What Are The Essential Components of a Business Plan?
What Are The Essential Components of a Business Plan?
A successful business plans covers the basics of organization and finance but also goes beyond to showcase the company's vision and unique offerings to the market.
Company123 offers a range of business plans that can be essential to the success of a business, providing vision, direction and a solid foundation of facts and figures.
Tailoring Your Business Plan
To aid your company in pursuing its development goals, Company123's expert team will combine their two decades of business and legal experience to draft up a tailored Business Plan once you fill in the “Set up Business Plan” form on our website.
We offer three perfectly tailored Business Plan options:
Standard Business Plans
Ar $199, we offer plans that are perfect for any basic business development goals.
Our Standard Business Plan includes:
Key Activities
Key Resources
Value Propositions
Market Analysis
Cost Structure
Revenue Streams & Sales Forecasts
These standard plans can be the first step in applying for more financing, assisting with rental lease applications, outlining your company's mission statement and drawing up business projections.
Advanced Business Plan
At $399, we offer plans that are highly tailored to achieving all financing ambitions.
Our Advanced Business Plans includes:
Executive Summary
Company Description
Market Analysis
Organization & Management
Service/Product Line
Marketing & Sales
Funding Request
Financial Projections
The advanced plans are perfect for business loan applications, sale of business and raising finance
Professional Business Plan
Our most comprehensive and robust business plan includes, and can include by discussion with our expert team, absolutely anything needed for the running and future goals of the company.
Our Professional Business Plan includes:
Plan Summary
The Business
The Market
The Future
The Finances
The Business
Business Details
Registration Details
Business Premises
Organization Chart
Management & Ownership
Key Personnel
Product/Service
Innovation
Insurance
Risk Management
Legal Consideration
Operations
Sustainability Plans
The Market
Market Research
Market Targets
Environmental/Industry Analysis
Your Customers
S.W.O.T Analysis
Your Competitors
Advertising & Sales
The Future
Vision Statement
Mission Statement
Goals/Objectives
Action Plan
The Finances
Key Objectives & Financial Review
Assumptions
Start-up Costs
Balance Sheet Forecast
Profit & Loss Forecast
Expected Cash Flow
Break-even Analysis
The Main Elements of A Plan
High-level strategy
Specific responsibilities, activities, deadlines and budgets
Financial plan
Elements of a Business Plan
Executive Summary
Within the overall outline of the business plan, the executive summary will follow the title page.
It should summarize what you expect your business to accomplish.
This is your five-minute elevator pitch. It may include a table of contents, company background, market opportunity, management overviews, competitive advantages, and financial highlights. It’s probably easiest to write the detailed sections first and then extract the cream to create the executive summary.
The statement should be kept short and businesslike, probably no more than half a page. It could be longer, depending on how complicated the use of funds may be, but the summary of a business plan, like the summary of a loan application, is generally no longer than one page. Within that space, you'll need to provide a synopsis of your entire business plan. Key elements that should be included are:
Business concept: Describes the business, its product and the market it will serve. It should point out just exactly what will be sold, to whom and why the business will hold a competitive advantage.
Financial features: Highlights the important financial points of the business including sales, profits, cash flows and return on investment.
Financial requirements: Clearly states the capital needed to start the business and to expand. It should detail how the capital will be used, and the equity, if any, that will be provided for funding. If the loan for initial capital will be based on security instead of equity, you should also specify the source of collateral.
Current business position: Furnishes relevant information about the company, its legal form of operation, when it was formed, the principal owners and key personnel.
Major achievements: Details any developments within the company that are essential to the success of the business. Major achievements include items like patents, prototypes, location of a facility, any crucial contracts that need to be in place for product development, or results from any test marketing that has been conducted.
Make it easy for the reader to realize at first glance both your needs and capabilities.
Business Description
This is where you explain why you're in business and what you're selling.
If you sell products:
describe your manufacturing process, availability of materials, how you handle inventory and fulfillment, and other operational details.
If you provide services:
describe them and their value proposition to customers. Include other details such as strategic relationships, administrative issues, intellectual property you may own, expenses, and the legal structure of your company.
Optional inclusions that pair well with this section, include:
Pricing
How you price your product is important because it will have a direct effect on the success of your business. Though pricing strategy and computations can be complex, the basic rules of pricing are straightforward:
-All prices must cover costs.
-The best and most effective way of lowering your sales prices is to lower costs.
-Your prices must reflect the dynamics of cost, demand, changes in the market and response to your competition.
-Prices must be established to assure sales. Don't price against a competitive operation alone. Rather, price to sell.
-Product utility, longevity, maintenance and end use must be judged continually, and target prices adjusted accordingly.
-Prices must be set to preserve order in the marketplace.
Market Research and Strategies
Spell out your market analysis and describe your marketing strategy, including sales forecasts, deadlines and milestones, advertising, public relations and how you stack up against your competition. If you can’t produce a lot of data analysis, you can provide testimonials from existing customers.
