Are you ready to start your dream business so that you can begin living life on your terms? It’s the season of entrepreneurship, as 2021 saw a huge increase in the number of businesses starting in the US.
But before you can start applying for business licenses, looking for commercial real estate, and making sales, you need an important document in place. You need a business plan.
There are many different parts of a business plan. And you can write one as short as one page or as long as a book.
The length isn’t as important as the content. Business planning takes discipline. But if done right, this document will guide you through your highs and lows and ensure you end up reaching success in your venture.
Keep reading to learn about the importance of a business plan and what components of a business plan to incorporate.
1. Executive Summary
When writing a business plan, you’ll complete the executive summary last. However, it’s the most important component and it will be placed at the beginning of your business plan.
Whoever needs to read your business plan will want a short, thorough summary of all aspects of the business and the corresponding plan. It should tell them everything they need to know about why the company exists, what it plans to do, and what steps it will take to get there.
2. Company Description
Here is where you get into the details about the company. What are the exact products and services that will be offered? When will each product and service be available?
If you’re selling products, where and how will they be sourced and manufactured? Who is the target customer and how will your business be positioned to reach them?
Describe in detail what your unique selling proposition is. How is your company going to stand out from all of the competition? In what ways will you ensure you earn enough business to not just survive but to thrive?
3. Market Analysis
Next up, you need to show your research about the current market. If you’re selling locally, what is the state of the economy? In what area do you plan to do business, and why is that location ideal for you to set up shop?
What is the demand for your product or service? Are there enough prospective customers in the area you plan to serve? If so, how much money do they make?
You need to have a very good understanding of your local area including the demographics and psychographics of your target customers.
4. Competitive Analysis
Now you get to provide information on all of the competition. You’ll have both direct and indirect competitors that you need to research.
Direct competitors are all other companies offering the same products and services, solving the same products, to your ideal customers. How many of these companies are there and how good of a job are they doing? Is the market oversaturated or undersaturated?
Describe each competitor in detail. What do they offer, what is their quality level, and what is their price level. Then describe why your company is better.
Don’t forget to talk about indirect competitors. For example, if you are opening a coffee shop, other coffee shops are your direct competitors. But bakeries and donut shops might be indirect competitors.
Even gas stations, which offer hot coffee and pastries, might be an indirect competitor.
5. Business Structure
Next up, detail the structure of your business. Will you be operating as a sole proprietor, a partnership, or an LLC? Or is there another structure that is better for your business?
If other people are involved in the business, make sure to include them in this section. Who are the owners and what is their ownership stake? What are they contributing to the business? Who will be managing the day-to-day operations?
If you’re going to hire people, when will that be? How many people will you need to hire, and what background do they need to have?
And how are you going to manage and oversee performance? Will you use performance management software? If so, you can find more information here about using it successfully.
6. Detailed Products and Services Overview
Now you get to detail your products and/or services. What exactly will you be offering? What is each of your individual products and services?
What are your customers most likely to purchase? Which products and services will be the most popular, and which exist as supporting products and services?
How much will you charge for each, and how much profit will it generate for your business? And how many do you anticipate selling per day?
Who is going to be your supplier? Everything related to selling products and offering services needs to be listed here.
7. Marketing Plan
One of the most crucial aspects of your business plan is the marketing section. How do you plan to market to your target customers? How are you going to generate business?
What advertising methods will you invest in? And what is the process customers will go through from the time they discover your business to the time they make a purchase?
8. Sales Strategy
After you market, you need to make individual sales. What is the sales process? Do you rely on agents to close sales?
Will you have an online checkout process? Or will everything happen in person?
Describe the exact process customers will go through in order to give you money.
9. Funding
Your business needs at least some startup funds to get going. Where are those funds coming from? Personal savings? The sale of investments? Loans or investments from friends or family?
Or do you need to go to the bank and get a loan? How much money do you need and what exactly will it be used for?
10. Financial Projections
Lastly, you need to show how much you anticipate making every day, week, month, and year for the next few years. Show a few variations to see how much you will profit if the business is as expected, better than expected, or worse than expected.
Don’t Skip These Parts of a Business Plan
There are other parts of a business plan that you can include, but these cover the basics. At a bare minimum, make sure you include these in full detail to help guide you and also to encourage investors or lenders to provide you with cash.
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