The 7 Elements of a Business Plan
"If you fail to plan, you are planning to fail" -Benjamin Franklin
Creating a thorough business plan for a new or evolving venture is essential. A convincing blueprint is a must for soliciting investors, but its value extends beyond that, as creating a business plan forces you to carefully examine your company's goals, strategies and potential.
Using a template like this one (applicable for most business entities, including partnerships, LLCs, corporations and sole proprietorships) will help ensure your business plan is presentable and digestible. But just as every business is unique, so is every business plan, and there's no one universally expected format. At the very least, though, a good plan will generally contain some version of the following seven sections.
1. Executive Summary
Nailing this abstract is crucial, especially if you're using your business plan to attract outside funding. This short section should include highlights from all the sections to follow and give a concise overview of the company. Pros suggest writing this introductory section last, enabling you to pull from and summarize what you've already laid out.
2. Business Description
What does your company do? And how will it make money? While straightforward, this section is hugely important. A thorough description should answer the following questions, among others:
- Why was the business formed?
- What's the mission and business model?
- Are there any existing strategic relationships to be leveraged?
It should include everything from basic identifying information (e.g. location, principal owners, legal structure, etc.) to more nuanced analysis of your market opportunity, capital requirements and projected growth.
3. Market Analysis
Assess your competition, and then differentiate your business. Begin by including projections and trends for your industry in general, including the market's size and growth potential. Then par down to discuss your core target market, including a profile of your idealized "best customer." If you've had the budget to pay for market research, this is the place to include it. If not, insiders suggest providing testimonials from existing customers as a next-best option.
4. Organization and Management
Discussing the qualifications and backgrounds of specific members of your management team is key to winning investor confidence. If you choose to seek outside funding, many venture capitalists value the team over the product, so prove that you have an experienced and talented squad, making sure to include how each person and position will directly help you meet your business goals. Also take the time to clarify which positions will hold what responsibilities.
5. Sales Strategies
This section should include pricing policy (how will you price your product or service? what is the relationship between your price point and image?), distribution (how will you get your product to market? how do your competitors get theirs to market?) and promotional efforts (advertising, sales promotions, etc.). Make sure to include any relevant insights about website development, public relations (both traditional and social), trade show attendance and sampling.
6. Funding Requirements
Here you'll need to provide not a single value but a range of best and worst case numbers for the amount of funding required in order to expand your business at specific benchmarks.
7. Financial Projections
This section quantifies what you've discussed previously about organization and marketing, so it makes sense to write this only after completing those other sections. As opposed to backward-looking accounting, this section should feature forward-looking projections, meaning projected profit-and-loss statements, balance sheets and cash flow statements for the next three years.