How to Write a Five-Year Business Plan

A five-year business plan can be written for a number of purposes. A general plan looks at the entire business holistically and projects it into the future, while a more targeted plan might be used by individual departments to develop strategies. Regardless of purpose, business plans share similar best practices guidelines -- identify your business goals, provide background of your business and what it does and describe financial projections that show your business is sustainable. Make sure the plan meets the needs of its target audience.

Look ahead five years and envision what your business will look like. This strategic vision will determine much of what follows, because your plan basically states how you'll get from your current state to that end goal. As you write the rest of the business plan, keep the distance between your business today and your desired future in mind, and be prepared to show the step-by-step path that will take your business there. On some level, everything in your plan will let the audience know how your business will make that leap in a way that makes it seem like a foregone conclusion and not just a fantasy.

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It's helpful to think of this as five one-year snapshots. Before you start constructing the plan, write down how you expect your business to look in each of the next five years, and what will have to happen for it to take each step along the path. This will help you present a cohesive path forward, rather than simply providing a stretch goal with not enough detail to back it up.

Start your five-year plan by introducing what it hopes to accomplish and how it will do so. For a larger business or organization, this may take the form of a letter to stakeholders. An introductory section then can be used to describe the business in letter to stakeholders -- what it does, who it serves and what it values. Detail your management team and organizational structure.

You'll also need to describe what you're selling, who your target market is and how you'll market to that audience. Discuss how that market will change over time. For example, you may plan on only marketing locally in your first couple of years to prove that your concept works on a small scale and iron out any problems. By year three, you may plan to build on that with a regional or national campaign, and by year five you'll be selling overseas. Your five-year plan should make that growth plan clear.

Include a market analysis that takes into account both the current and projected future state of your industry. If you're aware of any challenges your company faces, or that the industry or marketplace holds, state these as risks and note how your product and strategy mitigate them effectively.

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Clearly define what your business does and what makes it unique. The Small Business Administration recommends that you divide your products and services into a recognized market niche, and then detail how your wares service that niche. This lets readers know you have a strong vision for the company.

If part of the purpose of your five-year business plan is to solicit funding, be specific in saying what you want. Note both your current needs and what you're projecting you'll require over the next five years -- both from the investor you're pitching and a total amount. State how the funds will used -- for example, a capital improvement or expansion overseas -- and how you want to structure the arrangement as a funding source. For example, you might announce the intent to grant equity in the company, issue bonds, or go public and have your stock traded in the marketplace..

Financial projections are critical, particularly for companies that hope to use the plan to solicit funds from investors. Often the process is as important as the results -- nobody expects you to have a crystal ball and get the numbers correct down to the penny, but the information you've stated up to this point should make sense with the prose detailed earlier, as well as the historical data. Among the information the readers will be expecting includes:

• Income statements, balance sheets and cash flow statements for the previous 3 to 5 years
  
• Forecasted income statements for each of the next five years
• Forecasted balance sheets for each of the next five years
• Cash flow statements for each of the next five years
• Capital expenditure budgets for each of the next five years
• Ratio and trend analysis that track both historical and projected numbers over time.

Make sure your data matches your funding requests, and summarize how you came up with the information, particularly regarding the projections that shows growth over time. Note any assumptions you've made, such as the growth rate of the local economy or the benefits gained from bringing on new staff. You might, for example, have slow growth for two years if you plan opening a new storefront, based on the costs of opening the facility, but expanded growth after that because of the revenue.

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Graphs and charts help make your financial records stand out, and are easy to understand for readers. Include these in your five-year business plan.

When you're done coming up with the details of your plan, write the executive summary. This goes at the front of the business plan and gives the reader insight into what the rest of the document will tell them. This can be accomplished in a plan summary as well, useful for larger, more complex companies, or businesses going through a transitional period.