A business plan serves as a roadmap, guiding the company's direction, and also as a persuasive tool for attracting potential investors and securing financing.
While the specific content of a business plan can vary depending on the industry, company size, and target audience, there are fundamental components to how to make a business plan.
1. Executive Summary
While it's typically the first section read in a traditional business plan, it's often the last written as it requires a comprehensive understanding of it. The executive summary begins with a "Mission Statement" that outlines what the company aims to achieve and its fundamental reason for existence.
For example, Apple's mission statement is “To bringing the best user experience to customers through innovative hardware, software, and services.”
The summary then includes a "Description of the Business Idea" that provides a brief explanation of the products or services offered, focusing on what the company does and the value it provides to its customers. It also identifies the target market, specifying the customer segments that the business aims to serve.
Next is a "Market Overview" that highlights aspects of the industry in which the business operates, including the size of the market, its growth potential, and the competitive landscape. The market overview should demonstrate a clear understanding of the industry dynamics and how the business is positioned within it.
The executive summary also presents "Financial Highlights" that summarize the key financial projections, including expected revenue, profitability, and funding requirements. The financial highlights provide a snapshot of the business's financial potential and its expected performance.
Finally, the executive summary concludes with a "Call to action." This section tackles the desired outcome, whether the business is seeking investment, a partnership, or customer acquisition. The call-to-action is direct, specifying what the reader is expected to do next and why it is beneficial to them.
2. Company Description
This is the very first thing to be done to make a business plan. The company description provides a detailed overview of the business, its history, and its legal structure. It should establish the company's identity and position in the market.
Legal Structure
Clearly specify the business structure (sole proprietorship, partnership, LLC, corporation, etc.) and explain the reasons for this choice. Consider factors such as liability, taxation, and ownership.
Business History
A short yet informative summary of the company's history is important. This should include the company's founding, milestones, and achievements. It should highlight the company's growth and evolution over time.
Mission and Vision
Clearly articulate the company's purpose, core values, and long-term business goals. The mission statement should define the company's reason for existence and its primary goals. The vision statement should outline the company's desired future state and aspirations.
Products/Services and Target Market
A quick detail of the offerings and explain the benefits they provide customers. Describe the ideal customer, including demographics, psychological attributes, and buying behavior. Understanding the target market is useful for product development, marketing campaigns, and sales efforts.
Company Culture
Explain the company’s values, work environment, and employee expectations. This information can help attract and retain employees, as well as improve a company reputation. A detailed company description helps stakeholders understand the business's essence and its alignment with their interests.
3. Market Analysis
A thorough market analysis is crucial for assessing the industry's potential and identifying opportunities and threats.
Industry Overview
Understanding the industry means examining its size, growth, trends, and problems. Analyzing revenue or market share shows the industry's scale. Spotting patterns and changes in the industry helps identify opportunities and risks. Seeing the challenges businesses face gives clues about potential problems.
Customer and Competitor Analysis
To reach customers, it's important to know what they want and like. Researching customer interest in products or services helps shape offerings. Analyzing buying decisions shows what influences choices so businesses can adjust their marketing.
Meanwhile, finding and studying competitors is key to gaining a competitive advantage. Assessing their strengths and weaknesses in terms of products, market position, and reputation helps spot chances to stand out. Knowing where a company does better than competitors guides product development and marketing.
SWOT Analysis
A SWOT (Strengths, Weaknesses, Opportunities, and Threats) analysis looks at a company's inside abilities and the outside world. By finding strengths, weaknesses, opportunities, and threats, businesses can plan to use strengths, fix weaknesses, take advantage of chances, and manage risks.
Market Segmentation
Dividing potential customers into groups based on shared traits helps tailor marketing and products. Understanding customer groups lets businesses create a better marketing plan and develop products that match specific customer needs.
4. Organization and Management
This section provides an overview of the company's internal structure and leadership and should display the capabilities of the management team and their readiness to implement the business plan effectively.
Organizational Chart
The organizational chart must visually display the company's hierarchy, clearly showing the relationships between different roles and departments. It should also clarify the chain of command and the reporting structure within the company.
Management Team
Provide detailed biographies of prominent personnel. These biographies should focus on the individual's professional qualifications, work experience, and any relevant achievements that demonstrate their ability to contribute to the company's success.
Advisory Board
If the company has an advisory board, this section should also introduce the external advisors, explaining their roles and how their expertise supports the company's goals. The inclusion of advisors adds credibility by showing that experienced professionals are guiding the company's strategic decisions.
Employee Structure
Describe the company's staffing plan, including the positions and responsibilities, as this will help to clarify how the workforce is organized to achieve the company's objectives.
Human Resources Policies
Outline the company's approach to employee management. This includes a description of the benefits offered to employees, the compensation structure, and the training programs in place to support employee development.
5. Service and/or Product
This section provides a comprehensive explanation of the company's products or services, focusing on what makes them valuable to customers and why they stand out in the market.
Product or Service Description
The description should cover the specific features of the product or service, and the explanation should leave no ambiguity about what the product or service is and how it meets customer needs.
