In my article: 12 Reasons Why You Need a Business Plan, I said that a business plan is the road map for your business. It is the foundation of any successful business. In this article, I have explained the various components of a business plan and how to write an effective business plan that will help you to achieve your entrepreneurial objectives. This article will also guide you step-by-step on how you can write the type of business plan that would convince financial institutions to grant your request for a business loan.
There are several formats for writing a business plan, but the principles are the same. Whatever the format, the major sections of a business plan are as follows:
1. The Executive Summary
In this section you need to describe what your business is all about, why you believe in the business and why you think it would work. The executive summary is usually the first section readers of your business plan will look at because it summaries all other sections of the business plan – like the business overview/description, company profile, market analysis, your products/services, and your financial plan. Therefore, it is advised that the executive summary should be written last after you have written other sections of the business plan because you would have done the details already.
2. Company / Business Description
Here you give information about your company. Summarize what your business is into, its vision and mission statement and the company/ organizational structure. It should more importantly state the industry that your company belong, the overview of your company’s parent industry and your company’s potential role in the industry and how your new business will affect the industry.
3. Market Analysis
You should be able to state your target market for your product and why they will be buying your product, including the estimated percentage of the market share your product is expected to reach. Give a background information about the demographics and geographic location of your target market and their needs. Your target market should not be vague, but specific. Your market analysis should be based on both the market survey you have done on your own and by the surveys that other persons have done previously.
Your market analysis section should also include your findings about your competitors and your comparative advantage over your competitors. Your market analysis is very important because the result will give an idea on whether or not your business will be a success. It should contain an analysis of your business’ Strength, Weakness, Opportunities and Threats (also known as SWOT analysis).
4. Product and / or service
What are your products and /or services? How will your products benefit your target market? What problems do your products / services seek to solve? What other companies are offering similar or same products and why should the consumers buy you own products instead of that of your competitors? What uniqueness does your products and services bring to the table? All these questions should be addressed in the product section of your business plan.
5. Operations and management
In your operations plan, you should give information about where your business is located, the resources available for the business in terms of cash and equipment, the kind of technology you would use for your business operations, a description of your company’s manufacturing process and the kind of employees needed to man your operations.
In your management plan, you should describe your company’s management and organizational structure, both the internal and external management team and the company’s advisory board, if available. The responsibilities of the various members of your team should be clearly stated including a brief bios of each of them and their educational qualification and experience and why they are well suited for their various roles.
6. Market and Sales Plan
You would have written your market analysis before getting to this stage. Now in your marketing and sales plan you make a detailed and well-articulated marketing and sales technique you have chosen to employ.
Your marketing plan should include how you intend to get your products into the market and to consumers and the chain of distribution that you would use. You should decide if you will be reaching the consumers directly, or via middle men like the retailers and whole-sellers or both. Also state how you intend to get your products to these wholesalers or retailer or consumers.
Your sales part of the plan should describe your pricing strategy, your sales target and your sales team. Any business that doesn’t make the need amount of sales may not grow. Therefore, much thought and strategizing should go into your sales plan.
7. Financial Plan
This is the section where you should give details about the amount of funds you will need to start your business, otherwise known as your start-up cost. You need to state in detail the equipment, facilities and resources you will need to start the business and the amount you will need to procure or lease them.
Your financial plan should also contain your cash flow projections. Your cash flow projections should give an idea about your monthly and annual expected business profit, loss and expenses.
A detailed and well-articulated financial plan statement will aid you to obtain loans from financial institutions.
This last section of your business plan should include permits, leases, any available legal documents, your academic qualifications and that of your partners – if available and your product catalogue. There is no standard list of documents to include here. Just include any useful information or documents that can help to substantiate your business idea.
I hope I have shared useful explanation on how you can write your own business plan. Why not try writing one today. If you need further help on this, do not hesitate to contact us.
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