A business plan is your road map to profitability and success. A well-conceived plan describes the vision you have for the business and the path you will take to achieve that vision. It also serves as a communication vehicle for employees, customers and potential financial resources. An effective business plan has nine key elements.
1. Executive summary. The executive summary outlines the plan’s key sections such as the company’s mission and goals, target markets, products and services, primary competitors, marketing strategy and financials. The summary should be one to two pages long and should convince the reader to review the entire business plan.
2. Company description. The company description provides a clear idea of what your company is all about, what it does, and how it will operate. In other words, it articulates your company’s mission statement, which is a brief, formal declaration that describes the specific purpose for your business.
3. Market niche. This section of the plan describes your target customers, the larger environment in which your business will operate and why this environment is viable. The key is to identify your desired niche and to explain why you can be successful. To do this, you must answer three questions:
Who do I serve (who are my customers, who are the people I want to have as customers)?
What value do I offer (what are my customers able to do because of me = value proposition)?
How do I help customers achieve this value (what goods and services do I provide)?
4. Competition. This section of the plan describes your primary business competition, including their strengths and weaknesses. The most important factor is the identification of your competitive advantages. You can effectively develop this section by addressing the following questions:
Who is my primary competition?
How does what I provide differ from these competitors (think about your value proposition)?
What are my competitive advantages and disadvantages?
5. Marketing strategy. The single most important step you can take as an entrepreneur is to effectively market your goods and services. You can have the best products in the world, but if no one knows about them, your business will fail. Creating a successful marketing strategy is all about addressing the 5 P’s:
Product – What are you selling?
Price – How much will you charge?
Person – What is your target market (i.e., market niche)?
Place – How will your goods and services be distributed?
Promotion – How will you let potential customers know about your goods and services?
6. Operations. The operations section describes how the work will be done. This is not a particularly detailed section of your business plan, but it should describe your company’s typical business activities.
7. Management and organization. This section identifies the key business managers and the organizational structure. This is a very important section when you have a staff. It is also critical when you are seeking capital. Investors will thoroughly examine the backgrounds of the management team in charge of your business.
8. Long-term development. This section of the plan describes how your business will grow over time. You should provide a specific timetable for the company’s development, including identification of the potential risks your business faces. You can begin this process by addressing the following questions:
Where do you want your business to be 1 year from now in terms of product, person and place?
Where do you want your business to be 3 years from now in terms of product, person and place?
9. Financials. The last section of the business plan outlines your financial projections for the first several years of the business. Ideally, this includes the production of several forms including an income statement (describes anticipated profits over a specified timeframe), a cash-flow analysis (estimates the movement of cash into and out of the business), and a break-even analysis (estimates the point at which revenue received equals the cost of generating that revenue).