A business plan is a standard written document that includes your business goals, the methods within which these goals can be attained, and the time framing within which these goals need to be fulfilled.
But in reality and especially in the time of difficult markets like the ones we are experiencing with COVID-19, a business plan can play a role in the existence and continuity of your business.
I was reading a very detailed and complete article on the 10 key components of a business plan and I decided to explain more with a blogger-targeted easy language.
So What constitutes a business plan?
The executive summary is basically an overview of a business plan and its purpose is to give a synopsis of the key points of the document as well as educating and informing the reader about the company. Its purpose is to prepare the reader for the upcoming content. It must be clear and to the point as it serves the purpose of informing the potential investor of the opportunities that lay ahead as well as the size of the target market & profitability model. Emphasis should also be in putting across the competence and skill level of the company’s leadership to execute the business plan as this will make the compelling case to potential investors. The Executive Summary should be an easy to read document with no jargon, hence the executive summary is often called the most important part of the business plan. If it doesn’t capture the reader’s attention, the plan will be set aside unread. Please note it should be no longer than 2 to 4 pages.
This is where one outlines the strategic overview of the company, how it is organized and a listing of its product range or services. This applies to either current or future products & services. In depth analysis of how the company is qualified to serve its target markets should also be included. In business, the best indicator of a company’s future success is by looking at its past accomplishments so these accomplishments should be included as they give the reader a snapshot of where the company is headed.
Industry or Market Analysis
In this section give a brief overview of the industry your company will be competing in, evaluating competitors. Defining the industry in terms of
- Geographical size of the area or Market size of the target demography
- Current and past trends of the industry, trends and growth patterns that have existed within the industry.
- Who your completion is and how your company is likely to position itself within the industry focusing on how the company intends to take advantage of opportunities it has identified
Analysis of Customers
In this section describe your customers. Describe who your customers are in detail & how your products or services align with particular segments with in the market, why the customer needs that product or service. Provide demographics about your customers and show how the product your company offers falls within those specific demographics. The target demographic must be well defined in different segments i.e. online retailers, fitness enthusiasts, moms, teens, business executives, home owners etc.
As each segment is different and tends to be very specific, this will have a big impact on how your business operates and this should be highlighted in the analysis. Break down the target customers into demographic & psychographics profiles. Targeted profiles such as age, sex, income levels & genders can help you ascertain how best you can market to each demography in more effective manner
Analysis of Competition
No man is an island and operates in an isolated vacuum & neither will your business. Highlight the fact that you have or are going to have competition & you are planning for this.
A direct competitor is he who provides the exact same service or product that you supply to the very same customer you are targeting whilst an indirect competitor offers a similar product. Identify your direct and indirect competitors, gives an in-depth assessment of their strengths and weaknesses. This helps you ascertain areas your company has a competitive edge in as well as areas you can work on to improve your standing.
Marketing, sales & product plan
The purpose of a company’s marketing plan is to attract customers who are willing to purchase a particular product or service. When you come up with a Marketing and sales plan you outline the company’s strategy to penetrate its target market. Be sure to outline its key elements such as:
- An outline of the companies desired strategic position
- A comprehensive product or service list as well as potential product extensions
- Penetration strategies, the company’s plans for its initial entry into the market including image and branding
- Promotional strategies that will be used and implemented
- Pricing strategies the company will use
- Potential marketing partnerships that can be used to best achieve a robust marketing plan
Operations Strategy, Design and development
This section outlines internal strategies the company will implement in the transitioning of ideas from concept to reality. Answers to the following questions should be included
- Are there specific functions needed to run the business?
- Is there a chronological order of milestones needed before the venture is to be launched?
- Are there quality control mechanisms in place
The company should have a certain level of human resources to be successful. This section is meant to provide sufficient information that can support the premise that the management team meets skill set levels required for the company to succeed in its day to day running. Whether intended for internal or external use, readers of this section of a business plan should have a clear understanding of who is in charge and should deduce:
- The key management personnel and their backgrounds
- Additions that will be needed to be added to the management team
- Whether there are other investors or shareholders
- Whether there are professional advisors such as lawyers, risk management , accounting, etc
A financial plan details how income is generated from customers as well as determining the company’s profitability model. This section provides readers with a picture of where the company has been and where it is going. It is important for established companies to include financial data of past performance. Banks, venture capitalists and most lenders usually require at least three years of financial data. Remember a business plan is meant to help determine the amount of capital a company needs and this information should be located in the financial plan. It should include Projected Income Statements, Balance Sheets showing assets, liabilities and equity and Cash Flow Statements. The Financial Plan communicates how you intend to “monetize” the vision for the venture.
This is where the information supporting projections, strategies and assumptions made in a business plan will be located. An appendix will normally contain financial information to which company owners and managers might want to limit access credit histories and confidential date such as customer information only to those lenders requesting it. It is used for supporting reports, photographs and other information that takes up more than a couple of pages.
An appendix will begin with a table of contents corresponding to the organization of the sections of the business plan. Though it may contain information pertaining to some but not all sections of the plan, the appendix should always be located after the last section of the plan.
If you want to go deep and understand more about what you need and why you need a business plan, I encourage you to read the original article here.