Formulating a solid business plan is one of the most important things you can do to ensure the success of your new business venture. Your business plan will not only be studied by potential lenders or investors, but it will also force you to look objectively at the feasibility of your business idea. It allows you to clarify your vision of the business and determine what areas you will need to focus more energy on in order to be successful. By working things out on paper, you may be able to avoid costly mistakes before they ever even occur in the real world.Although business plans vary slightly, here is a list of six common elements which must be included in every good business plan.
1) Executive Summary
Although the executive summary is usually stated at the beginning of your business plan, it is recommended that you don’t construct this section until after you have finished the rest of your plan, because its content largely will depend on what you include in later sections. Typically one or two pages long, it gives a thorough overview of the business as you envision it. It should describe the nature of the business and touch briefly on market analysis, promotional ideas, marketing strategies, competition research, and management plans. All of these items should be covered more extensively in the later sections of your business plan. The primary function of this section is to interest readers enough to continue reading your entire business plan.
2) Description of Business
The business description should focus on the fine details of your operations. This is where you will put your day-to-day vision into words. It covers why you are qualified to run a particular business, your product or service, what your target market will be, and steps you plan to take in order to assure success.
In the market study section, you will state what you have learned from researching your market. You will detail market trends and tell why you feel there is a need for your product, and address the demographics of your target customers and how you will guarantee the quality of your product. Additionally, you will use this section to tell how you plan to distinguish yourself from your competition.
4) Marketing Plan
A marketing plan is the flip side of a market study. Now that you know your market exists, you need to figure out how to make that market want your product. This section will address how you will attract and retain customers. Advertising should be an essential part of your marketing plan, but your strategy must include more than just purchasing ads. It should encompass the 5 P’s of marketing: Product, Price, Place, Promotion, and Packaging. Be sure to include your advertising budget in this section as well.
5) Management and Operations
This section should go into detail about how you plan to run your business. If you sell a pre-made product, explain where you will obtain your inventory. If you make something, where will you get your raw materials? Explain the process by which products are to be made. How will you distribute your finished product? What days and times will your business be open? Is this a sole operation or will you have partners? What qualifies you to perform the service or produce the product? Will you need to apply for permits or licenses? Anything that you can think of regarding the operational side of the business will need to go into this section.
6) Financial Projections
This is the section where it all comes together. You need to realistically state your financial expectations for your business over the course of the next several years. You will need to figure out your anticipated costs and expenses as well as income. You should determine what your breakeven price will be and how you will price your product. This section should also address how you plan to obtain funding to start the business in the first place.
Creating a business plan can be a daunting task, but it is also a necessary one if your business is going to succeed. Not only will lenders require a business plan prior to considering your loan application, but any potential investors will want to view it as well. Writing out a thorough business plan allows you to critically evaluate all aspects of the potential business. By carefully constructing your business plan, you will increase your chances of being successful in your new endeavor.