A business plan is a blueprint that is needed to successfully run a business; with a workable business plan in place, you will reduce the trial-and-error approach to doing business. You will be able to manage your business with purpose, and you will know how to handle the challenges and growth you meet along the way.
The whole idea of writing a business plan is not just for the sake of having a business document in place. Your business plan should outline strategies on how you intend to manage and grow your business. The rule of thumb when writing a business plan is to be realistic and never to over-project when putting figures on income and profits.
As a matter of fact, it is safer to underestimate when writing a business plan so that you won’t be so disappointed when reality sets in. Having said that, a well-written business plan should contain the following components.
Components Of A Well Written Business Plan
Table of Content
The executive summary is an important component of a business plan. The executive summary is all about the concept of your business, descriptions of your company, your company’s vision statement, mission statement, where your company will be located, and also if you intend to sell out franchises or open outlets in different cities in your country.
Your executive summary provides an overview of the business plan as a whole and highlights what the business plan will cover. Experts usually advise that the executive summary of a business plan should be the last component you should write. This is important because it will give you an overview of the business hence you will be able to properly capture the summary of the business.
After the executive summary, the next component of a well-written business plan is the business description. The business description gives a comprehensive description of your business especially as it relates to the business goals, products, services, and target customer base.
Please note that when writing your business description, you should also include details regarding the industry your company will serve, and any trends and major competitors within the industry. In your business description, you should make sure you highlight your team’s experience in the industry, your competitive advantage in the industry, and the location you intend to launch the business.
Market Analysis and Strategy
Another important component of a well-written business plan is the market analysis and strategy of the business. A market analysis is a thorough assessment of a market within a specific industry. With this analysis, you will study the dynamics of your market, such as volume and value, potential customer segments, buying patterns, competition, and other important factors.
Market analysis is a diagnostic process to uncover the root causes and not just the symptoms of why markets underperform for poor people. A thorough market analysis will help you understand how the market operates and how it affects the poor.
Please note that the purpose of the market analysis and strategy component of a business plan is to research and identify a company’s primary target audience and where to find this audience.
Marketing and Sales Plan
The next component of a well-written business plan is the marketing and sales plan of the business. Marketing plans are all about identifying your business’ target market and creating strategies for reaching those customers. Sales plans detail the strategies the business will use to sell products and services and increase revenue. The sales plan often forms part of the larger marketing strategy.
Key areas that must not be missing from your market and sales plan are your anticipated marketing and promotion strategies, the pricing plans for your company’s products and services, and your strategies for making sales.
You should also include why your target audience should purchase from your company versus your competition, your organization’s unique selling proposal, and of course, how you will get your products and services in front of your target audience.
No business plan will be complete without a competitive analysis. A competitive analysis is a process of identifying competitors in your industry and researching their different marketing strategies. You can use this information as a point of comparison to identify your company’s strengths and weaknesses relative to each competitor.
A competitive analysis is the component part of your business plan that clearly outlines a comparison of your organization to your competitors. This section should also include any advantages your competition has in the marketplace and how you plan to set your company apart.
You should also cover what makes your business different from other companies in the industry, as well as any potential issues you may face when entering the marketplace if applicable.
Management and Organization Description
Another component part that must be captured in a well-written business plan is the management and organization description part. Management and organization descriptions cover the details of your business’s management and organization strategy.
In this section of your business plan, you are expected to introduce your company leaders and their qualifications and responsibilities within your business. Plus, you are also expected to include human resources requirements and the legal structure of your company.
Products and Services Description
No business plan is complete without a detailed description of the products and/or services that you want to render to the public. Of course, you would have given an idea of what your business is in the executive summary, but the product and service description part is to help you give the details of the products and services your company offers that you covered in the executive summary.
In this section, you are also expected to include all relevant information about your products and services such as how you will manufacture them, how long they will last, what needs they will meet, and how much it will cost to create them.
The next component of a well-written plan is the operating plan. An operating plan is a practical document that outlines the key activities and targets an organization will undertake during a period of time, usually one year. It is often linked to funding agreements as well as the organization’s strategic plan.
In essence, the operating plan of your business plan should describe how you plan to run your company. Include information regarding how and where your company will operate, how many employees it will have and all other pertinent details related to your organization’s operations.
Financial Projection and Needs
Another very important component of a well-written business plan is the financial projection and needs of the business. Trust me, this part should not be left out of any business plan no matter the template you want to use. This is because finance they say is the blood of any business. Besides, if there is no cash flow in your business, you are as good as not running a business.
A financial projection is a forecast of future revenues and expenses. Typically the projection will account for internal or historical data and will include a prediction of external market factors. You’ll need to develop both short-term and mid-term financial projections
The financial section of your business plan should give details of how you intend to bring in revenue and of course how you intend to raise your start-up capital. You should include your financial statements, an analysis of these statements, and a cash flow projection.
Milestones and Appendices
Lastly, a well-written business plan will not be complete if the milestones and appendices part is not added. Milestones in your business plan clearly state the status of this as it relates to the business plan. For example, if you have registered the business, you will indicate accomplished, if you are still working on your website, you will indicate – in progress, and so on.
Basically, an appendix is a page that is included at the end of your business plan to include additional information for your reader. That is any extra information to further support the details outlined in your plan. This part of the business plan is to support the viability of your business plan and give investors a clear understanding of the research that backs your plan.
It is important to state that there are different types of business plans. Business plans can be divided roughly into four distinct types. There are very short plans, or mini-plans, presentation plans or decks, working plans, and what-if plans.
Your choice of the business plan should determine the key components that must not be missing from it and of course the additional parts you should add. They each require very different approaches on how you can write it.