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Parts of a Business Plan
Whether you are starting a pizza shop or a plumbing business, a flower shop or a factory, you need a solid plan. In fact, your Business Plan will be an essential tool throughout the life of your business – from starting out to cashing in. It will help you to start out on the right foot, stay focused, get financing, manage your growth, and more.
Not every Business Plan will be the exactly same, but every Plan should incorporate several key elements.
The Parts of the Plan
Here are the key pieces to a solid Business Plan.
- The title, or heading, of the plan, and very brief description of the business.
- The name of the owner
- The company name and location
- A copyright or confidentiality notice
Table of Contents
- A list of the individual sections and their page numbers, starting with the Title Page and ending with a section for Special Materials (references, etc.).
- A brief, but focused statement (a few sentences or paragraphs) stating why the business will be successful. This is the most important piece of a Business Plan because it brings everything together.
- Identifies specific knowledge about the business and its industry, and the market (or customers) it serves.
- An analysis that identifies and assesses the competition.
Description of the Company
- Information about the nature of the business and the factors that should make it successful .
- Special business skills and talents that provide the business with a competitive advantage, such as a unique ability to satisfy specific customer needs, special methods of delivering a product or service, and so on.
Organization & Management
- The company’s organizational and legal structure, Is it a sole proprietorship? A partnership? A corporation? (See: “ Ownership Structures “)
- Profiles of the ownership and management team: What is their background, experience and responsibilities?
Marketing & Sales
- The company’s process of identifying and creating a customer base. (See: “ Market Research “)
Description of Product or Service
- How they will benefit from the product or service?
- Specific needs or problems that the business can satisfy or solve, focusing especially on areas where the business has the strongest skills or advantages.
- The amount of current and future funding needed to start or expand the business. Includes the time period that each amount will cover, the type of funding for each (i.e., equity, debt), and the proposed or requested repayment terms.
- How the funds will be used: For equipment and materials? Everyday working capital? Paying off debt?
- Explains or projects how the company is expected to perform financially over the next several years. (Sometimes called a “pro-forma projection.”) Because investors and lenders look closely at this projection as a measure of your company’s growth potential, professional input is strongly recommended.
- Credit histories (personal & business)
- Resumes of key personnel and partners
- Letters of reference
- Details of market studies
- Copies of licenses, permits, patents, leases, contracts, etc.
- A list of business consultants, attorneys, accountants, etc.
These are just the basic essentials to creating a Business Plan. Each plan should be tailored to the specific business. (See: Business Plan Assistance )
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Main Components of a Business Plan
- Executive summary This is your five-minute elevator pitch. It may include a table of contents, company background, market opportunity, management overviews, competitive advantages, and financial highlights. It’s probably easiest to write the detailed sections first and then extract the cream to create the executive summary. Try to keep it to just a couple of pages.
- Business description and structure This is where you explain why you're in business and what you're selling. If you sell products, describe your manufacturing process, availability of materials, how you handle inventory and fulfillment, and other operational details. If you provide services, describe them and their value proposition to customers. Include other details such as strategic relationships, administrative issues, intellectual property you may own, expenses, and the legal structure of your company.
- Market research and strategies Spell out your market analysis and describe your marketing strategy, including sales forecasts, deadlines and milestones, advertising, public relations and how you stack up against your competition. If you can’t produce a lot of data analysis, you can provide testimonials from existing customers.
- Management and personnel Provide bios of your company executives and managers and explain how their expertise will help you meet business goals. Investors need to evaluate risk, and often, a management team with lots of experience may lower perceived risk.
- Financial documents This is where you provide the numbers that back up everything you described in your organizational and marketing sections. Include conservative projections of your profit and loss statements, balance sheet, and your cash flow statements for the next three years. These are forward-looking projections, not your current accounting outputs.
- Local SBA Small Business Development Centers provide free consulting and low cost training for building a business plan. Find one near you.
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10 Essential Components of a Business Plan and How to Write Them
Business Plan Template
12 Min Read
A business plan is an essential document for any business, whether it’s a startup or an established enterprise. It’s the first thing any interested investor will ask for if they like your business idea and want to partner with you.
