7 Essential Components of a Business Plan
Creating a business plan does not have to be an insurmountable task. If you plan on doing one yourself, here are seven essential components to incorporate into your business plan.
The executive summary provides readers with an overview of your company. Details such as its current position, future goals, and plans for achieving these goals are outlined in this section. The executive summary is considered as the pillar of your business plan, since it determines the overall strength of your company.
Company Description of your business plan
Your company description highlights the different aspects of your business. This section goes into greater detail about your business and helps to enlighten potential investors about the intricacies of your company. The company description features the nature of the business; the benefits of products and services to be provided; the market (consumers, organizations, or businesses) that are being served or will be served; and the competitive advantage your company has over others in terms of location, expertise, or value.
The market analysis provides an evaluation of your industry and market based on extensive research in that particular field. Your market analysis covers the current size, historic growth rate, and trends of your industry. It also specifies your target market; its needs; and the demographics of that market. With this information you’ll be able to determine the potential gain of your market share, as well as the pricing and gross targets with which you should work.
The company strategy can be broken down into four strategies. These include a market penetration strategy; a growth strategy; the channels of distribution strategy; and a communication strategy. A market penetration strategy is where the price of your product is set low to increase its demand and market share. A growth strategy may focus on providing the same product to a different target market, or buying another business. The channels of distribution strategy may include distributors, retailers, or original equipment manufacturers. A communication strategy focuses on the methods that you’ll be using to reach your customers. Such methods may include public relations, promotions, or advertising. Once you’ve developed your marketing strategy, you can move ahead with your sales strategy. The sales strategy comprises of a sales force strategy and sales activities. A sales force strategy deals with the type of sales force you intend to use; the number of salespersons you intend to recruit; the recruitment methods you intend to implement; and the training and compensation you’ll provide to your sales force. The sales activities provides information on your sales performance based on factors such as the number of potential customers and the number of sales calls required to make a sale.
The products/services section outlines the benefits that such products/services will provide to your customers. These benefits may be described on the basis of how these products/services meet customers’ needs and how they stand out above their competition. The product’s life cycle, intellectual property, and research and development activities also appear in this section.
Financial Business Plan
The financial plan provides an overview of your company’s financial history. Owners of established companies should include historical information on their company’s financial performance, while those with start up businesses should provide their company’s financial projections.
The appendix in your business plan consists of items such as your company’s credit history; licenses, permits or patents; letters of references; and management resumes. This section should be excluded from the other six sections, since it contains sensitive information. Such information in your business plan should only be shared with those who play a key role in making lending decisions.