Research and Development
Discuss any ongoing or planned R&D activities, and they should cover any current or planned activities related to improving existing products or services, as well as the development of new ones.
Intellectual Property
Outline patents, trademarks, or copyrights that protect your offerings. Clarify how these protections safeguard the company's products or services, preventing competitors from replicating or exploiting them.
Product Lifecycle
Describe the product or service life cycle and any planned enhancements or new offerings. Providing a clear timeline for these developments helps to demonstrate the company's long-term planning and commitment to innovation.
6. Marketing Strategy
This section explains how the business plans to attract and retain customers. Show a clear understanding of the target market and the strategies the company will use to reach that market.
Target Market
Reiterate the profile of the ideal customer, including demographic, geographic, and psychographic details. Provide a detailed segmentation of the target market, explaining how the company will address the specific needs and preferences of each segment.
Marketing Channels
Describe the marketing channels that will be used to reach the target market. Explain the marketing mix, covering the product, price, place, and promotion. Detail the specific channels the company will use, such as online platforms, social media, traditional advertising, and direct sales.
Sales Process
Describe the structure of the sales force, including the roles and responsibilities of sales personnel. Provide details on the sales compensation plan, explaining how it is designed to incentivize the sales team to meet or exceed targets.
Pricing Strategy
Discuss the pricing model, whether it is cost-based, value-based, or competitive. Explain the pricing objectives, such as market penetration, profit maximization, or customer acquisition. Outline the pricing tactics that will be used, such as discounts, bundling, or premium pricing.
Customer Acquisition and Retention
Explain how the company will attract new customers, whether through advertising, promotions, partnerships, or other methods. Detail the approaches that will be used to build customer loyalty, such as loyalty programs, excellent customer service, or regular communication.
7. Operational Plan
This section provides a detailed explanation of how the business will manage its daily activities.
Facilities and Equipment
Describe the business location, size, and layout. It should cover the physical space where operations will take place, whether it is an office, warehouse, manufacturing facility, or retail location. List necessary equipment and technology (e.g., machinery, tools, computers, software) for the business's operations.
Supply Chain Management and Inventory Management
Outline where raw materials or inventory will come from, how production will be managed, and the methods used to distribute finished products to customers. Then, describe inventory control systems and procedures. This includes how inventory levels will be monitored, how stock will be ordered, and how products will be stored.
Quality Control
Explain quality assurance measures to ensure product or service excellence. Include specific processes and procedures in place for inspecting and testing products, as well as how any defects or issues will be addressed.
Production Process
Finally, the production process details each step involved in creating and delivering the company's products or services. This description covers everything from the initial stages of production to the final delivery to customers.
8. Financial Projections
This section provides a comprehensive financial roadmap for the business, offering crucial insights for investors and lenders, and should include detailed financial statements and analyses that present a clear picture of the company's financial outlook.
Income Statement
Show the company’s revenue, expenses, and net income over a specified period. Provide a detailed breakdown of expected revenue from sales, operating costs, and other expenses.
Balance Sheet
The balance sheet should detail the expected value of assets such as cash, inventory, property, and equipment. It should also outline anticipated liabilities, including loans, accounts payable, and other debts. The equity section should show the projected ownership interest of shareholders.
Cash Flow Statement
Forecast the cash inflows and outflows of the business. Include projections of cash generated from operations, investments, and financing activities.
Break-Even Analysis
Conduct a break-even analysis to determine the sales volume needed to cover all costs. Calculate the point at which total revenue equals total expenses, meaning the business is neither making a profit nor incurring a loss. Determine the sales volume needed to cover costs.
Funding Requirements
By detailing the amount of funding the business needs and how it will be used, it should outline the specific purposes for which the funds are required, such as purchasing equipment, expanding operations, or covering working capital needs.
Financial Ratios
Calculate financial ratios to assess the company's financial health. These ratios might include profitability ratios, liquidity ratios, and debt ratios, among others. Each ratio should be explained, showing how it relates to the company’s overall financial performance.
9. Appendix
The appendix of a business plan is a section that includes supporting documents that provide additional details and information not covered in the main body of the plan.
Resume
The appendix might include resumes of management team members to provide detailed information about the qualifications, experience, and skills of the individuals who are leading the company. This helps to establish the credibility and expertise of the management team.
Market Research Data
The appendix may also contain market research data to support the claims made in the market analysis section of a thorough business plan. It might include statistics, surveys, and studies that provide evidence of market trends, customer behavior, and industry dynamics.
Letters of Support
Letters of support from customers or partners can also be included, as these letters provide endorsements from stakeholders, demonstrating their confidence in the business and its potential for success.
Legal Documents
Legal documents such as permits, licenses, and contracts are often included in the appendix. These documents show that the business is in compliance with all legal requirements and has established formal agreements with suppliers, customers, or partners.
Financial Statements
For existing businesses, financial statements might be included. It can provide historical financial data, such as income statements, balance sheets, and cash flow statements.
Final Words
Writing a business plan is the first step to a company's success. By using this free business plan template and doing thorough research, you can make a document that explains your business idea and attracts investors or partners.
