Before you build a business plan, you need to understand what a business plan is for and how it will be used. A business plan has multiple functions, most of which are financial, but they can also help you know what you need to focus on every new year your business exists. Most people believe you need a business plan to start your business and don’t realize as your business grows and changes, so will your plan. Businesses constantly have to change strategies or budgets. Your business should not be the same as it was when you conceived your initial business plan.
Your business plan is, at its core, an introduction of your business, what it does, and what it is expected to do to anyone who reads it. The target audience of most business plans is those who would be investing in or financing your business. But you are also always going to be a member of the audience of your business plan as you should be referring to it and changing and updating it as your business changes and grows. To make an effective business plan, seven components must always be incorporated. Here they are and what they should include.
Executive Summary
The executive summary will be at the beginning of the business plan, and it is what it sounds like. It is a short but extremely detailed summary and overview of the business plan. It is an “in-a-nutshell” piece that should be engaging and grab the reader, making them want to dig into your business plan’s finer details. If the executive summary is ineffective, most potential lenders, investors, or partners will move onto the next business. Though it is the first thing in the business plan, it should be written last to include a thorough accounting of the entire business plan.
Company Brief
The company brief is the component that will be more about the personality and mission of your business. This area will include your mission statement and what makes your company unique, especially if it is in a market with a lot of competition. Investors, partners, and lenders want to know if this is a good investment, and this component can give them a sense of that.
Market Analysis
For the market analysis component, the title of it says it all. You will have to do a fair amount of research and market analysis to have insight into the market you are entering. For the reader, this area should talk about where the market has been, where it is now, and where it is expected to go, and how your business fits into that flow.
Competitive Analysis
Every business plan should have a strong awareness of the competition. The best competitive analysis component will show where your competitors excel and identify their weaknesses and shortcomings. This awareness will show potential shareholders and lenders that you understand what works and what doesn’t for your business. This will go a long way to gaining financing because the risk versus reward will entice someone aware of how their competitors stack up and that you are aware of their mistakes so they can be avoided.
Marketing Plan
The marketing plan will be of much interest to potential shareholders or lenders because, in small businesses with shareholders, there will be an expectation that some of the invested income be focused on marketing. The marketing plan has to show you understand your business, the market, competitors, and what you need to do to drive your company.
Sales strategy
Sales are the most important area in a company as it is how revenue and profits are generated. Without sales, a business will fail and die. Your business plan should include a strong and well-planned sales strategy. This strategy will go hand in hand with the marketing plan but has unique qualities as to what is included in the strategy. You will need to do research specific to the market you are entering to devise the most winning sales strategy.
Financial Plan
Though your financial plan is at the end of the business plan, it may be the most important when it comes to potential investors, lenders, or partners. This area is where you discuss initial investment needs and both short and long-term projections. In an already existing business, this component of the business plan can be fairly easy to compose. However, for a new business, you are using other businesses in the same market of similar size and using analysis of these businesses to make predictions and projections. This component will likely be of most interest to your readers because it will give them an insight into what’s in it for them financially.
Each business is different, so your business plan may look different from your competitor’s business plan. But a strong business plan that will have the most chance to help your business receive financing is key when starting a new business or even expanding an existing one.
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