Eight Elements of a Business Plan
So you want to start a new business or inject some new capital into an existing one? The first step is to create a business plan. This is a living document that essentially gives you a roadmap for how to run your business and make a profit. Whether you’re starting up or expanding, creating a business plan is a great exercise because it forces you to think through every aspect of how your business works.
The basic elements of a good business plan include:
- Executive Summary – This is the overview of your plan – the who, what, where, why and how of your business. A reader should understand what your business is all about (and what you want) just by reading this summary.
- Market Analysis – This establishes how well you understand your market. How will you handle pricing, distribution and marketing? What is the growth potential for your industry? Who is your competition and how will you differentiate your business? Be prepared to answer these questions here.
- Company Description – This is the view of the company from 30,000 feet. Here, you will explain how your products and services work and how all of the elements of your business fit together.
- Organization and Management – How will your business be structured? Provide details about your company’s organizational structure and ownership. Include an organizational chart and be sure someone is in charge of every strategic function.
- Products or Services – Describe the products and/or services you will offer in as much detail as possible. What are the specific benefits that your product or service offers? What need does it meet in the marketplace?
- Marketing and Sales – How will you attract customers and generate sales? Describe the strategies and channels you will use to go to market. It’s helpful to include some analysis of your competition in this section. What’s working and what isn’t?
- Financials – Once you have completed your market analysis and set clear objectives, you are ready to cover financials. If you are an existing business, be prepared to include three to five years of historical data. Startups should give prospective data for the coming five years.
- Funding Requirements – This is where you lay out the amount of funds you will need to expand your business. How much do you need now? How much will you need in the next five years? Be realistic and include best and worst case scenarios.
A good business plan is always changing and evolving. Revisit your business plan monthly – or at least quarterly – to get into the habit of thinking strategically about your business. To get started, check out your local community colleges and see if they have a Small Business Center. This is a great place to go for advice and assistance.