Knowing Your Plan’s Purpose
After spending time writing down your initial thoughts on your business, it’s time to start shaping your concept into a more formalized business plan. While companies and entrepreneurs present business plans in different formats and sizes, they all should contain sections that address the following:

* Executive Summary (you write this last)
* Statement of Purpose
* Business Description
* Products/Services Description
* Marketing Plan
* Operating Plan
* Management Team/Personnel
* Financial Plan
* Supporting Documents

Through the combination of these sections it should be clear why this business is a real opportunity worth pursuing. The reader should get a clear understanding of what the business is, from how it makes money and operates, to the ways it will get customers to make purchases, and the costs of operating the business.

Why you are writing it
Business plans can be written for a number of reasons, from making sure that the business partners have a clear and mutual vision of the business, to a tool for developing a new strategy. Therefore, in the statement of purpose, you declare the purpose of the plan. Perhaps it is “to seek $150,000 in funding from a Small Business Administration bank loan” or “to create a strategic plan to expand into a larger store location”. Some of the common reasons why people write business plans are:

* To obtain sources of funding, whether it’s a business loan or equity investment
* To help the entrepreneur and management team focus or explore a new idea
* To communicate the entrepreneur’s vision of the company to the entire company
* To sell your company to customers, suppliers and investors

The statement of purpose reminds you why you are writing the plan, which helps you determine what information to keep and exclude in the business plan.

For example, Adriana was interested in opening a hair salon after working several years as a hair stylist. She was in the fortuitous position of having friends and family who wanted to give her money to realize her dreams to start the salon. Although her investors did not require a business plan, she wanted to create one. Adriana felt that writing a business plan would help make sure that everyone investing in the business clearly understood how she would operate the business and decrease the likelihood of the investors having false expectations.

Adriana also wanted to have a clear sense of how much sales she would need to sustain and then grow the business. Having spent most of her time focusing on creating good customer service and staying current in the latest styling trends, she knew that she didn’t feel really strong with figuring out the money side of the business.

The resulting business plan reflected Adriana’s reasons for writing the plan. She viewed writing the business plan as an opportunity to flush out her concept as well as improve her business skills. Once the business was up and running, she knew that she would find it hard to find the time to learn basic accounting. Therefore, she really took the time to learn how to do a detailed sales projection and financial assumptions.

When it came to the management section of the business plan, Adriana chose not to go into much detail regarding her background and only briefly mentioned her previous experience. She did not need to demonstrate her expertise as a hair stylist: the investors had already observed her work. Adriana did, however, want to draw attention to her skills at growing and maintaining a steady clientele. Included in the appendix was a client chart that listed all of Adriana’s current clients, the average price tag of each customer’s visit and the frequency in which they used her service. She thought that when she had moments of self-doubt, she would find it comforting and confidence boosting to have a list of her business accomplishments thus far.

Adriana also used most of the section to describe her responsibilities in the new business. This allowed her to think through what her job description would be. Given her situation and purpose of the plan, writing a management section with extensive information on Adriana’s experience might not have been the best use of her time and energy.

Keep in Mind Your Audience
Knowing the purpose of the plan is important because then you also have a better idea of who might be the reader. In Adriana’s case, she knew exactly who would be reading the plan and tailored the document accordingly.

A reader who is a bank officer or venture capitalist will need to have certain information in order to decide whether or not to provide funding. For example, if you are writing a business plan for a bank loan, you are writing for a lender who wants to make sure that your business is strong enough to pay back a loan on time in each month. When in doubt about your plan, always ask yourself, “If I put myself in my reader’s shoes, is this answering the question that I have. Is it easy to understand and find in the business plan?”

How can you find out the information that the reader is seeking? If you’re going to a bank, most banks have helpful information on the small business sections on their websites. Another source of information is the Small Business Administration’s website (www.sba.gov). You can also look at books on business plans at your local library. Another thing is to do it the old fashioned way and just ask!

So what do I write?
The statement of purpose itself should be brief, often ranging from one to four sentences. It can be as simple as “MY COMPANY seeks a $150,000 Small Business Administration bank loan in order to grow the business into a profitable enterprise. The owners have invested $100,000 of equity to start the consulting business.”

In this case, you are laying on the table what you want as well as what you are bringing to the deal. After giving some thought and time to the purpose of the business plan, you will move on the business description section of the plan. More on this will soon follow. Happy writing!