A detailed business plan is one of the basic and most essential requirements when starting any kind of business. Without a proper business plan, it can be hard to keep track of its progress and growth. And not only will it be a personal road map for your business, but it can be critical in getting you the funding that you need for your business idea.
5 essential parts of a business plan
Here are the vital elements that should be included in any business plan:
1. Executive summary
The executive summary should be an overview of your business and act as an introduction to your plan. Since it should include information on each of the following sections, you might want to save this for last.
In addition to summarizing the business plan, it should also explain what sets your business apart from the competition and why that particular audience might be interested.
2. Product research
Describe the product and service that your business provides. The product research section should contain:
- Benefits of the product.
- How it differs from other products currently available in the market.
- Disadvantages associated.
- How your business develops products or services.
- Research and development of future products.
3. Market research
This section is where you describe the market you intend to serve. You’ll might want to include:
- A description of your target market.
- Strategies that you are planning to use to gain as big a share of the target market as you can.
- Specific customer profiles from different target markets.
- A list of your main competitors.
- How your products or services compare to your biggest competitor.
Underestimating the strength of your competition can often lead to business failure. You should research the competition thoroughly so that you can find ways to gain a competitive advantage.
4. Sales plan
Your marketing and sales plan should be a description of your strategy to increase sales specifically aimed at your target market rather than the general buying public. Your business plan should also include sales strategies and promotional activities that you are planning to undertake to increase sales.
5. Financial details
Outline the financial details of your business clearly. This section should include information about:
- How much funding your business needs.
- Where you expect to receive the funding from.
- Pricing of your products.
- Sales forecasts.
- Return on investment.
- Plans of future expansion, their financial requirements and how you expect to fund it. how you hope to raise the money for the expansion.
- Financial forecasts for at least three years.
Provide an explanation for any numbers rather than just listing them and briefly describe the process you went through to come up with any forecasts.
5 tips to write a killer business plan
- Spend time on research. Before you even think about writing, focus on researching every aspect of your company, from analyzing your products and market to suss out what makes your company truly unique.
- Tell a story. Numbers are great but often don’t give the why of your company. Make sure each section supports the others and the main argument of your business plan: What makes your company indispensable.
- Back up your claims. Graphs, and in-text data can make it easy for readers to show where your claims are coming from. Including an appendix with extra documentation such as permits and resumes also makes your plan appear strong.
- Consider your audience. Are you applying for a loan? Pitching to your investors? Each time you use your business plan, go back to it and make sure it works for the audience you have in mind.
- Have someone else look it over. Having a pair of fresh eyes look at your plan can help you spot errors and weak points you might not have noticed on your own — even if they don’t know anything about business plans or your business.
4 pitfalls to avoid
- Not knowing your numbers. By paying careful attention to the financial details of the business plan, you will be able to determine the exact capital expenditure that is required for your business.
- Being sloppy in presentation. A business plan should always be drafted and printed professionally.
- Being overly wordy. The plan should not be too verbose and should highlight all the main points clearly.
- Starting with your summary. Saving the summary for last can help make sure you won’t miss out on any vital points and that it is a clear summary of your entire business plan.
Why should I make a business plan?
A business plan is often required when you apply for a loan or pitch to investors. But even if you aren’t looking for financing, a business plan can help keep your business organized and on-task.
It should be a living document — as your business grows or shifts directions, update your plan to reflect those changes. Having an up-to-date business plan on hand also makes it easier to apply for financing and be prepared for lender interviews.
A business plan can make a huge difference in getting funding for future projects. And it can keep you and your employees focused on the big picture. You can learn more about how business financing works by checking out our guide to business loans.