10 Key Components of a Business Plan
Prepare Your Business Plan
Are you starting a business? If so, you will need a business plan. This article describes the most common components found in a business plan. There are no hard-and-fast rules requiring all of these components. However, as you prepare your business, think about how to include all of these elements so that you provide a complete picture of what you expect from your business project.
1- Cover Memo
The cover memo provides a brief description of your business plan. It should personally identify the person to whom you are sending the plan, and any personal connection they may have with you and your plan.
2- Title Page
The title page should include the name of your business, its industry, and who prepared the business plan.
3- Table of Contents
A table of contents will make it easier for your reader to find the information that he or she needs. If you are writing the document in Microsoft Word, use its automatic table of contents function.
4- Executive Summary
Here is your chance to grab your reader by the necktie, draw him or her in, and get him or her to support you. Your executive summary should summarize the nature of your project and present a simple, compelling case for it. It should start with a basic statement of your business project. The entire executive summary should be less than a full-page, using single-spaced type.
5- Description of the Initiative
In your first sentence, define your business concept. Then, explain the importance of the project. Next, describe your project in detail. Make sure to discuss how it is different from other competing projects that your readers may see.
6- Organizational Structure
Explain how you plan to manage your project, identifying individual roles and, if possible, who do you expect to fill those roles. Also, provide biographies of key people who will be working on the project. If you are not physically around, will you still be able to manage your business from anywhere or will someone else do it for you?
7- Market Analysis and Plan
Provide a market analysis explaining who will buy your product and why they would want to do so. What prices will your consumers expect to pay? Who is the competition? Also, explain how you plan to reach your sales market. Will you be using sales agents? Advertising? Social media? How much will these efforts cost?
8- Financial Projections and Plan
Will your venture be profitable? Provide projected financial statements for at least three to five years into the future, focusing on cash flow. If the business is expected to be seasonal, break down your cash flow analysis by month. How much financial resources will you need to support the business until it is profitable? Where do you expect these financial resources to come from? Give an example of how your small business can save money on HR. Provide a break-even analysis, explaining how sensitive your projections are to different sales assumptions.
9- Key Performance Measures
Identify several performance measures that you expect to use to monitor your venture’s strategic progress. These measures could include sales, number of customers, or even the number of website hits.
10- Strengths, Weaknesses, and Risks
No business plan is complete without identifying the strengths, weaknesses, and risks of the plan. Why identify weaknesses risks? By listing the weaknesses and risks, you show the reader how you plan to address those weaknesses, and the steps that you are taking to mitigate risks.
A business plan can take a lot of work to prepare. It should include a cover memo, a title page, table of contents, executive summary, a description of the project, the planned organizational structure, a market analysis and plan, financial projections, key performance measures, and discussion of strengths, weaknesses, and risks. However, taking the time to prepare well could open huge doors of opportunities. There is no gain without pain. Start working on the components of your business plan and talk to the appropriate person to whom you will display your money-making strategy.