Whether you are planning to expand your business, raise capital, or just starting out and in need of startup investment, having a well-defined business plan is a must. It isn’t only essential for you to secure a good investment, but a business plan helps you define your long-term goals, stay on track, and remember what you aim to accomplish with your company’s growth – your business values, goals, and missions.
Because no business is immune to change, business plans change over time in light of changing customer demands, government regulations, supply chain disruptions, and other risk factors. However, what stays constant are the ten essential elements of a strong business plan. Each of the following components of a major business plan has its own value, so in order to create an effective business plan, you must first understand the role that they play in molding your business structure and values.
There are 10 major elements of a strong business plan, each playing an important role in how your business works. Click to create an effective business plan.
1. Executive Summary
Providing an overview of your business and highlighting all the major components of the plan, the executive summary is one of the most critical elements of a strong business plan. Though placed at the top of the document, according to professional business plan writers, an executive summary should be written at the end in order to ensure that all the necessary details are covered.
When writing an executive summary for your business plan, be sure to include the mission statement and outline the five W’s (what, who, why, where, and when). While doing so, remember why you started the business in the first place and where you would like to be in the next ten years. In simpler words, the executive summary works as a five-minute elevator pitch, showcasing what your brand has to offer (product and services), your experience in the industry, and why people should invest in your business.
2. Market Analysis and Strategy
Market analysis shows the customers or stakeholders that you have a clear understanding of the ins and outs of the niche that you are planning to enter. You will start by highlighting your company’s strengths in the industry, backed by statistics and data and a breakdown of the current themes and trends. This includes telling people what other organizations (your competitors) are doing and why and how they fail or succeed. In short, the primary purpose of this section is to research and identify your target audience and where to locate them. Some major pointers to be covered in this market analysis and strategy section of the business plan includes:
— Pain points experienced by your target market.
— Geographical location of your target audience.
— Demographics of your target customers.
— What are the needs of your consumers, and how are you solving that issue through your services or products.
— Does your target audience prefer online shopping or spending time in physical locations?
The ultimate goal of this particular section is to help you clearly identify your target audience and create a strategic plan along with estimations on how well you expect your service or product to perform.
3. Business Description
Next in your list of elements of a strong business plan is the business description. As the name itself suggests, the role of the business description is to provide a comprehensive understanding of your business goals, target customer base, services, and products.
— Structure of your business.
— Understanding of the industry that you are planning to work in.
— Major competitors and trends within the industry.
— Your team’s experience.
— What will make your brand stand out in the market?
4. Sales and Marketing Plan
Just like business plans change over time, so do the marketing strategy and sales plan. This section of your business plan mainly discusses how you plan to advertise and sell your services and products. Therefore, make sure to include a breakdown of the steps that you’ll take to promote your brand and the budget that you need to implement the marketing strategies. To help you out, we have created a checklist of all the important elements that your sales and marketing plan should cover:
— Strategies to sell services or products.
— Anticipated promotion and marketing strategies.
— Pricing plan for your brand’s services and products.
— Your business’ s unique selling proposal.
— What makes your brand stand out? Why should customers invest in your brand?
— How will you reach out to, and connect with, your target audience?
5. Organization and Management Description
In the organization and management description section of a business plan, you will discuss your company’s structure and management strategy in detail. This includes introducing some of the important players of your team (managers) and their qualifications, skills, and job responsibilities. You can also mention the human resources requirements and terms and conditions of your organization.
An effective way to do this is by creating a diagram to map out your brand’s chain of command. Moreover, do not forget to highlight the operational nature of your business, whether it will work as a sole proprietorship or a partnership. Also, if your company has a board of directors, be sure to identify them and their role in establishing your business.
6. Competitive Analysis
Being one of the most essential elements of a strong business plan, the competitive analysis presents a clear comparison between your brand and your indirect and direct competitors. Therefore, when writing this section, make sure to mention your company’s strengths and weaknesses along with how you plan to fight back. You should also talk about what makes your brand different in the industry and the potential problems that you might face when entering the industry.
7. Financial Needs and Projection
This section will be a breakdown of your financial expectations and goals, which you have set based on the market research. It will discuss how you aim to generate revenue to get your business started. If you have taken out a loan, all relevant information should be included in this section, along with all the essential financial statements, a cash flow projection, and an analysis of these statements.
Don’t forget to include your annual projection earnings for the first five years of the business and an expected revenue for the first twelve months.
8. Operating Plan
In this section of your business plan, you will describe how you plan to manage and operate your company. The operating plan will include all necessary information, such as:
— Where will your company operate from?
— Number of employees that you will have.
— What will the organization hierarchy be?
— What are the perceived risks, and how you can overcome them.
9. Products and Services Description
When drafting this particular section of the business plan, make sure to give a detailed breakdown of the services and products that you intend to provide, the strategy that you will use to ensure that they meet the demand, and how long they will last. You should also include relevant information about your suppliers, the cost of manufacturing the product, the profit you aim to earn from each service or product, and all information pertaining to copyright and patent concerns.
10. Appendices and Exhibits
Being the last section of your business plan, any extra information you need to provide to support your vision should be included in the Appendices and Exhibits section. Incorporate information that proves the viability of your business plan while providing researched evidence that supports your ideas. Some common information to put under the Appendices and Exhibits section include:
— Financial documents.
— Resume of company stakeholders and management.
— Marketing materials.
— Pictures of products.
— Relevant legal documentation.
Regardless of the type and size of your business, it is important to remember that your major business plan isn’t written in stone. It’s just a piece of paper that you and your stakeholders can amend, update and improve as your brand changes and grows. To make sure that your goals are met, incorporate the aforementioned ten elements of a strong business plan and review your monthly progress so that you make the necessary changes.