Business Plan Checklist

Essential Initial Research

Societal Level

• Apply a PESTEL analysis to learn about the overall factors that might affect your business concept

Industry Level

• Apply a Porter's (1985) Five Forces Model analysis to examine the particular industry in which you intend to operate

Market Level

• Apply a market-level analysis by answering a set of questions about the particular market within your chosen industry in which your business will reside

Firm Level

• Apply a SWOT analysis / TOWS Matrix to formulate and evaluate potential strategies
• Apply a VRIO framework analysis to analyze a firm's strategy
• Analyse founder fit with venture idea
  
• Financial attractiveness: compare estimates for proposed venture to what is known about similar firms in the particular industry and market in which the venture will operate
• Financial attractiveness: analyse the firm's projected margins (if possible)
• Financial attractiveness: do a break-even analysis (if possible)
• Financial attractiveness: do a pro-forma analysis (if possible – requires pro-forma financial statements)
• Financial attractiveness: do a sensitivity analysis (if possible)
• Financial attractiveness: do return on investment (ROI) projections (if possible)
• Financial attractiveness: determine the projected operating capacity of the venture and at how much of that capacity the firm will operate at certain time intervals until it reaches full capacity (if possible)
• Financial attractiveness: if possible and relevant, estimate the share of the market that the venture might capture and when it might reach various levels of market share. Note that the previous checklist item (projected operating capacity) is often a more relevant concern than market share.

The Business Model

• Use the Business Model Canvas or a similar tool to describe and analyse the proposed venture's business model

Initial Business Plan Draft Create Your Template

• Prepare a template by using the business plan outline to create headings Word from which to later automatically generate a table of contents

Insert Work From Essential Initial Research and the Business Model Into the Business Plan Draft

You must decide between two separate ways to include the results from your societal, industry, market, and firm-level analyses in your business plan. The best choice is usually to disburse the relevant parts of those analyses throughout the entire plan to support the decisions and strategies outlined in the plan. An alternative choice is to include the results from all or some of the relevant parts of those analyses as their own sections in the business plan. The reason why the first option tends to strengthen the business plan more than the second is because it explicitly ties your analyses to the decisions influenced by those analyses.

• Integrate the relevant and important results from your societal, industry, market, and firm-level analyses into your plan, either as distinct sections of the plan or embedded into the other sections to support the decisions and strategies outlined in the plan
• Ensure that all analyses are fully and properly referenced in the business plan to establish and ensure your credibility as an entrepreneur, your plan's credibility and to meet ethical requirements to cite the sources for the information used

During the second stage of business plan development, you developed your business model. As there is no separate section in a business plan in which to specifically describe a business model, you need to incorporate your business model elements into the plan wherever they fit best. It will usually be fairly self-evident where the business model elements fit into a business plan. The important thing is to ensure that all of the elements of your business model are reflected in your business plan.

• Include each element of your business model in the appropriate parts of your business plan

Fill in All of the Sections of the Business Plan Draft

Draft Introduction

• Write a brief description of your business concept
• Write a brief description of the purpose for your business idea
• Write a brief history and description of the evolution of the business concept
• Write a vision
  
• Write a mission
• Write a values statements
  
• Write a first draft set of goals
• Avoid harming your plan's credibility by failing to indicate the sources for all of the information you include in your introduction. Whenever you make an assumption that you should later replace with a factual or expertly-based statement or number, flag the assumption by using a distinct colour font.

Draft Operations Plan

• Write an operations plan
• Ensure that all numbers included in the operations plan are a) sourced so a reader knows from where it came, or b) explained so they know how it was calculated, or c) flagged as being an estimate that will be replaced with a true number with a source
• Avoid harming your plan's credibility by failing to indicate the sources for all of the information you include in your operations plan. Whenever you make an assumption that you should later replace with a factual or expertly-based statement or number, flag the assumption by using a distinct colour font.

Draft Human Resources Plan

• Write a human resources plan
• Ensure that you show how you will earn a living while starting the business
• Ensure that all numbers included in the human resources plan are a) sourced, or b) explained, or c) flagged as being an estimate that will be replaced with a true number with a source
• Avoid harming your plan's credibility by failing to indicate the sources for all of the information you include in your human resources plan. Whenever you make an assumption that you should later replace with a factual or expertly-based statement or number, flag the assumption by using a distinct colour font.

Draft Marketing Plan

• Write a marketing plan
• Ensure that all numbers included in the marketing plan are a) sourced, or b) explained, or c) flagged as being an estimate that will be replaced with a true number with a source.
• Avoid harming your plan's credibility by failing to indicate the sources for all of the information you include in your marketing plan. Whenever you make an assumption that you should later replace with a factual or expertly-based statement or number, flag the assumption by using a distinct colour font.

