When it comes to starting your own company (or managing someone else's), every business needs to develop and write a good business plan they can follow to achieve the company's goals, which can then be used to pitch to investors or seek out commercial loans.
Put simply, a business plan is an outline of goals and the steps needed to achieve them, and while not all businesses require a formal business plan, composing a business plan, in general, is an essential step to starting your own business as it lays out what you plan to do to get your business off the ground.
All business plans-even informal outlines-require several key components including an executive summary (including objectives and keys to success), a company summary (including ownership and history), a products and services section, a market analysis section, and a strategy and implementation section.
Why Business Plans Are Important
Taking a look at a sample business plan, it's easy to see how these documents can get quite lengthy, but not all business plans need to be as detailed as this-especially if you're not looking for investors or loans. A business plan is simply a way for your business to evaluate whether or not actions would benefit a company's ability to achieve its goals, so there's no need to write extra details if they're not needed to organize your business.
Still, you should be as detailed as necessary when composing your business plan as each element can greatly benefit future decisions by outlining clear guidelines for what the company plans to achieve and how it plans to achieve it. The length and content of these plans, then, comes from the type of business you're creating a plan for.
Small businesses just looking to stay organized benefit from the objective-strategy structure of the standard business plan while bigger businesses or those hoping to expand can fully summarize every element of their businesses so investors and loan agents get a better understanding of the mission of that business-and whether or not they want to invest.
Introduction to Business Plan
Whether you're writing a web design business plan or a tutoring business plan, there are several key components that must be included in the introduction to the document in order for the plan to be considered viable, including a summary of the business and its goals and the key components that indicate success.
Every business plan, big or small, should start out with an executive summary that details what the company hopes to accomplish, how it hopes to accomplish it, and why this business is the right one for the job. Essentially, the executive summary is an overview of what will be included in the rest of the document and should inspire investors, loan officers, or potential business partners and clients to want to be a part of the plan.
The objectives, mission statement, and "keys to success" are also principal components of this first section as they will outline achievable, concrete goals that the company plans to achieve through its business model. Whether you're stating "we'll increase sales by more than $10 million by the third year" or saying "we'll improve inventory turnover to six turns next year," these goals and missions should be quantifiable and attainable.
The Company Summary Section
After fleshing out the objectives of your business plan, it's time to describe the company itself, starting with a company summary that highlights major accomplishments as well as problem areas that need to be solved. This section also includes a summary of the ownership of the company, which should include any investors or stakeholders as well as owners and people who play a part in management decisions.
You will also want to give a full company history, which includes the inherent barrier to your goals thus far as well as a review of prior years' sales and expenses performances. You'll also want to list any outstanding debts and current assets alongside any trends noted in your particular industry that affect your financial and sales goals.
Finally, you should include the company's locations and facilities, which detail the office or workspace being used for the business, what property assets the business has, and which departments are currently part of the company as they relate to achieving the company's goals.
The Products and Services Section
Every successful business must have a plan to make money through the products or services that business provides; so naturally, a good business plan must include a section about the core revenue model of the company.
This section should start with a clear introductory overview to what the company offers consumers as well as the voice and style in which the company wishes to present itself to those customers-for example, a software company might say "we don't just sell good accounting software, we change the way you balance your checkbook."
The products and services section also details competitive comparisons-how this company measures up to others that offer the same good or service-as well as technology research, sourcing for materials, and future products and services the company plans to offer to help drive competition and sales.
The Market Analysis Section
In order to properly project what goods and services a company might want to offer in the future, a comprehensive market analysis section should also be included in your business plan. This section details exactly how well the current market in your company's business field is doing, including major and minor concerns that could affect your ability to achieve your sales and income goals.
The section starts with an overview of the market your company targets (demographics) as well as industry analysis of what types of businesses typically exist within that marketplace and known participants who are your main source of competition within that industry.
You should also include distribution, competition, and buying patterns alongside the company's main competitors and an overview of statistical figures from an in-depth market analysis. This way, investors, partners, or loan officers can see that you understand what stands between you and your company's goals: competition and the market itself.
The Strategy and Implementation Section
Finally, every good business plan needs to include a section detailing the company's marketing, pricing, promotions, and sales strategies-as well as how the company plans to implement them and what sales forecasts have been discovered as a result of these plans.
The introduction to this section should contain a high-level view of the strategy and their implementation including bulleted or numbered lists of objectives and the viable steps that can be taken in order to achieve them. Calling out objectives like "emphasize service and support" or "focus on target markets" and describing how the company will go about doing this shows investors and business partners that you understand the market and what needs to be done to take your company to the next level.
Once you've outlined each element of your company's strategy, you'll then want to end the business plan with sales forecasts, which detail your expectations after implementing each element of the business plan itself. Essentially, this final section tells investors exactly what will be accomplished by carrying out this business plan into the future-or at least give them an idea that you've thought about what could happen if you implemented the plan.