That’s why it’s important to pay attention when writing your business plan and the components inside it. An incomplete business plan can give the impression that you’re unqualified—discouraging investors and lenders.
A good business plan reduces ambiguity and communicates all essential details such as your financials, market analysis, competitive analysis, and a timeline for implementation of the plan. In this article, we’ll discuss the 10 important business plan components.
10 Important Business Plan Components
A comprehensive and well-thought-out business plan acts as a roadmap that guides you in making sound decisions and taking the right actions at the right times. Here are its key components and what to include in them.
1. Executive summary
The executive summary is one of the most important parts of a business plan. It’s the first thing potential investors will read and should therefore provide a clear overview of your business and its goals.
In other words, it helps the reader get a better idea of what to expect from your company. So, when writing an executive summary of your business, don’t forget to mention your mission and vision statement.
A mission statement is a brief statement that outlines your objectives and what you want to achieve. It acts as a guiding principle that informs decisions and provides a clear direction for the organization to follow.
For instance, Google’s mission is to “organize the world’s information and make it universally accessible and useful.” It’s short, inspiring, and immediately communicates what the company does.
A mission statement should be realistic, and hint towards a goal that is achievable in a reasonable amount of time with the resources you currently have or are going to acquire in the near future.
While a mission statement is more actionable and has an immediate effect on the daily activities of the company, a vision statement is more aspirational and has a much broader scope.
In other words, it highlights where the company aims to go in the future and the positive change it hopes to make in the world within its lifetime.
2. Company description
The second component of your business plan is the company description. Here, you provide a brief overview of your company, its products or services, and its history. You can also add any notable achievements if they are significant enough for an investor to know.
A company overview offers a quick bird’s-eye view of things such as your business model, operational capabilities, financials, business philosophy, size of the team, code of conduct, and short-term and long-term objectives.
Products and services
The products and services part of your company description explains what your business offers to its customers, how it’s delivered, and the costs involved in acquiring new customers and executing a sale.
Company history is the timeline of events that took place in your business from its origin to the present day. It includes a brief profile of the founder(s) and their background, the date the company was founded, any notable achievements and milestones, and other similar facts and details.
If you’re a startup, you’ll probably not have much of a history to write about. In that case, you can share stories of the challenges your startup faced during its inception and how your team overcame them.
3. Market analysis
The market analysis section of your business plan provides an in-depth analysis of the industry, target market, and competition. It should underline the risks and opportunities associated with your industry, and also comment on the attributes of your target customer.
Demographics and segmentation
Understanding the demographics of your customers plays a big role in how well you’re able to identify their traits and serve them.
By diving your target audience into smaller and more manageable groups, you can tailor your services and products to better meet their needs.
You can use demographics such as age, gender, income, location, ethnicity, and education level to better understand the preferences and behaviors of each segment, and use that data to create more effective marketing strategies.
Target market and size
Understanding your target market lies at the core of all your marketing endeavors. After all, if you don’t have a clear idea of who you’re serving, you won’t be able to serve well no matter how big your budget is.
For instance, Starbucks’ primary target market includes working professionals and office workers. The company has positioned itself such that many of its customers start their day with its coffee.
Estimating the market size helps you know how much scope there is to scale your business in the future. In other words, you’re trying to determine how much potential revenue exists in this market and if it’s worth the investment.
The next step is to figure out the market need, i.e., the prevalent pain points that people in that market experience. The easiest way to find these pain points is to read the negative reviews people leave on Amazon for products that are similar to yours.
The better your product solves those pain points, the better your chances of capturing that market. In addition, since your product is solving a problem that your rivals can’t, you can also charge a premium price.
To better identify the needs of your target customers, it helps to take into account things such as local cultural values, industry trends, buying habits, tastes and preferences, price elasticity, and more.
4. Product Summary
The product summary section of your business plan goes into detail about the features and benefits that your products and services offer, and how they differ from your competitors. It also outlines the manufacturing process, pricing, cost of production, inventory, packaging, and capital requirements.
5. Competitive analysis
Unless you’ve discovered an untapped market, you’re probably going to face serious competition and it’s only going to increase as you scale your business later down the line.
