Whether you are a startup owner or are running a big company, the importance of having a well-written business plan can never be over emphasized. This formal document serves as your guide in implementing your business’ strategies and in achieving success in the near future.
In addition, business plans are usually required when you need to approach a bank for a business loan or when you have to do a presentation to a potential investor. They need to know your current business status and what you’re doing to improve, along with what your plans and projections are.
As the great Benjamin Franklin famously said, “If you fail to plan, you are planning to fail.” Of course, that also applies to running a business.
In this article, we’ll share with you 7 of the most crucial components of a good, sustainable business plan. Not all plans are written or structured the same way but by reading this, you’ll learn how you can create the right one for your company.
1. Executive Summary
Think of the executive summary as your elevator pitch. This part should be short and direct, yet compelling.
Highlight your mission statement. Explain why your business matters. Include your company’s history and background. List down and briefly describe the products or services you offer. When needed, describe the market opportunity’s size and scope, as investors will find that interesting to read.
As a general rule, try not to go beyond 1 to 3 pages for this section. You’ll have your chance to go into greater detail in the following pages.
2. Company Description
This is your opportunity to be as comprehensive as you want. Start with a description of your industry and then discuss how your business will seize existing opportunities. Explain about your target market. Talk about your specific goals and plans on how you propose to set yourself apart from your competitors.
Simply put, this section allows you to put your business’ strengths in the spotlight. When done right, readers of your business plan will be convinced about your company’s significance in the market.
3. Market and Competitive Analysis
You can’t really go into business without conducting thorough market research. In this section, you will share the data you’ve gathered pertaining to the market and even your competitors.
Describe the type of industry and the specific market you are trying to target as a business. Mention unique opportunities or upcoming trends you may have discovered during your research. Moreover, write about what your competition is doing and how you plan to position yourself against them. What are they doing well and what are they failing at? Are there any challenges in the industry? How do you plan to overcome them? Who are your target buyers? How much do they earn and what are their purchasing habits?
Providing answers to these questions will help you steer your brand in the right direction. Back your claims with relevant data and statistics.
4. Operations and Management Structure
Now this is the part where you will talk about how your business will operate on a daily basis. Outline the logistics that will be involved in keeping your company running, such as what expenses are necessary, which suppliers you will tap, who will perform which tasks, and how you plan to do quality checks. Where will your headquarters be? Will you be renting a coworking space or will you be running everything from your home office? Be as detailed as possible so readers can get a clear picture of how you plan to turn your concept into a real, functioning business entity.
Don’t forget to include your business’ legal structure (i.e. sole proprietorship, partnership, etc) and your organizational chart, detailing who heads each department and who are the team members, along with what their specific roles are. Basically, the point is to show you have sufficient human resources to get your business going.
5. Product or Service Description
As you can tell, this one focuses on the products or services you will be offering the public. Be detailed in your descriptions and be sure to include the features, the cost, and what makes it stand out from similar products or services out there.
If you have any marketing or promotional campaigns in mind, this is where you mention them, too. You may have the best product or service in the market but you need to have a solid plan so you can build brand awareness. You can’t expect your business to go anywhere unless you take time to reach out to your intended audience.
6. Financial Factors
If you’re borrowing money or are hoping to secure cash from an investor, this section is where you exhibit all the important information regarding your finances. Demonstrate your financial performance for the past years (such as your income and cash flow statements), along with your projections. Be detailed yet realistic. On top of that, explain how much money you are hoping to borrow or raise and how the said capital will be used to boost your business.
You want to be clear in your explanations so use charts and illustrations whenever possible. That way, potential lenders or investors will understand more easily if your product or service deserves the financial aid you’re requesting.
Last but not the least, the appendix is the home for all other relevant information (such as letters, licenses, patents, reviews, technical artworks, etc) that you may not have included in the other sections.
If you think a piece of detail will support your overall plan, put it here.
Additional tip: Be ready to revise
You may have already succeeded in creating a good business plan but here’s a friendly reminder: things do not have to be set in stone.
You will evolve and grow as an entrepreneur over the years and so you might feel the need to update your plan so that it reflects your current status and future vision. Feel free to change certain items – or even entire sections – if you think it would be beneficial in the long run.
According to a post by the Harvard Business Review:
“The real key to succeeding in business is being flexible and responsive to opportunities. Entrepreneurs often have to pivot their business once it becomes clear that their original customer is not the right customer, or when it turns out that their product or service fits better in an alternate market.”
When it comes to creating a business plan, what matters most is that you write something that’s realistic and detailed. Each word and picture used should be there for a valid reason. As much as possible, try to keep it only up to 20 pages or less. Take time to proofread and edit out unnecessary portions.
Remember, your goal is to help readers understand your business – not to bore or confuse them. For more ideas on how you can write and organize your own plan, go ahead and look up some examples online to get some ideas.