A business plan is a living, written document that describes in detail how a business is going to achieve its goals. It is a road map that provides marketing, financial, and operational direction, so that it can avoid many of the bumps in the road along the way. It is also extremely helpful when seeking investors or financial help, because it allows people to visualize the opportunity your business provides.
So, what exactly are the components of a business plan? According to the Small Buisness Administration (SBA) and Small Business Development Center (SBDC), there are several components of a business plan that you should be aware of. As a consultant, I've reviewed quite a number of business plans and the ones that I found to be the most thorough and helpful had these things included:
1. Executive Summary
The Executive Summary is just that- a summary. It's a short dive into what your business idea is, the market opportunity, and how you intend to make it succeed. You'll want to include brief information regarding the financials and the management team's experience, but don't worry, you'll be able to go more in depth later on.
Don't provide too much information or description, you only have a maximum of three pages for the summary. Think of it as your elevator pitch!
2. Business Description
Guess what you go over in the Business Description section? That's right, your business! Now, a lot of people will make the mistake of going into too much detail about their idea in the executive summary; however, THIS is really where you want to provide that information.
In the Business Description section you'll describe:
The business history
Performance to date (if you're just getting start, you likely won't have much information in this part)
Key goals and timelines
Legal and liability information
Insurance and security issues
3. Products and Services
The Products and Services section is where you will list out what you are providing through your business. You will want to address the special or unique benefits to your customer, as well as the raw material and time to provide these goods and/or services.
4. Management and Organization
This is where you will describe the management structure of your business. You should provide information regarding the position, the needs of the company, and who is expected to fill these positions. This section should also convince the reader of the management team's ability to make the company succeed.
5. Marketing Plan
Marketing is my favorite part and that's why I consider it the heart of the plan! This section requires a ton more research than the rest (except for the financial plan, maybe). You'll want to address some of these key points:
Identify your target market
Address the market size and potential
Trends within the industry and how you will keep up
Advertising, promotion, and packaging
And most importantly the budget!
Many businesses don't invest much thought or money into the marketing side of things and that seems to be a major pitfall. There's an old business saying, you gotta spend money to make money, and I believe it to be true. How else are people going to know about your business? It doesn't even necessarily have to be cold-hard-cash, just invest some time into spreading your business ideas.
I'll be releasing a separate blog later on discussing the importance of marketing strategy in your business, so be sure to keep an eye out.
This is where the SWOT analysis comes in. Have you heard of a SWOT analysis? If not, it stands for Strengths and Weaknesses, which are internal to the company, and Opportunities and Threats, which are external factors impacting the business.
Be sure to consider all kinds of competitors- direct and indirect. Many people will make the mistake of disregarding a competitor, because they don't do EXACTLY what they're doing. Remember a competitor should be anyone or anything a potential customer can spend their time or money instead of yours.
For example, a competitor of Chuck E. Cheese is a public park. People can choose to host their kid's birthday party at a free park; however, a strength of Chuck E. Cheese is that it's indoors, so it's climate-controlled, which sounds pretty great in the summer heat!
This is where you will discuss the pricing structure of your business.
8. Financial Plan
The Financial Plan is where you go into detail about how you actually plan to pay for everything. You will discuss things from projections to loan repayment plans. You will also need a contingency plan outlined in this section, because life happens and nothing in life is guaranteed, this is an important component, which is often overlooked.
9. Financial Projections
You described these projections in the section prior, but here's where you provide the worksheets.
You'll want to include:
A list of financial assumptions
A Break-Even analysis
Cash Flow Projections for the next three years (the first year should be broken down into months)
Profit and Loss Projections for the next three years
and End-of-Year Balance Sheets for the next three years
The appendices are where you can put anything extra such as, financial statements, advertising samples, resumes, patents or copyrights, market studies, etc.
The most important thing to remember is that a business plan should be a living document. That means updating it and keeping it current with your goals and aspirations for the business. As the business matures, you may find yourself focusing less on certain areas of the plan and adapting other parts. Having a business plan aids in keeping focused on your business's goals and growth!