components of a business plan

Business Plan Outline

There are 8 primary components of a business plan:
1. Executive Summary
2. Business Overview
3. Management Team
4. Industry Analysis
5. Marketing Analysis
6. Operations Plan
7. Financial Plan
8. Risk Section

Executive Summary


An executive summary is a 1-2 page overview of your business plan; it is a summary - brief and concise. It is important to note that while it is presented first in your plan, it is the last component that is written. It should describe your business, the problem your business is going to solve, the target market, and highlight the financials. An executive summary contains the following:

- Business Description
      o Business name, type of entity and the key personnel
      o Product or service
           State the need and how you will fill this need
      o Your industry
      o Target market/Niche market
           Demographic components (i.e. age, education, sex, etc.)
      o Your location
- Capital Required for Your Venture
      o How much you have invested
      o Existing financial backing (if applicable)

Business Overview


A business overview provides more in-depth insight on your business. In this section you will be more descriptive of your venture and place an emphasis on the "who, what, when, where, and how." If you've established a mission and vision statement (which is recommended), they will go in this section. Communicate if your venture is new, an acquisition of an exisiting company, or if you are buying a franchise. You will also want to describe what kind of legal entity you will be establishing (sole proprietorship, partnership, LLC, or corporation.

Additionally, a business overview goes into detail about what your business is going to offer and whether it's a product or service. If the business is going to provide a service, elaborate on how you will reach your customers and what differentiates your business from others; you will want to do this for a product as well. If you are a product related business, the business overview should provide details on where you will be positioned- will the product be manufactured by you? Are you selling direct to consumers, or to other businesses? You will also want to address your location and how you will operate your business (brick and mortar or e-commerce).

Management Team


The management team section provides an opportunity to convey your knowledge, skills, abilities, experience, and everything in between; to include partners of the business (if applicable). Here you will address the management structure; the "chain of command" and who will lead each area of responsibility. Experience is critical, as potential investors want to see that the business has solid leaders capable of leading a successful business. Point out not only relevant professional experience, but more importantly successful experience these leaders have had. If members of your management team are coming from other industries, tie their experience into your current venture and place an emphasis on the value they will add to your business.

Industry Analysis


An industry analysis is a section that will require most of your time; it requires a lot of research to gather facts on your industry and how your business will fit in. Note- ensure your facts come from credible resources and cite them! Ideally, information will come from .edu or .gov sites, or personal surveys. In this section you will want to start by discussing your industry as a whole, then progress to your specific niche in the market. Address specific trends in your industry and communicate the outlook based on the trends.

If you are offering a niche product or service, it is okay to mention related statistics of the larger industry, but focus on numbers/statistics related to your specific niche. Be sure to understand your product and where it fits within the industry. A SWOT Analysis and Porter's 5 Forces are two popular approaches to conducting an industry analysis.

Marketing Analysis


A marketing plan describes how you will earn revenue. It entails a thorough analysis of your product and addresses the (popular) 4 P's of marketing; product, placement, price, and promotion. Get specific here. Emphasize the specifics of your product or service, and provide in-depth details of your consumer (your target market). This area digs into the details of geography, demographics, and psychographics; physical location (where), type of person (what), attributes of the people (who). Psychographics are the details of what make up the people (are they into fashion, are they energetic, outdoorsy, introverted, etc.).

 

The small business administration also offers a 30 minute course providing a quick overview of how to conduct market research.

Operations Plan


By the time you get to this section, you will have done A LOT of research. In this component of a business plan you focus on how the business will operate. You should focus on the daily operations (with a fair amount of detail) and address long-term goals. Discuss scalability (the growth potential) of your business and how you will execute changes to enable growth.

Daily operations should cover: location, facility, required equipment, as well as the processes required to carry out your production or services. Address processes related to purchasing goods/services, and any inventory related information. For example, how much inventory is needed, where will it be stored, and how will it be controlled. For day to day operations discuss the distribution process (from raw product to end consumer) and place an emphasis on the logistics.

Financial Plan


Your financial plan is a look at how you expect the business to do; be conservative and realistic. Try not to let your enthusiasm for your new business sway you into inflating your numbers; be objective. Investors do this for a living, so they will see through it. If you are a new startup, coming up with these numbers will be challenging and will require more in-depth research. If an industry already exists try to get numbers from other start-ups in the same industry and use them for comparison purposes against your own numbers. The financial sections consists of pro forma statements (balance sheet and income statement) that outline what your expectations are for the first three years (but you may want to go out to five years if your business requires extensive capital).

Risk


The risk component of a business plan covers just that, RISK. Be objective, critical, and address all the risks you see. An important part of addressing these risks is providing a risk mitigation plan; how do you plan to confront these risks, or how will you overcome them. While you are doing research these will pop up and you will want to be aware of them.