business plan
Business, Entrepreneurship, Management, Organization, Productivity, Success

8 of the Most Important Components of a Business Plan

The value of a business plan can never be overstated. After all, building a startup requires an investment of precious resources (money, energy, and time), all of which need to be organized. Entrepreneurs might think of a business plan as a piece of sheet music, the score that orchestrates the functions of core components and loose ends of a soon-to-be company.

How to compose this document is a challenge many first-time business owners face, but the process can be as simple as posing a series of questions and doing the necessary work to find the answers. Done well, this Q&A will produce the information needed to fill out a basic outline detailing the mission, research, and strategy that will support the endeavor.

Business plans vary in size and specifics, but they generally adhere to a standard blueprint with certain indispensable elements. The following list highlights a few of these pieces.

  1. The executive summary

Executive summaries will appear at the front of a business plan, but it is strongly advised to write this piece last. An executive summary gives an overview of the rest of the plan, and its overall purpose is to convince the reader (be it potential investors, prospective employees, or even the owner) that the business is uniquely positioned for success. When writing this portion, try to stick to a single page, unless adding more will make a crucial difference.

  1. A description of the business

The business description allows you to go into more detail than the executive summary does. In this section, include a clear definition of the product or service that your business will sell. Also provide basic information on the structure of the business (i.e., is it an LLC, corporation, or nonprofit, etc.?). The description is an introduction and its contents should justify the inclusion of the sections that follow.

  1. Details on products and services

Business plans are useful because they can help people determine whether or not a product or service will sell and if it is worth the investment. Going into further detail on what the company offers should therefore describe not only how it works but also why it’s different and, most importantly, why it will sell. This section can be relatively short, too, but it needs to drive home a clear picture of the good or service itself so that people know exactly what they will be working with.

product workup

  1. Analysis of market competition

A good segue from the product or service details is to provide a preliminary analysis of the surrounding marketplace. Will the business be entering an established space? How will it stand up to competition? Will it be carving out an entirely new industry? How will it maintain position when other companies decide to compete? Part of this analysis will feature what can be measured now, and the other part will naturally feature projections on what one might expect in the future.

  1. The sales and marketing approach

After defining the market in which the business will operate, the next task is to express how to go about selling and marketing the good or service. The digital age now all but requires businesses to have an online presence, and this dynamic will figure heavily into this section. Questions to ask include “How will consumers find you, and how will you find them?” and “What is the target demographic that will help the company grow sustainably?”

  1. Outline of logistics

Another important section of any business plan is the one that lays out the logistical details of how the company will operate. Where will the business reside? What kind of staffing will be necessary up front? How many employees will be needed in a year or two? This outline should also feature information on overhead costs, legal and tax relationships, and what, if any, suppliers or distributors will be involved in the regular operations.

logistics

  1. Leadership overview

One might include the leadership overview in the same section as the logistics outline, but it many cases it is a good practice to give it its own spot in the business plan. Here, provide specific information on the size of the company and what kind of leadership bandwidth it will require. Entrepreneurs might start up a business with several co-founders or with an executive team in mind. Whatever the case, put it in writing, along with considerations for how the business will accommodate growth.

  1. Summary of finances

No business plan is complete without a log of the financial standing of the new company. This will include records of investments (if any) and startup capital. It will detail how the business will budget its costs and revenue, as well as what is still needed to get the startup up and running. In addition, the finance section should provide a plan of action for how the business will grow and for how it will respond to setbacks that may surface along the way.

 

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