The Business Entity

April 13, 2006

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The business entity portion of the plan provides information that is specific to your business. This document sets forth the current status of operations, the management structure and organization, and the identification of key personnel. If the plan is being created for an existing business, historical information is also included. The business background provides the reader with information regarding:

the type of business (e.g., wholesale, retail, manufacturing, service, etc.)
type of legal entity (e.g., corporation, partnership, sole proprietorship, etc.)
when the business was established
where it is located
the type of facilities, if any (e.g., retail establishment, manufacturing plant, etc.), although you may need to devote a separate section to this subject if your facilities are very important to your business
the number and type of employees
the organizational structure (table of organization showing who is responsible for what)
operational information, such as a schedule of the hours the business is open
identity of key employees, including a description of their abilities that make them vital to the success of the business. You may decide to devote a separate section to employees, if you think they are key to your success.

The information provided should go beyond a simple statement of facts. For example, if you chose to incorporate rather than to operate as a sole proprietor, what factors influenced your decision? Explaining why a particular decision was made goes a long way in helping the reader understand your decision-making process.

Don't forget yourself when you think about key employees, particularly if you're starting a new business. You need to present your educational background and prior business experience in a way that establishes your ability to succeed. While you probably won't include a copy of your resume, much of the information that appears on your resume will appear in the plan. Don't be afraid to present yourself in the most favorable light that you can honestly and objectively portray.

The business background is also the place to identify the goals and objectives of the business by explaining in general terms what business you are in or want to be in. How is it unique and why will your goods or services appeal to customers? This requires consideration of competitors who are appealing to the same customers. Why will customers prefer your business to theirs?

Note that startup businesses face a special challenge when drafting the business background. In the absence of an existing business, the background will be couched in terms of what the business will do, not what it has done. This makes it even more important to have a clear picture in mind of how your business will look and operate once it's up and running. When you have a track record, it's easy to point at the results you've achieved as an indication of your potential for success. Without any history, you'll have to work a little harder to make sure that you've developed, and presented, a realistic idea of what it will take to make your business work.