Draft Financial Plan

• Plan how you will back up every number through one or both of the following:
• Explanations in the body of your plan, maybe along with your schedules, or
• Notes included with your financial statements
• Only insert a number for a particular item once (and flag this cell somehow – maybe by using a color to highlight it so you know which numbers are input directly and which appear by formula)
• Whenever a number is required more than once, ensure it is transfers forward by formula only
• Prepare all of the following schedules that you will need to feed numbers into your projected cash flow statements:
• Sales schedule, if you will sell more than one product
  
• Project schedule, if you will manage projects
• Cash from sales schedule, cash from receivables schedule, and accounts receivable schedule, if you will have accounts receivable
• Cash purchase schedule, credit purchase schedule, and accounts payable schedule, if you will have accounts payable
• Credit card collections schedule, if you will need to calculate your costs for accepting credit card payments from customers (you can normally consider credit card payments as cash payments in your cash flow statement)
• Inventory schedules, if you will have ending inventories
  
• Start-up cost schedule, if you will have start-up costs
• Capital cost allowance schedule or depreciation schedule, if you will purchase and sell capital equipment on which you will need to calculate depreciation
• Payroll schedule, if you will have payroll expenses
• Operating loan schedule, if you will need an operating loan
  
• Term loan schedule, if you will need a term loan, especially if you may make extra payments toward it before the term expires
• Promotions schedule, if you expect to use several promotional methods
  
• Prepayment schedule, if you expect to prepay insurance and similar expenses
• Other schedules that are needed
  
• Prepare projected cash flow statements
• Input the numbers from your schedules by formula into the projected cash flow statements. You might also discover the need to develop a schedule after you have first tried inputting the numbers directly into the projected cash flow statements.
• Very few numbers in your projected financial statements should be input directly – and each directly inputted number should be flagged using cell shading or another means so it is easier to fix any errors in the statements.
• Ensure that the written part and the financial part tell exactly the same story using the exact same numbers and sources.
• Note that that you will almost certainly have to estimate some numbers while preparing the projected cash flows. Immediately upon estimating the numbers, go to the written part of your plan and include them there.
• Prepare your projected income statements by formula only
• Calculate your taxes owing and feed these back into your projected cash flow statement.
• Calculate your retained earnings.
  
• Prepare your projected balance sheets by formula only
  
• Correct your statements until your balance sheet balances
• Avoid harming your plan's credibility by failing to indicate the sources for all of the information you include in your financial plan. Whenever you make an assumption that you should later replace with a factual or expertly-based statement or number, flag the assumption by using a distinct colour font.

Making the Business Plan Realistic

At to this stage, your projected financial statements in your draft business plan are almost guaranteed to be unrealistic and undesirable. Your projected cash balances and profit levels will be unrealistic, either too high or too low. The original amounts you had planned to invest in your business or to acquire through investors will probably be inadequate. In general, your draft plan will have many weak areas and many holes to fill, but it should provide you with a great foundation upon which to build a realistic and desirable business plan.

The purpose of Making the Business Plan Realistic is to make your business realistic. You do this by adjusting your proposed business model and your plans and strategies as presented in both the written part of your plan and in the financial part.

• Replace as many of the assumptions (those items flagged with a distinct coloured font) as possible with factual and expert information and numbers while always indicating the sources for the new information and numbers.
  
• Review and revise the sales projections to make them more realistic by comparing the projections to industry norms and available comparative data with similar companies. Review and revise as necessary both the sales projections model used and the assumptions fed into the model to generate the monthly sales figures.
  
• Decide what the appropriate range of end-of-month cash balances is for your type of business.
  
• It is not possible to have a negative cash balance at the end of a month. Eliminate any negative end of month cash balances by taking steps to turn each of these into positive numbers, that fall within your target range, by adjusting one or more of the following:
  
• Planned loan amounts (operating and/or term loan amounts)
  
• Planned owner investment amounts (or draws from built up investment accounts)
  
• Planned amounts in schedules (increase prices, increase sales amounts, decrease expenses)
  
• It is also inappropriate to have an excessive cash balance at the end of a month because this would indicate poor cash management practices. Eliminate any excessive end of month cash balances by taking steps to reduce each of these numbers, so they fall within your target range, by doing one or more of the following:
  
• Use the excess money to generate more profits (expand your business, purchase an asset you need, etc.)
  