This is where the competitive analysis section helps; it gives an overview of the competitive landscape, introduces your immediate rivals, and highlights the current dominant companies and their market share.
In such an environment, it helps to have certain competitive advantages against your rivals so you can stand out in the market. Simply put, a competitive advantage is the additional value you can provide to your customers that your rivals can’t—perhaps via unique product features, excellent customer service, or more.
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6. Marketing and sales plan
The marketing and sales plan is one of the most important business plan components. It explains how you plan to penetrate the market, position your brand in the minds of the buyers, build brand loyalty, increase sales, and remain competitive in an ever-changing business environment.
Unique selling proposition
A unique selling proposition (USP) conveys how your products and services differ from those of your competitors, and the added value those differences provide.
A strong USP will stand out in a competitive market and make potential customers more likely to switch to your brand—essentially capturing the market share of your rivals.
Your product might be unique, but if people don’t even know that it exists, it won’t sell. That’s where marketing comes in.
A marketing plan outlines strategies for reaching your target market and achieving sales goals. It also outlines the budget required for advertising and promotion.
You may also include data on the target market, target demographics, objectives, strategies, a timeline, budget, and the metrics considered for evaluating success.
Sales and distribution plan
Once people are made aware of your product, the next step is to ensure it actually reaches them. This means having a competent sales and distribution plan and a strong supply chain.
Lay out strategies for reaching potential customers, such as online marketing, lead generation, retail distribution channels, or direct sales.
Your goal here is to minimize sales costs and address the risks involved with the distribution of your product. If you’re selling ice cream, for example, you would have to account for the costs of refrigeration and cold storage.
Pricing is a very sensitive yet important part of any business. When creating a pricing strategy , you need to consider factors such as market demand, cost of production, competitor prices, disposable income of target customers, and profitability goals.
Some businesses have a small profit margin but sell large volumes of their product, while others sell fewer units but with a massive markup. You will have to decide for yourself which approach you want to follow.
Before setting your marketing plans into action, you need a budget for them. This means writing down how much money you’ll need, how it will be used, and the potential return you are estimating on this investment.
A budget should be flexible, meaning that it should be open to changes as the market shifts and customer behavior evolves. The goal here is to make sure that the company is making the best use of its resources by minimizing the wastage of funds.
7. Operations plan
The operations plan section of your business plan provides an overview of how the business is run and its day-to-day operations. This section is especially important for manufacturing businesses.
It includes a description of your business structure, the roles and responsibilities of each team member, the resources needed, and the procedures you will use to ensure the smooth functioning of your business. The goal here is to maximize output whilst minimizing the wastage of raw material or human labor.
8. Management team
At the core of any successful business lies a dedicated, qualified, and experienced management team overlooking key business activities.
This section provides an overview of the key members of your management team including their credentials, professional background, role and responsibilities, experience, and qualifications.
A lot of investors give special attention to this section as it helps them ascertain the competence and work ethic of the members involved.
An organizational structure defines the roles, responsibilities, decision-making processes, and authority of each individual or department in an organization.
Having a clear organizational structure improves communication, increases efficiency, promotes collaboration, and makes it easier to delegate tasks. Startups usually have a flatter organizational hierarchy whereas established businesses have a more traditional structure of power and authority.
9. Financial Plan
Financials are usually the least fun thing to talk about, but they are important nonetheless as they provide an overview of your current financial position, capital requirements, projections, and plans for repayment of any loans.
Your financial plan should also include an analysis of your startup costs, operating costs, administration costs, and sources of revenue.
Once an investor has read through your business plan, it’s time to request funding. Investors will want to see an accurate and detailed breakdown of the funds required, and an explanation of why the requested funds are necessary for the operation and expansion of your business.
The appendix is the last section of your business plan and it includes additional supporting documents such as resumes of key team members, market research documents, financial statements, and legal documents.
In other words, anything important or relevant that couldn’t fit in any of the former sections of your business plan goes in the appendix.
Write a Business Plan Worth Reading
Starting a business is never easy, but it’s a little less overwhelming if you have a well-made business plan. It helps you better navigate the industry, reduce risk, stay competitive, and make the best use of your time and money.
