Main components of a business planExecutive Summary. This is your five-minute promotional speech. This is where you explain why you're in business and what you're selling. Make a list of your company's daily operating expenses (rent, salaries, supplies, insurance, telephone, Internet, and the like) and the income you'll need to offset them.
If the expenses are too high, you'll see it right away and you can work to reduce overhead. I recommend using BizStats, a free online tool that helps you compare your company's expense rates with those of other companies in your industry. This identifies your company's sources of revenue and when they will arrive. For example, you can get revenue from a large quarterly order, as well as a steady stream of revenue from monthly sales.
Identifying periods of cash shortages will allow you to allocate additional resources to those slow times, avoiding cash crises that can make it difficult to pay your bills. Cash flow is different from profitability (the amount of money left after subtracting expenses from income). Your business may be profitable, but have poor cash flow. It's also possible to have decent cash flow and not be profitable, especially if you run your business with savings or a line of credit.
Use your business plan to understand where the money comes from and how much it's actually costing you to run your business. Of course, different companies have different time frames to break even and, ultimately, be profitable. Make sure that the cash available to start your business, plus the incremental increases in revenue, will hold it until your company begins to break even. Where will your sales be six months from now? A year from now? Realistic projections will help you identify how much you will need to reinvest in your company to cover expenses as more supplies, equipment and employees are needed to support its growth.
Trade associations and regional small business development centers (SBA resources that help entrepreneurs with everything from market strategy to basic research) can help you determine sales metrics for your area and industry. The executive summary may seem contradictory, but the executive summary of your business plan should be the last part of the document you write, although it will appear on the first two to five pages summarizing the entire plan and summarizing your company's strengths. If you're having trouble clearly articulating your company's purpose, strengths, challenges, and objectives in just a few pages, this is a sign that you may not be clear about your business vision or market strategy. It's a good idea to share your executive summary with someone objective, such as your accountant or a business mentor.
That way, you'll ensure that it's totally understandable and sensible when you show it to a potential lender or investor. According to a study published by Harvard Business Review, entrepreneurs who create business plans are 16% more likely to succeed than those who don't. These findings highlight the importance of taking the time and effort to develop a comprehensive plan. Not only can a solid plan help your company access investment capital, but, as the study found, it can even determine the success or failure of your company.
The executive summary briefly explains your company's products or services and why they have the potential to be profitable. You can also include basic information about your company, such as its location and the number of employees. The company description helps customers, lenders, and potential investors to better understand your product or service. It provides detailed descriptions of your supply chains and explains how your company plans to bring its products or services to market.
The market analysis section outlines your plans to reach your target audience. It usually includes an estimate of the potential demand for the product or service and a summary of the market research. Market analysis also includes information on marketing strategies, advertising ideas, or other ways to attract customers. A competitive analysis explains your company's unique strengths that give it a competitive advantage over other companies.
The organizational structure explains the legal structure of the company and provides information about the management team. It also describes the company's operating plan and details who is responsible for what aspects of the company. The financial plan is one of the most critical parts of the business plan, especially for companies seeking outside funding. If your company is already profitable, your financial plan can help convince investors of future growth.
At the end of the financial section, you can also include a value proposition, which calculates the value of your business. Some of the most common components of a business plan are an executive summary, a description of the company, a marketing analysis, a competitive analysis, a description of the organization, a summary of growth strategies, a financial plan, and an appendix. Learn the 11 steps to starting a business Try Shopify free for 3 days, no credit card needed. By entering your email, you agree to receive marketing emails from Shopify.
While recognizing that the days of the “crazy 100-page plan” are behind us, he says that Good Food Accelerator teaches entrepreneurs the five components of a well-structured company, including business finance, leadership, operations and manufacturing, marketing strategy and funding. With that in mind, Frabizio stresses, a business plan is a living document that can evolve and grow with the company. Shopify offers a free business plan template for startups that you can use to format your business plan. A business plan explains your company's products or services, how you expect to make money, the reliability of supply chains, and the factors that may affect demand.
The specific details of a business plan vary widely between industries and individual companies; however, most business plans contain six key components. As Purdue University explains, starting a business plan is one of the first things you should do before launching a company. Business plans can be complex documents, the product of a large amount of research and analysis that cover all facets of your business. Writing a business plan is a journey that can take you exactly where you expected or to a new kingdom with new opportunities you haven't thought of before.
Whether you're launching a new business or making changes to a company you already own, a business plan is the place where your hopes and dreams connect to the real world, like rubber on asphalt, propelling you toward realizing those dreams. If you have a complete set of financial statements and projections, your business plan can identify all of these potential pain points before launch. Because it will influence your business decisions, the ideal is to start with a solid plan and continue planning as your company grows and evolves. .
