Parts of a Business Plan
What Is in a Business Plan?
Business plans detail the concept of your business, assess the market you intend to enter, describe how you will operate, and contain financial reports. The parts of a business plan work together to form a detailed roadmap for your business. There are some elements that are standard in a business plan, but exactly what is in a business plan depends on your circumstances, your objectives, and your intended audience.
What Is In a Business Plan Is Determined by Your Goals and Your Situation
Are you a one person shop or small business writing a business plan for your own use or internal reference only? Is one of your goals to obtain a small business loan or acquire funding from outside investors? Are you a brand new business or do you have some history established?
If you are a brand new business, the financial section of your business plan will be based on projections rather than historical data. If you are applying for a loan, you'll need to detail how much money you need, what the money will be used for, and how you intend to pay it back. If you sell physical products, you'll have to determine the cost of goods sold. If you are a pure service provider, cost of goods sold is not applicable.
If you are planning on applying for a loan or seeking funding, loan officers and prospective investors are going to want to see a business plan. They will also expect certain items to be included.
The Parts of a Business Plan - Business Plan Sections Described
- Cover Page - The first thing that people see so it should look polished. It will have the name of your company, the company contact information, the primary contact's name, and a date. You'll probably want to include a copyright statement as well as a notice that the plan is confidential and may not be shared without your written consent. In highly competitive industries like technology, business plans are often numbered. The recipients are logged and the covering page may contain a line with the copy number and the recipient's name.
- Table of Contents - Not the most crucial part of your business plan, but your business plan table of contents makes the document look professional and organized. Readers will appreciate it.
- Executive Summary - An overview of the business idea that ties all the parts of a business plan together. This is the first thing that lenders or potential investors will really read so it's important to touch on all of the important points of your plan and be engaging. Write it last after all the other pieces of the plan are complete.
- Business Description - Describes your business in full detail. Include the details of your business structure, your products or services, and why a consumer or business would buy your product or use your service.
- Market Analysis - Discusses your target market, the scope of the opportunity, and industry trends. Investors will want to see a market that is big and growing.
- Competitive Analysis - The competitive analysis section describes the competitive landscape. You should also explain your unique selling proposition and spell out exactly how your business intends to set itself apart from competitors.
- Marketing Strategy - Explain your plan for attracting your target customers. Describe how you will position your brand in the marketplace. Outline which methods you will use to raise awareness about your product and bring in business.
- Operations - Detail how the business will function on a day to day basis. Explain the staffing requirements, logistics, vendor relationships, and accounting methods you'll use. How is your product manufactured and distributed? What is your credit and collections policy?
- Management - Who is responsible for each aspect of the business? What are the qualifications and responsibilities of each member of your management team? These questions must be answered in detail.
- Financial Analysis - You'll need to create balance sheets, profit and loss statements, and cash flow statements. If you are a new business with no operating history, your financial statements will be "pro forma" meaning projected. Include a summary where you state how much money you need to cover your startup costs, how that money will be spent, how you intend to repay, and how much of your own money you'll be putting into the business.
- Appendix - The appendix is where you attach all of your supporting documentation. Resumes of your management team, references, market research, existing agreements or contracts you have in place, patents, insurance policies, and anything else that supports the claims or assumptions made within the plan.
What Is in a Business Plan? The Parts of a Business Plan
What Are the Parts of a Business Plan I Should Focus on if I'm Self Employed or Not Seeking Funding?
If you are a solopreneur or financing your business entirely out of your own pocket, your business plan doesn't have to be as formal or as extensive as it would be if you were presenting it to bankers or investors. If you are writing a business plan for internal use only, you might focus less on certain aspects of the business plan. For example, you might lay out your marketing strategy in detail, but omit the sections of a business plan that would be of more interest to investors such as the qualifications of your management team.
Even if the finished business plan will only be read by you or used exclusively within your company, examining your business concept, conducting research, and preparing the plan will be extremely beneficial. You can write a business plan that clarifies your idea, establishes your business objectives, and outlines the strategies you need to focus on to reach your goals in 5 to 10 pages. The parts of a business plan that you might choose to focus on include:
- Mission Statement or Vision Statement - Instead of an Executive Summary, you might choose to write a mission statement instead. Describe the business you're creating and why you're creating it. Getting your vision down on paper will help you build the kind of business and company you've always wanted.
- Goals - Create clear and specific objectives for your business. Determine how you will measure success. Get more customers is not a goal. Secure 5 new accounts in the third quarter of 2012 resulting in monthly recurring revenue of $10,000 is a specific and measurable goal.
- Strategy - Will you be switching vendors to lower costs? Raising prices? Launching an aggressive advertising blitz? Outline the methods you will use to meet or exceed your goals.
- Marketing Plan - Every business needs a marketing plan. Determine who your target market is, how to get your product or service in front of them, and how to outdo the competition. Will you be marketing at trade shows, advertising on television, using direct mail marketing, buying leads, or using some other marketing method? Will you hire a marketing firm or do it yourself? How much will you spend on marketing?
- Budget - Create a balance sheet, an income statement, and cash flow projections.
You don't need a business plan with thousands of words and colorful charts. In fact, if you intend to use the business plan to guide you through the next year, the plan might end up in a drawer if it's too long and the information that matters to you most is buried.
What Is In a Business Plan?
If you're trying to attract financing, your business plan might look a lot different that it would if you were writing a business plan only for yourself. It doesn't have to look different of course, but what is in a business plan can depend on who is going to be reading it and whether you need outside investment. A business plan does not have to be lengthy or fancy in order to be useful. If you're self-financing, you can put more emphasis on the parts of a business plan that define your business, help you set goals, and give you direction.