As mentioned in the previous post about small business management, writing a formal business plan is very essential to the planning process of a business. A business plan will cover all your master plans about how you want to achieve the things that you want to achieve. Take your time in writing a business plan, don’t rush it. Think thoroughly and from every possible angle when designing an operating plan so that you save valuable time later. Having a solid business plan is also needed if you want to have an independent investor to invest on your business. A good business plan takes about 6 months to write and can contain 25-50 pages. The methods and tips of writing a formal business plan are given below:

Cover Letter
Only one thing is certain when you go for hunting money to start a business. That is you will not be only one hunter out there. You will need to make potential investors want to read your business plan instead of hundreds of others on their desk. Your cover later is supposed to be an interesting and intelligent one so that it captures the attention of the investor. Don’t start the letter with “To whom it may concern” or “Dear Sir”. Try not to be gender biased in the salutation. If you know the name, you can use it to address the investor.

Executive Summary
Begin with two or three page management summary of the proposed venture. It includes a short description of the business and discusses the major goals and objectives.

Company Background
This section will include company operations to date (if any), potential legal considerations and areas of risk and opportunities, past and current balance sheets, income statements, cash flow statements and other relevant financial records. It is wise to include an insurance coverage. Investors want to be assured that death or any mishaps will not pose major threat to the company.

Management Team
This section includes an organization chart, job descriptions of listed persons and detailed resumes of current and proposed executives.

Financial Plan
Provide five year projections for income, expenses and funding sources. This will project your financial plans for the business. Don’t assume the business will grow in a straight line. Adjust your planning to allow for funding at various stages of company growth.

Capital Required
Write how much capital you would need initially to start your business. Include spending per sector to project a clear work plan.

Marketing Plan
Never underestimate the competition. Mention detailed procedures about how you see yourself among all other competitors, how you want to position yourself and how you would capture the attention of your target market. Don’t forget to include which market segment you are aiming for.

Location Analysis
Depending on your business, location analysis can play a vital role. If you are planning to run a retail organization, location analysis is a must. Is you location suitable for your business niche?

Manufacturing Plant
If applicable, describe the minimum plan size, machinery and other related things required.

Appendix
Include all marketing research on the product or service and other information about the product concept or market size. Provide a bibliography for all the reference materials used inside the business plan’s body.

So, these are the basic sections of a formal business plan. Make sure you mention all the necessary parts in the report. This will not only help you to get potential investors’ attention, but also help you to in the long run. If you enjoyed this daily dose of work relief, make sure to subscribe to the Workdose Daily Dose Email and/or RSS feed. And did we tell you how much we love it when you give us props via Twitter and Facebook?