First, here is what a standard business plan should cover:
- The company (its legal formation, history, and ownership)
- What it sells (the product or service)
- The market (including size of market, growth, and trends)
- The plan (sales forecast, sales and marketing strategy, milestones, assumptions, and tasks)
- The management team (organizational structure and managers’ backgrounds)
- Financial analysis (cash flow, profitability, balance, and returns)
The most important part of the plan is where it says specifically what is going to happen. The core of a business plan is the collection of detailed dates, deadlines, responsibilities, and commitments. I call it these the milestones, and I’ve also seen it called MAT, for milestones, assumptions, and tasks. Ironically, this kind of detail is frequently left out of business plans that are full of big ideas and strategy. What you want from a plan is results, and the way to get results is to build specifics you can track.
The cash flow statement is the second-most important item. Plan cash flow by month for the first 12 months of your plan. “Cash” in this context means money in the bank, not coins and bills; it is critical to business.
There are two good reasons for stressing cash flow. First, businesses live or die with cash — not profits. Second, cash makes much more sense in a plan, laid out month by month, than in your head. Putting it down on paper will help you understand your cash flow projections and any problems will become immediately apparent.
Complete financials include, at the very least, projections for profit, cash, and balance sheet, which should be in monthly detail for the first 12 months in a plan and then annually for the following two to four years. A three-year plan is enough for most businesses, although some investors want to see projections for five years.