Components of a Business Plan
Business plans are an essential element to starting and running a successful business. It doesn’t matter if your business is large, small, online or offline – having a solid business plan is a key indicator of future success. The part of the business plan that is helpful is that a business owner is forced to study the market, develop products and/or services for that market, and then use the figures discovered to determine in advance whether or not the idea has a chance of success. Many of the components of a business plan are easy to fit together once you know where they fit.
Believe it or not, for some small sole proprietor businesses you can write a one-page business plan that will be effective. A larger business will need more pages, but what’s important about your business plan is that it includes the following components and covers 3 to 5 years of projections:
* Executive Summary – This is first, but it’s written last because it is simply a summary of all the major points below. This usually covers less than two pages. For some small businesses, this one page is enough to help you get started on the right foot. You just summarize the highlights, like your projections and results.
* Company Overview and Description – Describe your company’s mission, unique differentiators, and the opportunity you are filling. Describe what gives your company an advantage, include the names and resumes of each person involved in your business, and describe everything you can about management and operations. This doesn’t have to be really long, but it needs to show why you are qualified to run the business.
* Market Analysis – Include a study of your competition, describe your customers and your industry as a whole, and how your business will measure up to each area that you cover. This is where you identify your target audience down to a specific persona. This is an important part of business to make sure you know your audience and their needs.
* Service or Product Descriptions – Detailed descriptions and samples of your products and services should go in this area. Describe your products and/or services and who exactly will be using them. This will be a starting point for where you are going, and shows your business is not just a one “dimensional” design, but that you understand that there are layers to your shop. Perhaps you talk about seasonal merchandise, or how you are going to bring in matching accessories and complimentary merchandise.
* Sales and Marketing Strategy – How will you get the word out to your market? Describe in detail each and every aspect of sales and marketing, including what type of shopping cart you will use on your website or in your store. Also describe how you will market, such as via social media, print advertising, television and more. The small details matter and show that you understand the way your market finds information.
* Financial Review and Projections – Your current finances should be included, such as your income statement, balance sheet, cash flow statement, and budget. You should also include probable income projections based on projected future sales. Consider setting up a budget proforma in QuickBooks to help you show the cash flows. Cash flow is the important part of your business – you will need to pay for inventory and staff before you get paid by customers. You don’t want to be short, so it’s necessary to know how much of a shortfall you anticipate.
* Plan of Action – Include a step-by-step plan of action to make each of your objectives and goals come to fruition. Including a time line of actions is helpful. Start from the projected date of opening and work your way backwards until today to create a realistic plan. This helps you and your investors to understand how long the process will take.
Taking the time to prepare a business plan will save you a lot of work later down the road. You might even avoid serious problems through analyzing the marketplace on paper, creating an environment where your business will be able to overcome serious errors before actually committing them. By doing your due diligence you’ll set yourself up for success. You know the saying, “Failing to plan is planning to fail.”
Did you make a business plan for your shop or are you “flying by the seat of your pants”? I’ve done both and I prefer to at least make a budget using YNAB – you need a budget. What about you?