Whether your business is large or small, home-based or in a commercial location, whether you are the sole proprietor or developing your business with partners, and particularly if you are looking for investors in your business, a well-written business plan is essential. If nothing else, your business plan will help you to remember why you went into business in the first place.
The size of your business and your intentions for its future will dictate how much detail you need to go into in your business plan. Here are the major components of a good business plan.
This is the most important section of your business plan, but it’s also the last section you will write. This is the reader’s first insight into your business, and so it should be compelling in both presentation and detail. Information here will include an overview of the history of your company, a thorough description of your product service, the market its intended for, why there is a need for what you’re offering, your relevant experience in your area of business, and your future plans for your business. Further down the road, more financial information can be added to this section. Including a Table of Contents in this section will make your business plan more user-friendly.
Mission, Vision & Culture
Where your mission statement clarifies what you are trying to accomplish in your business, the culture of your business identifies how your business will be organized – casual, formal, traditional, trendy – think jacket-and-tie corporate executives vs. Google professionals in jeans, riding scooters to and from meetings. Vision is your ultimate high-hopes for what you want your business to become.
Provide enough information here for the reader to be able to identify precisely what your product or service is, what it does and why there is a need for it.
Market analysis is crucial to your success. In this section, convey your knowledge of the industry your business is associated with by including information on the growth, trends and needs of the industry, and your awareness of the market your business is targeting (Marketing 101 – don’t try to be all things to all people). Your market analysis should characterize the traits of your intended market, geographic numbers, estimation of the market share for your business, and resource information on how you intend to reach your market. In this section, you will also discuss the results of market tests, your expected lead time to deliver products or services to your market and an analysis of your competition.
If you have advantage factors such as a prime location or an innovative way to solve a common problem, stress them here.
Marketing & Sales Plan
You may know who your market is and how you intend to reach them, but hone in on your strategies for acquiring customers. Where are your prospects coming from? How do you plan to reach out to them, and how often? What medium(s) are you planning – print, broadcast, sales. Include pricing, and your reasons for your pricing strategy should be indicated, as well as whether or not you intend to develop levels of products or services.
Organization & Management Plan
What is your business structure? Is the business incorporated? Do you have a partner(s)? or are you a solo operation? Who is responsible for the various aspects of your business? Will you be outsourcing certain components of your business? Detail your credentials and qualifications, and those of anyone else associated with your business, including significant experience or contributions in your industry, recognitions, memberships – anything that builds the reader’s trust and confidence in your abilities.
If you’re looking for investors for your business, this section should be highly detailed. Include start-up expenses ranging from equipment and utilities to payroll and legal fees, cash flow and balance sheet projections that show your disbursements over a projected period of time, estimated income statements, a ratio analysis to compare your business performance to companies in your industry, and an overview of your assumptions and risks. All of these give potential investors a balanced projected picture of your business. If you’re not looking for backers, analyzing your business finances in this much detail may not seem necessary, but the better financial picture you have, the more realistic and attainable your financial goals will be.
Funding Request and Exit Strategy
Clearly state the amount and type of financing you require, and how much you personally are contributing. Let investors know how they will be compensated should you leave the company someday – buyout, IPO if the company goes public on the stock exchange.
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