:

• Talk about your product or service.
• Be sure to call out your solution's value proposition. What makes it unique? Why would someone buy your product over another?

Use Cases

• Who will use your product?
• How will they use it?
• What will it allow them to do?
• What won’t it allow them to do
• What might it do in versions 2, 3, and on-ward but not in version 1?
• Consider including current customer testimonials.

Specifications

• Describe, in technical terms, the product. What is it made out of, how big is it, what color, etc.?

Pricing

• How will you price what you are offering?
• Will it be a one-time fee, a subscription, a license, etc.?

Marketing & Sales

This is my least favorite section. Probably because it is the most important and I’ve seen founder after founder whiff here. Without marketing and sales activities you don’t have a business! So, take the time to really think this through. And, for God’s sake, don’t count on going viral on social media.

Marketing

• How will the company market its solution(s)?
• How are competitors marketing their solution(s)?
• Is this a low-cost or differentiation play?
• What distribution channels will be leveraged?
• Will you attend industry conferences or events?
• What type of marketing strategy will the business leverage? A frontal attack, guerrilla marketing tactics, encirclement, bypass, etc.
• What strategic partnerships, if formed, would provide leverage for the business?
• What is the company’s unique value proposition as compared to its competitors?

Sales

• How will you facilitate sales?
• Will you hire salespeople? Will you pay them commissions?
• Will you use affiliates?
• Will you outsource your sales to another organization or strategic partners?

Funding Request

There is no point in writing a business plan to send to a lender if you are explicit about how much money you need. On top of asking for that, you need to include details about where you will spend that money.

• How will the company fund its launch? Where will the startup capital come from?
• How will the company fund its growth?
• How will the company be funded? Through investors or loans or both?
• How much $ are the founders able and willing to invest or have invested to date?
• Have you raised any money prior to this round of funding? If so, from whom, how much?
• What will the funding go toward? You should be able to pull this information from your projections.

Projections

The key to quality projections is having defensible assumptions and data that can support what you are claiming.

I always recommend that founders create, or at least participate in, the projections process. That’s because the founder should know all of the necessary inputs more than anyone else.

But, I also know that good, conservative projections are tough to do. Especially if you don’t have a solid financial background.

So, consider using a pre-existing template or hiring an Accountant or MBA to do them for you.

SCORE offers a free template for completing your projections. You can access it here.

Things to consider include:

• What types of expenses will the company have?
  • What are the fixed expenses?
  • What expenses are variable?
• Will the company own fixed assets? I.e. real estate, equipment, etc.
• Are my projections realistic?
  • Does the growth I am projecting make sense?
  • Will investors or lenders believe my estimated growth rate?
  • Does the growth rate I am projecting mirror that of businesses in my sector?
• When will each key employee start taking a paycheck? This is rarely on Day 0 or Day 1

Other sections to consider

One of the biggest differences between this structure and the one I tend to use with a lot of business plans I write for customers is that I like to have specific Problem and Solution sections. I will usually peel out the problem statement from the Company Description section and replace the Service or Product with a Solution section.

There are four other sections that I consider including, depending on various factors such as the phase of the business and the model itself.

• Key Performance Indicators (KPIs) - KPIs are the metrics you will monitor to determine how the business is performing. Examples include top-line revenue, gross margin, net margin, number of users, etc.
• Milestones - this displays the timeline of events that will occur. I typically include this section, in a visual format, for any newer business. It might show when the first product will hit the market, when the first 1,000 users are expected to be acquired, etc.
• Risks - this is one of my favorite additions to the SBA’s recommended format. Because it forces you to think about the things that could impact the business that are, often, out of your control. For this, I use the PESTLE method (Political, Economic, Social, Technological, Environmental, Legal).
  • What legal, regulatory, political, ethical, moral, or other risks exist?
  • How are the competitors addressing these risks?
  • What barriers to entry exist that could cause problems for the business?
    • Are there intellectual property barriers?
  • What pre-mortem risks exist? i.e. if XYZ happens the business will be dead on arrival
• SWOT Analysis - SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. Keep in mind that Strengths and Weaknesses come from factors internal to the business and Opportunities and Threats are external factors. Questions I like to think about here are:
  • What strengths does the business have in its favor?
    • What barriers to entry can the company create?
      • Intellectual property
      • First mover
  • What weaknesses do they need to augment?
  • What are the opportunities in the market?
  • What threats exist in the market?
    • What are the opportunity costs of pursuing this idea? i.e. could the money be better spent on a different model of this business or another business idea?
  • How can you mitigate the weaknesses and threats? I.e. what plans of action, features, functionality, etc. will help offset the risks?

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