Remember, since every business is unique, every business plan is unique too and must be regularly updated to keep up with changing industry trends. Also, it’s very likely that interested investors will give you feedback, so make sure to implement their recommendations as well.
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What Is a Business Plan?
Understanding business plans, how to write a business plan, common elements of a business plan, how often should a business plan be updated, the bottom line, business plan: what it is, what's included, and how to write one.
Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.
A business plan is a document that details a company's goals and how it intends to achieve them. Business plans can be of benefit to both startups and well-established companies. For startups, a business plan can be essential for winning over potential lenders and investors. Established businesses can find one useful for staying on track and not losing sight of their goals. This article explains what an effective business plan needs to include and how to write one.
- A business plan is a document describing a company's business activities and how it plans to achieve its goals.
- Startup companies use business plans to get off the ground and attract outside investors.
- For established companies, a business plan can help keep the executive team focused on and working toward the company's short- and long-term objectives.
- There is no single format that a business plan must follow, but there are certain key elements that most companies will want to include.
Investopedia / Ryan Oakley
Any new business should have a business plan in place prior to beginning operations. In fact, banks and venture capital firms often want to see a business plan before they'll consider making a loan or providing capital to new businesses.
Even if a business isn't looking to raise additional money, a business plan can help it focus on its goals. A 2017 Harvard Business Review article reported that, "Entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical nonplanning entrepreneurs."
Ideally, a business plan should be reviewed and updated periodically to reflect any goals that have been achieved or that may have changed. An established business that has decided to move in a new direction might create an entirely new business plan for itself.
There are numerous benefits to creating (and sticking to) a well-conceived business plan. These include being able to think through ideas before investing too much money in them and highlighting any potential obstacles to success. A company might also share its business plan with trusted outsiders to get their objective feedback. In addition, a business plan can help keep a company's executive team on the same page about strategic action items and priorities.
Business plans, even among competitors in the same industry, are rarely identical. However, they often have some of the same basic elements, as we describe below.
While it's a good idea to provide as much detail as necessary, it's also important that a business plan be concise enough to hold a reader's attention to the end.
While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.
Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.
The length of a business plan can vary greatly from business to business. Regardless, it's best to fit the basic information into a 15- to 25-page document. Other crucial elements that take up a lot of space—such as applications for patents—can be referenced in the main document and attached as appendices.
These are some of the most common elements in many business plans:
- Executive summary: This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
- Products and services: Here, the company should describe the products and services it offers or plans to introduce. That might include details on pricing, product lifespan, and unique benefits to the consumer. Other factors that could go into this section include production and manufacturing processes, any relevant patents the company may have, as well as proprietary technology . Information about research and development (R&D) can also be included here.
- Market analysis: A company needs to have a good handle on the current state of its industry and the existing competition. This section should explain where the company fits in, what types of customers it plans to target, and how easy or difficult it may be to take market share from incumbents.
- Marketing strategy: This section can describe how the company plans to attract and keep customers, including any anticipated advertising and marketing campaigns. It should also describe the distribution channel or channels it will use to get its products or services to consumers.
- Financial plans and projections: Established businesses can include financial statements, balance sheets, and other relevant financial information. New businesses can provide financial targets and estimates for the first few years. Your plan might also include any funding requests you're making.
The best business plans aren't generic ones created from easily accessed templates. A company should aim to entice readers with a plan that demonstrates its uniqueness and potential for success.
2 Types of Business Plans
Business plans can take many forms, but they are sometimes divided into two basic categories: traditional and lean startup. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.
- Traditional business plans : These plans tend to be much longer than lean startup plans and contain considerably more detail. As a result they require more work on the part of the business, but they can also be more persuasive (and reassuring) to potential investors.
- Lean startup business plans : These use an abbreviated structure that highlights key elements. These business plans are short—as short as one page—and provide only the most basic detail. If a company wants to use this kind of plan, it should be prepared to provide more detail if an investor or a lender requests it.
Why Do Business Plans Fail?
A business plan is not a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections to begin with. Markets and the overall economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All of this calls for building some flexibility into your plan, so you can pivot to a new course if needed.
