Writing a business plan is important for many reasons. The primary justification for taking the time to prepare a solid plan for a business is to ensure that a well-researched plan of action is clarified. The research and thought involved in compiling a plan guarantees that a business is starting with a complete understanding about competition, marketing, operational, legal and financial considerations.
Another reason for preparing a plan for a business is to secure financing. Details about a company’s goals and resources accompanied by a realistic plan of action impresses investors and partners, attracting much needed capital in the forms of loans or investments. One of the main reasons that businesses fail is due to a lack of capital. A plan is required by many prospective financial partners so that they can evaluate a financial relationship.
A business plan includes sections addressing certain key aspects of a business. While plans differ, there are certain expected components. An executive summary is recommended as the first section since it provides a snapshot of the business and summarizes goals.
Other sections of a plan include a market analysis, company description, organization and management, marketing and sales management, service or product line, financial projections and funding request. Some plans also have an appendix. The appendix is optional and typically has resumes, leases and legal documents for review. Below are brief descriptions of the major elements in a plan for a business.
Business Plan Executive Summary
Depending on the phase of your business, different elements are expected in an executive summary. For an established business, the mission statement, growth highlights, product or service descriptions, financial information and goals for the future are common areas discussed. For a new business just getting started, there will be less information in this section. For a startup business, it is important to focus on the market analysis that motivated the owners to start the business and the background and expertise the management team brings to the business.
Market Analysis/Company Description
As is implied by the title of these sections, the market analysis and company description cover a review of the industry and information about the target market. Factors such as the demographics of the typical customer and an analysis of competitors should be discussed along with how the company expects to capture market share. This section should also comment on possible barriers to be faced as a new company entering this market and how management plans to overcome them.
Organization and Management
By glancing at this part of a business plan, it should become clear what the organizational structure of the company is and how the management staff and the board of directors can help the company achieve its goals. An organizational chart provides a clear illustration of the management hierarchy. Management profiles are usually included.
After analyzing available historical and prospective financial data, financial projections can be estimated for the future. By planning for future revenues, management can better anticipate costs. Financial projections are also used to get funding and for hiring and training purposes.
A business plan should be prepared by any serious businessperson. Without a plan in place, success is unlikely. Investors and lenders expect to see a business plan before considering a partnership with a business.