You probably know that there is more to starting a business than you initially thought. There are so many pieces to put together, coordinate and do before starting a business. Many entrepreneurs are either overloaded with information or confused as to where to start from!
A business plan is a formal document that put these ideas together in a logical sequence. Just like a blue print is necessary for building a house, a business is the THE first step in starting a business. It is a realistic and a workable plan that outlines various aspects of business including industry performance, market statistics, and financial summary and so on.
Alan Lakein once said, “Failing to plan is planning to fail.”
Many entrepreneurs write business plans only when they seek financing or start-up capital for their business. I have always felt that a business plan is an essential document to any business whether or not it is seeking capital. Yes, investors and bankers need a business plan to understand your plan, but more important than that is you being sure as to what you need and where you want to go!
However, in order to write down your business ideas there are several aspects that you need to research upon. Most of this information would be available on the internet or with industry and trade associations. Once the plan is written, it will give you a complete picture of the business including its potential weaknesses, opportunities, strengths, threats, legal and financial considerations and so on. This will help in completely understanding your business and defining its framework before you go ahead and jump into it.
Here, we’ve summarized the key sections that you’ll find in a business plan.
The Nine Key Sections of a Business Plan
1. Executive summary
This is one of the most critical aspects of your business plan. I have seen many clients whose plans were rejected by investors just because the executive summary was not well written. An executive summary is a one (or two) page summary of your entire business idea, the industry, market, competition, management team, risks, financial projections and the implementation plan. Ideally, the executive summary should be written last after the entire business plan (including its financials are ready)!
2. Business/Company Overview
This is the first section of your main business plan. This should start with an introduction and a brief business overview. This should include details on the history of the business, type of entity, mission and vision statement, objectives, ownership structure and a brief summary of the financial proposal/funding request.
3. Products and Services
This section explains to the reader, the products and/or services you propose to sell. Here you need to give the detailed product(s) information, features, benefits, value proposition, competitive advantages, how and where your product/services will be produced/rendered.
4. Industry overview
The industry overview section of the business plan demonstrates the viability of your business idea by discussing the size and growth of the industry. We generally recommend our clients to use the ‘funnel approach’ when writing this section of the business plan. Under the funnel approach, the industry overview of the entire country is given first, followed by the region/state and then narrowed down to the performance of the industry in the cities/towns where you propose to have the business. Any industry permissions (such as pollution certificates, permits, licenses etc) should also be discussed here.
5. Marketing Strategy
The marketing section of the business plan is one of the most important sections of the business plan. Even if you have the best product in your entire industry, you need to plan on how it should reach the customers and where they are! Here you should describe the target market segment, competitors, and the key value proposition.
You also should discuss what will be your pricing and promotion packages and how these will appeal to the target customers. You might also have to factor in the latest trends such as social media, networking and the mix of each type of these tactics and how they will affect your sales.
6. Operations Plan
An effective management team is the key to driving any business from where it is now to where it wants to go. In this section, provide a profile of your management team, your manpower plan, your production plan, and an overview of day-to-day operations. It is very critical that this section is written well since people will bet on the jockey than bet on the horse.
7. Financial plan
Many entrepreneurs that I have worked with fear this part of the plan and somehow or the other try to avoid it. This is THE most important part of the business plan since investors or bankers will not invest if the business plan is not financially viable. This section should contain financial projections for at least three to five years and should include income statements, working capital statements, cash flow statements and balance sheets.
Many business plans that I have reviewed do not contain an analysis of these financial statements. Ideally a simple ratio analysis, industry benchmarking, charts and graphical representations go a long way in making this section appealing to the investors.
8. Project Appraisal and Risk Analysis
Nine out of ten plans do not have this section. From a readers’ perspective I can’t stress how important this section of the plan is. This section will discuss the key risks that the business is exposed to and how these risks are proposed to be mitigated. For example, if you are planning a restaurant and assumed that 100 customers will come in everyday, this plan will analyze the sensitivity of your assumption of 100 customers on various factors such as profitability, cash flows etc – What if only 80 customers come? Will I make sufficient profits to repay my loan?
Again, this is one of the most commonly ignored sections in a business plan. Having read your complete plan, the reader would like to know the next steps in making this business idea a reality. In this section of the business plan, you should discuss the key milestones in the near future, how you are going to achieve them, who (among your management team) are responsible for each of these milestones and so on. This would give the business plan a complete finish from being just a concept to making it a reality!