How frequently a business plan needs to be revised will depend on the nature of the business. A well-established business might want to review its plan once a year and make changes if necessary. A new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.
What Does a Lean Startup Business Plan Include?
The lean startup business plan is an option when a company prefers to give a quick explanation of its business. For example, a brand-new company may feel that it doesn't have a lot of information to provide yet.
Sections can include: a value proposition ; the company's major activities and advantages; resources such as staff, intellectual property, and capital; a list of partnerships; customer segments; and revenue sources.
A business plan can be useful to companies of all kinds. But as a company grows and the world around it changes, so too should its business plan. So don't think of your business plan as carved in granite but as a living document designed to evolve with your business.
Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."
U.S. Small Business Administration. " Write Your Business Plan ."
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Different Parts of a Business Plan
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6 Types of Business Plans
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A business plan is your chance to tell your story to potential investors and lenders. This is where you bring the vision of having your own business to life. Each section of a business plan interacts with the other sections. They must all come together, like instruments in an orchestra, to create a ballad that lures others to your dreams.
The Executive Summary
The executive summary is the first paragraph investors read. If it doesn't grab the reader's interest, it will be the last paragraph they read. In just a few sentences, describe the business concept, its products and services, the competitive advantages and why the company will be incredibly successful. This opening should intrigue readers and make them want to read more.
The Business Description
The description fills in the details outlined in your summary. It puts together the structure of the business and should include the following:
- What is the name of the business?
- Where is it located?
- What is the business structure: corporation, proprietorship or limited liability company?
- Why is this business unique?
- Why will it succeed?
- What factors will cause the business to grow?
">Description of Products and Services
The descriptions should show why the products and services are innovative, unique and exciting. The reader should believe that you've really come up with an idea or concept that no one else has created. Use the following as an outline:
- What are the products or services you plan to offer?
- What are their features?
- What are their benefits?
- What makes these products and services unique?
- How do they meet the needs of your customers?
- How do they add value to the customers?
Defining the Target Market
Your target market must be clearly defined. You need to show detailed thought about who your customers are and that you have identified their characteristics:
- Who are the likely customers?
- Are they male or female?
- What are their ages?
- Where do they live?
- How many customers are in your target market?
- Is the market growing, shrinking, or is it stable?
- What are the national and local trends that affect your industry?
Outline Your Competitive Advantages
In this section, you have to spell out how you intend to forge a share of the market against more established competitors. This can't be something like just working harder; it needs specific actions and steps that have a chance of succeeding and winning customers. Outline your competitive action plan with answers to these questions:
- Who are your strongest competitors?
- What are their strengths and weaknesses?
- How do they attract customers?
- Why do customers buy from them?
- Are your products price-competitive?
- Are your competitors' businesses increasing or decreasing?
- What will make your company different and better than your competition?
Describe Your Marketing Strategy
After you identify the weaknesses of your competitors, the marketing plan should describe how you plan to exploit those weaknesses.
- How will you position your products against the competition?
- Will you compete on price?
- Can you offer better customer service and quicker response times?
- Do you have a company logo and promotional theme?
- What sales tactics will you use?
- How will your products be distributed?
Financial Projections and Profit Plan
The objective of financial projections is to show that you have worked through the numbers and come up with a plan to make a profit. Great ideas are nice, but you need cash flow to start up a business and stay around long enough to gain market share.
- What are the projections of sales and cash flow for the first year?
- What are the initial operating costs?
- How much do you need for personal expenses, and where will these funds come from?
- How will you finance the startup and growth of the business?
- Do you have a bank loan or line of credit?
- How long will it take to break even and have a positive cash flow?
A word of caution: Take your sales projections for the first few years and cut that number in half. Recalculate your cash flow and profits based on the lowered sales estimates, because these figures will be closer to reality. If your business can survive with these lower projections, then you've done a good job of figuring out how to forge ahead and become successful.
Sell Your Management Team
The real heart of any business is its people. Even the best ideas will fail if a company does not have skilled and aggressive employees. The management portion of the business plan needs to assure investors and lenders that you have a top-notch team lined up to work for your company. Sell your management team with answers to the following questions:
- Who will manage the company and each of its departments?