• Use the excess money to pay down operating loans (and possibly term loans)
• Invest the excess money in financial investments
  
• Distribute some of the cash as dividends or owner draws
  
• Adjust planned amounts in schedules (decrease prices, decrease sales amounts, increase expenses)
  
• Simultaneously adjust your goals, strategies, and plans in the written and financial projection parts of your plan for the purpose of making your projected financial statements realistic:
  
• Analyze your projected financial statements and develop plans to correct the elements that are unrealistic and undesirable. For example, if your planned start-up financing is too high to be realistic, you might choose to down-scale some elements for start-up. For example, on the expense side, you might plan to start with a smaller facility, fewer employees, less inventory, and different advertising methods. On the revenue side, you might project lower sales because of your smaller facility, fewer employees, and so on. You might also plan to finance some of your expansion through retained earnings rather than by taking out a large initial loan or by giving up a higher amount of ownership to an investor.
  
• Continually adjust the written and financial sections of your draft plan to reflect your new goals, strategies, and plans. This will be an iterative process since everything is connected and each change will have a ripple effect throughout your plan.
• Adjust the amounts in your schedules to reflect your planned changes (increase prices, increase sales amounts, decrease expenses)
  
• Use a series of ratio analyses as you incorporate your new goals, strategies, and plans.
  
• Continually compare your ratios to industry average ratios.
  
• Continually compare your ratios to what is expected and desirable for a business like yours.
  
• Continually adjust the written and the financial parts of your plan until your ratios are desirable and realistic relative to industry standards.

Making the Business Plan Appeal to Stakeholders and Desirable to the Entrepreneur

You should now have a second full draft of your business plan. It should be much more realistic than your first draft, but is it unlikely to be desirable to you as an owner and appealing to your potential investors. The purpose of this stage is to retain, and possibly improve the realism of your plan while making it desirable and appealing.

• Determine what your medium and longer term goals are for your business as they relate to what you want to get out of it. Based on your goals and on the amount of financing you require, identify the most desired sources of financing for your venture and incorporate those into your plan to indicate how you will meet your financing needs.
  
• As you fulfill the following requirements, be certain to incorporate all of the needed elements in your business plan to attract your targeted investors and make them want to invest in your company.
• As you identify and analyze your critical success factors by completing what-if analyses on your financial spreadsheets, continue to simultaneously adjust your goals, strategies, and plans in the written and financial projection parts of your plan until (1) you are satisfied you are prepared to deal with issues that will affect your critical success factors, and (2) your projected cash flow statements, income statements, and balance sheets are realistic, consistent with healthy industry norms, and meet realistic expectations and aspirations for a healthy business.
  
• Use a copy of your spreadsheets and change some key numbers to see what happens. For example, you might discover that you are particularly vulnerable if your sales end up being less than you had expected (and/or challenged if sales end up being higher than expected). Sales levels, then, is one critical success factor.
  
• Determine what the impact would be on your business if the critical success factors are impacted in a way you had not planned on. For example, when you examine sales as a critical success factor, you might discover that if sales are 3% less than you had planned (maybe because of an economic downturn or the emergence of a new competitor), your entire profits evaporate. It might also be true that you will run into cash flow or capacity problems if your sales end up being higher than you are planning for.
• Decide whether you need to make adjustments to your goals, strategies, and plans in your business plan to reduce your vulnerability to changes to the critical success factors, or whether you can instead adjust your goals, strategies, and plans to prepare for any changes that might occur to the critical success factors. For example, you might decide to change the pricing, distribution, and promotions strategies in your business plan so that if you would still break even if your sales levels were 8% less than expected. Alternatively, instead of changing your marketing strategy in your plan, you could describe sales levels as a critical success factor and include a description of how and at what point you will implement another strategy if sales levels are not as expected, and describe what your strategy is.
  
• Decide how to present your analysis of your critical success factors.
• If appropriate for your business, you can include three sets of projected financial statements in your business plan: most likely, optimistic, and pessimistic.
  
  

Finishing the Business Plan

• Revise your goal section to make sure the goals are included that will best meet your purposes and will resonate with your target readers. Note that your goals will have changed dramatically between when you first wrote them and how they should look once the plan is completed. Although not required, it can be effective to follow each goal with a note about where in the plan your strategies are located for achieving that goal.
  
• Write your executive summary.
  
• Complete a proof read for the purpose of ensuring the written and financial parts of the plan are completely consistent
  
• Complete a proof read for the purpose of ensuring there are no spelling, grammar, formatting, calculation, or other errors in your plan. If required, have a skilled proof reader complete this task for you or with you.
  
• Write a letter of transmittal to later customize for the targeted readers to whom you will give your plan.
  

Prepare to Pitch and Present Your Business Plan

• Prepare and practice your pitch. Be clear on why you are pitching your plan and customize it to meet those goals.
• Prepare a presentation using a tool like PowerPoint to use if you are asked to more formally present your plan.
  
• Make sure to always have business cards with you to give to those who express an interest in your business and who you want to connect with later.

Source: Lee Swanson, https://mountainscholar.org/bitstream/handle/20.500.11785/572/BookId-495-BusinessPlanDevelopmentGuide.pdf?sequence=1&isAllowed=y
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