A business plan is very important both before and after establishing a business. You must prepare and write it accurately after conducting market research and developing the right attitude toward the business venture.
The essentials of a good business plan include:
- An executive summary
- A clear description of the product and the people behind it
- Research findings
- Marketing strategies
- Costs, wages, and financial projections
In other words, good business plans do not rely on expensive bindings, lengthy discussions, or fancy graphics. The emphasis should always be on solid information and reliable explanations of how that information was collected.
The following outline is designed to help in writing a solid business plan. Although the nine sections below are not mandatory in every situation, the information contained in them should still be addressed. Ideally, every section of a business plan should be easy to read and arranged in a way that is visually appealing to the intended reader.
A Cover Page and Table of Contents
First impressions are important. Every business plan needs an eye-catching, professional-looking cover page followed by an easy-to-use table of contents.
An Executive Summary
A good executive summary briefly uses one or two pages to describe the product or service, its competitive advantages, who the product will serve, the size of the market, the entrepreneur’s goals and objectives, and a few profitability estimates.
Keep everything short and direct. The objective here is to capture the reader’s interest, not to explain every detail.
A Full Description of the Product or Service
This section should explain how the product or service was conceived, why it is needed, its function and design, why it is different, and how it compares with similar products or services.
Focus on both competitive advantages and disadvantages, and provide a brief overview of the intended customer base. Profitability estimates — along with explanations of how those estimates were obtained — should also be included.
A Description of the Business
The goals and objectives of the business should be clearly stated, as well as the intended location of the business and the reasons for choosing it.
An explanation of the business’s legal structure and organizational setup is also essential. Comparisons with similar businesses can further strengthen this section.
Market Potential
This is where market research becomes important. This section should contain:
- A full assessment of the market, including demographics, characteristics, and trends
- A complete description of product demand, including where potential customers are located and their estimated numbers
- The future outlook of the market
- A thorough analysis of competitors, including their strengths, weaknesses, locations, and likely future actions
Make sure that all data used is accurate and reliable. Avoid exaggeration. If a bank loan or outside funding is being sought, all numbers and forecasts should be supported with clear explanations showing how the data was collected.
Marketing Strategy
This section explains how the business will introduce itself to the market, how the product or service will be advertised and promoted, the costs involved, market entry barriers and their solutions, pricing strategies, and distribution plans.
A brief explanation of selling procedures and how sales activities or the sales team will be organized is equally important.
Financial Overview
If outside funding is being sought, this will likely be the most carefully studied section by investors and lenders. In fact, many experts consider the financial section of a business plan to be the most important part.
Financial forecasts for the first, second, third, and fifth years should be included, along with balance sheets and clear explanations of how the financial figures were calculated.
The People Behind the Plan
This section should describe the main people responsible for implementing the business plan, including their skills, experience, education, and professional backgrounds.
It should also include:
- The number of employees required
- Wage requirements, including the entrepreneur’s salary
- Job descriptions and responsibilities
- Employee training procedures
An Exit Strategy
Because many entrepreneurs do not know when to stop, an exit strategy is an important part of a business plan.
For example, if the business becomes highly successful, it may eventually require an experienced manager to handle growth. At what stage will this happen?
On the other hand, if the business continues to lose money, there should already be a plan outlining when and how operations will end. Questions such as the following should be considered in advance:
- How much money will be lost before failure is recognized?
- Will the business be sold as a whole or in parts?
- What steps will be taken to reduce losses?
An exit strategy helps answer these questions before the entrepreneur falls deeper into debt.
Final Thoughts
A business plan is the foundation that provides a clear picture of what your business is and how far it can go. Therefore, a business plan should be written accurately and implemented properly to help the business grow and avoid failure.