Understanding What Goes into an Effective Business Plan
When working with established business owners and fresh entrepreneurs, there’s one thing that I’ve found can help any business to succeed: a business plan.
A business plan is more than just a simple document. It’s a valuable tool that can provide guidance throughout your business journey and it can evolve and grow along with your needs.
With a plan:
- you’ll be better prepared to face an uncertain future,
- there will be a direct course of action to follow, and;
- it will even help to create a foundation that allows you to effectively budget and allocate resources in the future.
If your business is stalling without any real direction or strategy, then this guide will help you to write a valuable business plan that will aid your operational and decision making process in the future.
Dissecting the Key Elements of a Business Plan
Business Plan – Executive Summary
Your entire business plan should be written from an outside perspective. A new member of your organization should be able to read the executive summary and know exactly what you want to achieve with your business in the mid and long term.
Business and Industry Description
What does your business do?
What are your core product or service offerings?
This section will describe your business in detail as well as provide perspective on the rest of the industry. What are the needs of your consumers and how do established companies in the industry address these needs? How will your current and future offerings help to address these needs in unique or better ways?
Knowing your competition is key to succeeding in business. By understanding the overall competitive landscape, you will not only put your own strengths into perspective, but you’ll understand areas where there is room for improvement or innovation over the competition.
A competitive analysis can include the names and summaries of companies that you have identified as business rivals. Detail what they do and why it works.
When you understand your customers you will be able to develop better products and services, while delivering a customer experience that helps you to build a reputation as an industry leader. Try to look at this section as something that could provide value to future clients or even partners or investors.
Key information would include: customer demographics (age, gender, income range etc.) and spending patterns if you have access to this information. Develop a basic customer profile which can be used when developing new products or services. If you have real customer feedback available, even if it comes from competitive research, then this could be included in the profile.
Management and Operational Overview
What is the management structure of your business?
Are you a sole proprietor, are you in partnership with another owner, or have you already reached the point where you have a complex operating structure with multiple teams working in unique areas of your company?
The operational overview should describe the legal structure of your business, including a hierarchical leadership diagram. Specific roles and people in your business should include detail which describes their function as well as the strengths that are brought to the organization as a whole.
As your company grows, the operational overview will be invaluable because it will allow you to identify when new roles need to be created, where existing roles should be consolidated, or where you can reallocate resources to achieve your goals.
A business plan will include a general overview of your marketing strategy, which is another document that you will need to develop if you want to be successful.
Your marketing strategy overview will detail all current and proposed marketing channels, along with any existing data that shows the effectiveness of these channels. If you are creating a new business and don’t yet have any marketing metrics, then this section will include an outline of your plans and any supporting data that supports your chosen channels.
Look at the current financial status of your company and record the figures in your business plan.
- What is your operating income (earnings before interest and taxes/EBIT)?
- How much of your budget is allocated for research and product development?
- What is your allocated spend for marketing?
- How much do you need to earn to stay in business.
- Where will the money come from (sole proprietor, investors, business loans, grants etc.)?
Keep Your Business Plan Concise and Use Supporting Data Wherever Possible
Details are important in your business summary, but don’t go so deep that the business plan becomes difficult to read. You want your business plan to be read, not just by you, but by future employees, partners, investors, loan officers etc. The longer your business plan is, the less valuable it will be.
Know also that you may need to write more than one business plan to cater to a specific audience.
For example, a business plan for internal use may include more data relating to your product or service offerings (including technical terms), whereas a business plan for an investor or a loan officer would be more focused on your high level business goals, strategy, and financial structure.
When you take the time to think about what goes into your business plan and who will be using it, you’ll find that it’s better able to serve its purpose of being a tool to both run and grow your business.
If you’re looking for more, we’re here to help you develop a business plan and build your business.
© Copyright: 2018 Peter Spann – All rights reserved