Business Plan Basics
For a complete information on Business Plans and related information contact your RABC small business advisor.
What is a business plan?
A business plan is a written document that describes your business, its objectives and strategies, the market you are targeting and the financial forecast for your business. It will assist in setting realistic and timely goals, help secure external funding, help measure your success, clarify operational requirements and establish reasonable financial forecasts. Preparing your plan will help you focus on how your new business will need to operate to give it the best chance for success.
Why do I need a business plan?
Getting financial assistance to help get your business up-and-running is directly tied to your business plan. To be considered a viable candidate to receive funds from financial institutions or investors, you must fully demonstrate your firm grasp of every aspect of your business, and particularly its ability to generate profit.
Beyond creating a business plan for the sake of lenders and investors, it is also a necessary exercise to help you map out the growth and progress of your business. The success of your business depends on your clear vision of the future:
How will you generate positive cash flow?
How will you sustain your business in the ‘lean times'?
Who is your competition, and how will you coexist?
Who is your target market?
The above are just a few examples of the questions you will answer in your business plan, providing you with the direction in which you will guide your business.
What are some common guidelines when preparing a good business plan?
Define your business objectives: Think about who is going to read the plan. The objectives can help you decide how much emphasis to put on various sections of your plan.
Show drafts of your plan to others: Get feedback on your draft business plan from various people, including people associated with the business and others.
Ensure your financial projections are believable: For many readers, the financial section is the most important section of the business plan, because it identifies your financing needs and shows the profit potential of your business. A good financial plan will also give the reader confidence that you really understand your business. So, be sure to test how reasonable each of your expectations are. If you are overly optimistic or fail to take into account the full costs of running your business, your business plan will not be credible.
Research your business plan: A business plan is only as good as the research that went into producing it. Research to find out more about your industry, potential customers, competitors, sales and costs of doing business.
Write your own business plan: A common mistake is to copy too much information from a sample business plan. Business plans that borrow too much information from other business plans tend to be disjointed, with some sections contradicting others and some key issues being overlooked.
Write the executive summary last: The executive summary can be the most important section of your business plan, because people will read it first and it may be the only section that is read. It should be short (two pages at most), it should highlight what is important in your plan and it should get the reader excited about your business.
Where do I find market research, industry and competitor information for my plan?
Research is vital to your business plan — the more information you have in your arsenal, the better. When beginning the research phase of your plan, keep in mind that there is a lot of information out there, especially online, but not all of it is accurate. It's always important to consider the source of any information you gather: research is only valuable to you if it's factual.
There are many excellent government market research tools that are available online. Canada Business and Industry Canada both offer market research and statistics resources. For example, a great resource is Industry Canada's SME Benchmarking Tool, which can help you create an accurate financial profile of your business.
Learn more about market research, how to conduct it and where to find free information and statistics to support your market research project.
Use these tools to calculate your performance in areas such as asset utilization, liquidity, leverage, inventory turnover, sales, and net profits.
Find out how your firm measures up to comparable small businesses within your industry.
Looking for information that is relevant to your business? Find research, statistics and analyses of Canada's industries and economy.
The Canada Business Network has centres across the country that offer guidance, information and resources to help make your journey in business a successful one.
What are the most common mistakes in writing a business plan?
Ignoring the competition: There will always be competition. Use your business plan to demonstrate how your business can thrive in a crowded market.
Too many ideas: As an entrepreneur, you are full of great ideas and it can be tempting to “pitch” them all in your plan. Keep in mind that your business plan is about the business around your ideas, such as operations, logistics, management, finances, and marketing.
Relying on a few customers: Some businesses are born from a single customer's need, but they do not want to remain that vulnerable for long. Plan on how you will generate more customers and more contracts.
Diluting priorities: A plan that focuses on dozens of priorities is not really a plan. Focus instead on a few key priorities.Procrastinating: It's easy to put it off, but your business plan is an essential tool to help you guide the direction of your business — there's no time like the present.
Being overly optimistic: Getting excited and projecting best-case scenarios is easy to do, and it can be a fatal mistake. It is in your best interest to make accurate, reasonable financial and market projections.
Copying a sample plan: Sample plans can be a great resource, but you want to avoid using too much information from them. Ultimately, your business is about you — let yourself shine through.
How long should my business plan be?
There is no rule for the exact length that your business plan should be. The important thing to concentrate on is the research, and then the writing of a plan that covers every aspect of your business.
The following categories are generally included in a business plan:
Identify your business opportunity
Marketing, sales and competition analysis and strategy
Where can I find sample business plans?
You will find samples from major Canadian banks, industrial development organizations and private companies. You can also call, email or visit the RABC office for access to free business plan samples.
The organizations listed here provide free templates, writing guides and sample plans to help you develop a professional business plan.
Do I need protection of the information in my business plan when I submit it to others?
Ultimately, whether or not you choose to protect the original ideas in your business plan is up to you - many business plan submissions include a simple and straightforward confidentiality clause following the title page. If the information in your business plan is of an exceptionally sensitive nature, you may consider including a non-disclosure agreement; however, this is an avenue you will need to discuss with your attorney.
Do you really need a lawyer? Business law can be very complex, and it can be difficult for you to forecast potential legal issues that may arise down the road. Find out when to hire a lawyer and how you can reduce potential legal costs.