- What are the managers' experience and qualifications?
- How many employees are needed for full-time and part-time positions?
- What are the jobs and responsibilities of each employee?
- Will the company pay competitive wages and benefits?
- How will employees get training?
A business plan is not just something needed for possible investors and lenders. It forces the aspiring entrepreneur to make a harsh and realistic analysis of his dream business. The would-be owner must address all the different parts of the business if he wants to have a chance at success.
- Northeastern University: The Guide to Writing a Business Plan
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James Woodruff has been a management consultant to more than 1,000 small businesses. As a senior management consultant and owner, he used his technical expertise to conduct an analysis of a company's operational, financial and business management issues. James has been writing business and finance related topics for work.chron, bizfluent.com, smallbusiness.chron.com and e-commerce websites since 2007. He graduated from Georgia Tech with a Bachelor of Mechanical Engineering and received an MBA from Columbia University.
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- 1 What Is the Overall Purpose of a Business Plan?
- 2 Why Is an Effective Business Plan Introduction Important?
- 3 Basic Business Plan Structure
- 4 How to Create a Business Plan as an Entrepreneur
Parts of Business Plan and Definition
The parts of business plan and definition refer to the governing document of your company and the elements it should include. 3 min read
The parts of business plan and definition refer to the governing document of your company and the elements it should include. The business plan thoroughly describes your company's purpose, structure, and goals for potential partners, stakeholders, and investors.
Purpose of a Business Plan
Your business plan will be informed by the specific goals for your business. The more complex your product or service, the more complex and detailed your business plan must be. If you are using the business plan to seek investors, you'll need to provide a thorough explanation of your concept and how it fits into your industry.
Once you've drafted a plan, show it to colleagues, partners, and mentors you trust. They can provide an objective view of the business plan and indicate areas where you may need to provide more thorough information.
This is the first section of your business plan and provides a quick overview of what you want to accomplish with your company. This should comprise the mission statement followed by a description of the services and/or products you provide. Use this basic outline:
- Description of the business
- Goals and objectives
- Owner and executive qualifications
- Funding information
- Cash and earnings projections
A more involved company description should follow the executive summary. This section details the business's key information and examines the market segment you want to capture. The company description is the "meat" of your business plan and should include information about:
- The name of your business
- The business location
- The type of business entity (proprietorship, corporation, or limited liability company (LLC))
- How your company is different from its competition
- Growth and success factors
- How the products and services you offer will solve a problem or fill a need for your desired audience
This is also where you should include operational details such as your hiring plan for the first year or two in business with job classifications and duties. You should also indicate the type of facility you will need for operations and where it will be located.
This section will demonstrate your understanding of your specific market as well as your industry as a whole. Include the following information:
- Description of your target market
- Overview of industry projection
- List of all competitors with business analysis of each
Product and Service Information
Describe the products and services your business will offer, providing enough detail for those who may be unfamiliar with your industry. Indicate whether you will need to patent your product idea and/or whether a patent application is pending. You should also indicate other steps you've taken to protect intellectual property such as your business name, product names, logo, and branding identity.
If you are manufacturing a product, include information about the materials you'll need and your suppliers for those materials as well as the production process.
This section demonstrates your plan to make a profit using realistic numbers with a basis in research. Although your ideas are important, you'll also need to show that you will generate enough cash flow to capture a significant market share. Elements this section of your business plan should address include:
- Initial operating costs
- First-year cash flow and sales projects
- Personal expenses
- Start-up and growth financing
- Business bank accounts and/or credit lines
- Projected timeline to a positive cash flow
A strong management team will inspire confidence in potential lenders, investors, and partners. The purpose of this section is to make your people shine by highlighting their unique strengths. This part of your business plan should include answers to these questions:
- Who are your company-level and department-level managers?
- What are their qualifications?
- How many full-time and part-time managers do you need?
- How many employees will each manage and what are their responsibilities?
- How will you fund wages and benefits?
- What are your plans for employee training and mentorship?
Complete your business plan with supplemental information that will strengthen your case. Finish with a summary that restates the highlights of your plan and indicates your determination to succeed as a business owner. Attach supporting documents such as licenses, permits, patents, product diagrams, building blueprints, and letters of support from consultants and/or your accountant and attorney.
