So, perhaps you already understand a business plan to be the document that establishes your business and proves its profitability. However, that doesn’t necessarily mean you understand all 10 components that need to be included in one.
Today, we’re going to break down each one thoroughly in terms that will be simple for anyone to understand. But before we get into the nitty gritty, here’s a sneak preview of all 10 components you’ll be expected to include: Executive Summary; Company Description; Keys to Success; Market Analysis; Management; Products and Services; Marketing Strategy; Funding Request; Financial Projections; and Exit Plan.
Again, we know this might all seem overwhelming…but just stick with us and we promise by the end of this article you’ll be able to wrap your head around it all and even start writing your very own business plan.
Why 10 Components?
We know, 10 components may seem like a lot for one document, but trust us when we say there’s a rhyme and a reason for each of them.
While the number of components just happens to be the round number of 10, (with an optional 1th one that we’ll get into below), no section is superfluous. In fact, business plans are notorious for being concise and to the point, not verbose. But then still, the question stands: how come a business plan is expected to be 25+ pages?
Well, your business plan really is meant to prove to yourself, and the reader, that your business is capable of making money. And it does this by analyzing every important facet of your business, from the leadership team, to your offered product(s) and/or service(s), to your marketing strategy, and more.
So, while 10 components might seem excessive, trust us when we say it’s not. In fact, if done correctly, a business plan might even make you reflect on some parts of your business and make necessary changes so it will be more profitable in the long run.
If this ends up happening, don’t panic. Instead, be grateful, because in truth, that’s exactly what a business plan is for. To make sure that your business has a strong foundation and will be able to stand the test of time.
The 10 Components of a Business Plan
|Component||Questions it Should Answer||Approximate Length|
|Executive Summary||In a nutshell, who are you and what do you do?What’s your elevator pitch?What consumer problem do you solve, and why do you solve it better than anyone else?||1 – 2 pages|
|Company Description||When did your company get started?Where are you located?Who are the key people involved in your company?What type of business are you? I.e. LLC, S Corp, etc.||1 – 2 pages|
|Keys to Success||What key partnerships are necessary for your business’ success? I.e. your partnership with a manufacturing companyWhat key activities ensure that your business is profitable? I.e. “Unlike our competitors, our business…”What resources set you apart from your competitors? I.e. An amazing leadership team, cutting edge technology, etc.||1 – 2 pages|
|Market Analysis||What value does your company bring to the market? Or, in other words, what problem do you solve and why are you better at solving it than your competitors?What is your plan to forge and build long-lasting relationships with customers? I.e. new member incentives, membership rewards, and referral programsWho exactly does your business serve?What type of market is your typical customer: mass, niche, segmented, diversified, or multi-sided?||2 – 4 pages|
|Management||Who manages your business?What qualifies them to do so?What does the chain of command look like? (Graphics here, such as flowcharts, are encouraged.)||Length will vary depending on the size of your management teamFlowcharts of business organization are encouraged|
|Product and Services||What products and or services do you offer? (This can be in list format.)What does it cost to make your product and/or service? (Consider costs like production, shipping, wages, etc.)What is your profit margin on your offered products and services (should be at least 30%)?||Length will vary depending on how many products and/or services you offer, however do be sure to list each one along with a small description, its landed cost to produce, and why it’s better than what your competitors are offering|
|Marketing Strategy||How will you reach your customer base?Why will it be effective?How will you communicate with your customers before, during, and after a sale is made?How will you ensure customers return?How will you continually bring in new customers?Why is your business profitable? (i.e. Do you have cheap production costs? Can you charge more because it’s a “luxury item?” etc.)What are your streams of revenue? I.e. selling ad space, membership fees, etc.||2 – 3 pagesNote: You do not need to include a marketing strategy timeline here, that’s what a marketing plan is for.|
|Funding Request||How much money do you need?What, specifically, do you plan on using it for?Remember: this part should be rather convincing as it’s where you’re essentially asking the reader to become an investor, lender, or partner and commit monetarily to the launching of your business.||2 – 4 pages|
|Financial Projections||Where does your business plan to be financially one month from now? One quarter from now? One year from now?What evidence do you have to back these projections up? (Graphs are encouraged in this section).||2 – 4 pagesMay include graphs and current financial statements|
|Exit Plan||How will you pay back any loans your business has accrued?What’s the long term goal for your business? I.e. To sell it? Keep it in the family? Franchise? etc.||Length varies depending on how thorough your Exit Plan is.|
Additionally, sometimes business plans will have an optional 11th component known as the appendix. This is a section of the document that includes additional paperwork that did not feel appropriate to include elsewhere, including patents and contracts you might have referenced throughout the document.
But what if I still need helping writing my business plan?
Even if after reading the breakdown above, the 10 components of a business plan still scare you, remember: When you write a business plan, you’re not necessarily alone. You have your colleagues, partners, and employees to pull on for inspiration. In fact, some very new companies will often hold brainstorming meetings to gather ideas for the very purpose of drafting a business plan.
Another idea to consider if you feel lost in developing your first business plan is calling on some entrepreneurial contacts who may have experience in writing up this document. Their advice, or even better, their willingness to show you their own business plan, can really be invaluable, especially because the 10 components that must be included in a business plan are always the same, no matter what your business model is.
Another option to consider if you feel lost writing your business plan is to hire someone out. While this can be costly i.e. $50 an hour for 25 hours of work, or $1250 on the lower end of the spectrum, it is a good investment to consider. Especially if you feel as though you are already spending your time wisely on other necessary tasks for your business.
Our final and most favorite option though is using sources on the internet to teach yourself the skill of business plan writing. Why? Because every time you learn a new skill as an entrepreneur, you become more valuable and knowledgeable, which will in turn reflect in the success of your business. Therefore, do check out tools like this business plan builder software and free business plan templates in order to improve your business acumen and complete your business plan.
We know that the 10 components of a business plan might look overwhelming altogether, but just know that there are plenty of resources out there to help you. Including our free newsletter, which you can sign up to be a part of below.
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