The Basics on How to Develop a Business Plan: NCCED – Page 1
THE BASICS ON HOW TO DEVELOP A BUSINESS PLAN
Whether your company is organized as a sole proprietorship small business, corporation or nonprofit, a
wellwritten business plan is considered your most important roadmap to success. The document may
vary in length, but should be comprehensive and include a specific timeline: at least six months of
detailed strategy, a year or two of general planning, and a vision about where the business is headed for
the next five years.
A business plan has to answer some critical questions about the new business venture.
Is this a viable business idea?
Is there a market for this product or service?
§ What will it take to produce and deliver the product or service (materials, resources, personnel)
§ Who will buy it, how much, how often and how will your potential customers find out about
§ Who and where is your competition?
§ Your cash flow projections should cover both the startup phase of your business and ongoing
operations. How much will it take to open the doors?
§ And, what will it take to cover direct costs, overhead and expenses, and still clear a ‘profit?’
A startup business or organization begins to incur costs (licenses, fees, permits, leases, telephones,
computers, etc) long before it starts to generate any income. Most likely, money will be going out
faster than it is coming in. This negative cash flow will continue until your business or organization is
generating enough revenue to equal the amount of money going out the door. This is the business’
cash breakeven point. You, the business owner, must have some way of financing the negative cash
flow of your business until you reach that cash breakeven point. If you project that your business will
have an accumulated negative cash flow of $50,000 before you reach your cash breakeven point, then
you need to determine how you will get the $50,000 you’ll need before you start the business.
Most banks a