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Top 10 Components of a Business Plan
Whether you’re planning to open a shop that makes the best coffee or you want to sell eco-friendly office supplies, you’ll need to explain why your business is necessary and how it’ll differ from its competitors. That’s where your business plan comes in. It provides investors, lenders and potential partners with an understanding of your company’s structure and goals. If you want to gain the financial autonomy to run a business or become an entrepreneur, a financial advisor can help align your finances.
1. Executive Summary
Your executive summary should appear first in your business plan. It should summarize what you expect your business to accomplish. Since it’s meant to highlight what you intend to discuss in the rest of the plan, the Small Business Administration suggests that you write this section last.
A good executive summary is compelling. It reveals the company’s mission statement, along with a short description of its products and services. It might also be a good idea to briefly explain why you’re starting your company and include details about your experience in the industry that you’re entering.
2. Company Description
A company description includes key information about your business, goals and the target customers that you want to serve. This is where you explain why your company stands out from other competitors in the industry and break down its strengths, including how it offers solutions for customers, and the competitive advantages that will give your business an edge to succeed.
3. Market Analysis
This is where you show that you have a key understanding of the ins and outs of the industry and the specific market you plan to enter. Here you will substantiate the strengths that you highlighted in your company description with data and statistics that break down industry trends and themes. Show what other businesses are doing and how they are succeeding or failing. Your market analysis should also help visualize your target customers. This includes how much money they make, what their buying habits are, which services they want and need, among other target customer preferences. Above all, the numbers should help answer why your business can do it better.
4. Competitive Analysis
A good business plan will present a clear comparison of your business vs your direct and indirect competitors. This is where you prove your knowledge of the industry by breaking down their strengths and weaknesses. Your end goal is show how your business will stack up. And if there are any issues that could prevent you from jumping into the market, like high upfront costs, this is where you will need to be forthcoming. Your competitive analysis will go in your market analysis section.
5. Description of Management and Organization
Your business must also outline how your organization is set up. Introduce your company managers here and summarize their skills and primary job responsibilities. An effective way could be to create a diagram that maps out your chain of command.
Don’t forget to indicate whether your business will operate as a partnership, a sole proprietorship or a business with a different ownership structure. If you have a board of directors, you’ll need to identify the members.
6. Breakdown of Your Products and Services
While your company description is an overview, a detailed breakdown of your products and services is intended to give a complementary but fuller description about the products that you are creating and selling, how long they could last and how they will meet existing demand.
This is where you should mention your suppliers, as well as other key information about how much it will cost to make your products and how much money you are hoping to bring in. You should also list here all relevant information pertaining to patents and copyright concerns as well.
7. Marketing Plan
This is where you describe how you intend to get your products and services in front of your target customers. Break down here the steps that you will take to promote your products and the budget that you will need to implement your strategies.
8. Sales Strategy
This section should answer how you will sell the products that you are building or carry out the services that you intend to offer. Your sales strategy must be specific. Break down how many sales reps you will need to hire and how you will recruit them and bring them on board. Make sure to include your sales targets as well.
9. Request for Funding
If you need funding, this section focuses on the amount of money that you need to set up your business and how you plan to use the capital that you are raising. You might want to include a timeline here for additional funding that you may require to complete other important projects.
10. Financial Projections
This final section breaks down the financial goals and expectations that you’ve set based on market research. You’ll report your anticipated revenue for the first 12 months and your annual projected earnings for the second, third, fourth and fifth years of business.
If you’re trying to apply for a personal loan or a small business loan, you can always add an appendix or another section that provides additional financial or background information.
Every company is different so your business plan might look nothing like another entrepreneur’s. But there are key components that every good plan needs to have, and it’s always a good idea to provide a clear and accurate summary of your business goals in your business plan.
Tips for Business Owners
- A financial advisor can help you align your personal finances to give you an edge as a business owner or an entrepreneur. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now .
- If you are thinking of buying real estate, equipment, developing new products and other big-ticket activities for your business, you should consider using a capital asset pricing model to determine whether an investment is worth your risk.
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