Begin your market analysis by defining the market in terms of size, structure, growth prospects, trends and sales potential.
Ideally, your market analysis will show that you know the ins and outs of the industry and the specific market you’re planning to enter.
To further enhance this section, you can include the following:
Competitor analysis
A good business plan will present a clear comparison of your business to your direct and indirect competitors. You’ll need to show that you know their strengths and weaknesses and you know how your business will stack up. If there are any issues that could prevent you from jumping into the market, like high upfront costs, it’s best to say so.
According to theory, the performance of a company within a market is directly related to the possession of key assets and skills. Therefore, an analysis of strong performers should reveal the causes behind such a successful track record. This analysis, in conjunction with an examination of unsuccessful companies and the reasons behind their failure, should provide a good idea of just what key assets and skills are needed to be successful within a given industry and market segment.
Through your competitor analysis, you will also have to create a marketing strategy that will generate an asset or skill competitors don't have, which will provide you with a distinct and enduring competitive advantage.
Marketing Strategy
In your business plan, it’s important to describe how you intend to get your products and services in front of potential clients. In order to accomplish this, the promotion strategy must encompass every marketing tool utilized in the communication effort.
As you pinpoint the steps you’re going to take to promote your products, you’ll need to mention the budget you’ll need to implement your strategies.
Sales Potential
Once the market has been researched and analyzed, conclusions need to be developed that will supply a quantitative outlook concerning the potential of the business. The first financial projection within the business plan must be formed utilizing the information drawn from defining the market, positioning the product, pricing, distribution, and strategies for sales. The sales or revenue model charts the potential for the product, as well as the business, over a set period of time. Most business plans will project revenue for up to three years, although five-year projections are becoming increasingly popular among lenders.
Management and personnel
Provide bios of your company executives and managers and explain how their expertise will help you meet business goals. Investors need to evaluate risk, and often, a management team with lots of experience may lower perceived risk.
You’ll introduce your company managers and summarize their skills and primary job responsibilities. If you want to, you can create a diagram that maps out your chain of command.
Don’t forget to indicate whether your business will operate as a partnership, a sole proprietorship or a business with a different ownership structure. If you have a board of directors, you’ll need to identify the members.
This section can also include:
Organisational Structure
The organizational structure of the company is an essential element within a business plan because it provides a basis from which to project operating expenses.
The four stages for organizing a business are:
1. Establish a list of the tasks using the broadest of classifications possible.
2. Organize these tasks into departments that produce an efficient line of communications between staff and management.
3. Determine the type of personnel required to perform each task.
4. Establish the function of each task and how it will relate to the generation of revenue within the company.
Financial documents
This is where you provide the numbers that back up everything you described in your organizational and marketing sections. The three common statements are a cash flow statement, an income statement and a balance sheet. Include conservative projections of your profit and loss statements, balance sheet, and your cash flow statements for the next three years. These are forward-looking projections, not your current accounting outputs.
Income Statement
The income statement is a simple and straightforward report on the proposed business's cash-generating ability. It's a score card on the financial performance of your business that reflects when sales are made and when expenses are incurred. It draws information from the various financial models developed earlier such as revenue, expenses, capital (in the form of depreciation), and cost of goods. By combining these elements, the income statement illustrates just how much your company makes or loses during the year by subtracting cost of goods and expenses from revenue to arrive at a net result--which is either a profit or a loss.
Cash Flow Statement
The cash-flow statement is one of the most critical information tools for your business, showing how much cash will be needed to meet obligations, when it is going to be required, and from where it will come. It shows a schedule of the money coming into the business and expenses that need to be paid. The result is the profit or loss at the end of the month or year. In a cash-flow statement, both profits and losses are carried over to the next column to show the cumulative amount. Keep in mind that if you run a loss on your cash-flow statement, it is a strong indicator that you will need additional cash in order to meet expenses.
The Balance Sheet
The balance sheet is divided into three sections. The top portion of the balance sheet lists your company's assets. Assets are classified as current assets and long-term or fixed assets. Current assets are assets that will be converted to cash or will be used by the business in a year or less.
Other assets that appear in the balance sheet are called long-term or fixed assets. They are called long-term because they are durable and will last more than one year.
After the assets are listed, you need to account for the liabilities of your business. Like assets, liabilities are classified as current or long-term. If the debts are due in one year or less, they are classified as a current liabilities. If they are due in more than one year, they are long-term liabilities.
Once the liabilities have been listed, the final portion of the balance sheet-owner's equity-needs to be calculated. The amount attributed to owner's equity is the difference between total assets and total liabilities. The amount of equity the owner has in the business is an important yardstick used by investors when evaluating the company. Many times it determines the amount of capital they feel they can safely invest in the business.
This section can also be followed with a Request for Funding, if necessary.
If you need funding, you can devote an entire section to talking about the amount of money you need and how you plan to use the capital you’re trying to raise. If you’ll need extra cash in a year or two to complete a certain project, that’s something that’s important to disclose.