Business Plan Core Components
When considering what you want to include in a business plan it is important to reflect on both why you are writing the plan and who the plan is for. Remember, a business plan serves as a roadmap for your business and provides the information necessary to help you make strategic decisions that will lead to success and external parties the information they require to determine their view on your organization.
Executive summary
The executive summary should provide an overview of the entire business plan and should include a brief description of the company, its mission statement, its objectives, and its competitive advantages. The executive summary should include a brief overview of the company's products and services, its market analysis, its marketing strategy, its financial projections, and its management team. The executive summary should also provide a summary of the key points that will be discussed in the business plan. This should include any unique features of the company or product, the competitive advantages it has over other similar products or services, and any potential risks or challenges that may arise as the business grows. Keep the executive summary as brief as you can; remember, it is a summary and your detailed information in the business plan will be included throughout the document.
Mission and Vision Statements
The mission and vision statements of a business plan are a short, concise statement of the purpose and goals of the company. The mission statement typically outlines why the company exists and what it hopes to accomplish, while the vision statement describes the company's desired future state. Both statements should be actionable, inspiring, and aligned with the company’s values. When writing a Mission Statement for your business plan make sure it reflects the company’s core values. Keep the statement specific, measurable, achievable, realistic, and more importantly timely (SMART). As your mission statement will be used throughout your organization and may also be provided to other related stakeholders, make sure it makes use of inspirational language.
Mission statement
Your mission statement is an opportunity to present an inspiring vision for your company and demonstrate that you have thought carefully about its purpose. Think about why you decided to start your business and what you hope to achieve. Be sure to keep your mission statement short and to the point; you don't want to overwhelm readers with too much information at once.
Simple mission and vision statement examples
Mission Statement:
We are a customer-focused organization, dedicated to providing innovative and reliable products and services that meet and exceed our customers’ expectations.
Vision Statement:
We strive to become the premier provider of our customers' preferred products and services by leveraging cutting-edge technology and best-in-class customer service.
| Mission and vision statements from well-known global organizations 1) Microsoft Mission Statement: “Empower every person and every organization on the planet to achieve more.” 2) 2. Amazon Mission Statement: “To be Earth’s most customer-centric company, where customers can find and discover anything they might want to buy online.” 3) 3. Google Vision Statement: “To organize the world’s information and make it universally accessible and useful.” 4) 4. Apple Vision Statement: “To make the best products on earth and enrich people’s lives.” 5) 5. Walmart Mission Statement: “We save people money so they can live better.” |
A Vision Statement should envision the future and articulate your desired state. It is your businesses own aspirational yet achievable statement of what you wish it to achieve. When writing the vision statement, it is also important to prioritize concrete objectives and measurable outcomes, keep it simple, memorable, and inspiring. Also, it is important to ensure the vision statement is aligned with the mission statement and organizational core values and vice versa.
Company description and background
The description of the business should include information about the company's history, its current operations, and its future. It should also include information about the ownership structure, the management team, and any key employees. This section also provides potential investors with an overview of your business and its objectives. It should give them a clear idea of what you’re trying to achieve as well as some insight into your company culture. Before you begin writing your company description and background, it’s important to do some research on your industry and competitors. Doing so will give you an understanding of where your business fits within the larger marketplace and what sets it apart from other companies in the industry. Having this knowledge will also help you make informed decisions about how to craft your company’s description and background.
By providing readers with an overview of your company’s history, mission statement, values, recent accomplishments, and future plans, they will be able to get a clear picture of who you are and what makes your business unique from other businesses in its industry. Writing a compelling description and background section for your business plan is essential to helping potential investors understand why they should invest in your business now instead of waiting for something better to come along later down the road.
Value proposition
The value proposition section of your business plan is essentially the selling point of your business. It is the part of your business plan that defines what makes your product or service stand out from the competition. A strong value proposition can make or break your plan's success. A value proposition is a succinct statement that defines why customers should buy from you instead of another company. It should include clear and concise information about how your product or service stands out from the competition and why it offers more value for money than its competitors. Your value proposition should be specific and measurable; it should also clearly address the benefits of your product or service to customers. These benefits should be tangible, such as better quality, lower cost, faster delivery, etc. If you can't articulate these in your value proposition, then it won't be persuasive enough for potential investors.
| Tips for Writing an Effective Value Proposition 1) Identify Your Target Audience: Before you begin writing your value proposition, you need to understand who you are targeting with it. Knowing who your target audience is will help you craft an effective message that resonates with them and speaks to their needs. 2) Focus on Benefits: The primary focus of your value proposition should be on the benefits of your product or service to customers. It should also clearly explain how these benefits can add value to their lives or businesses. 3) Keep it Simple: Your value proposition should be easy to understand and remember. Keep it brief and avoid using industry jargon; use language that anyone can understand and relate to. 4) Make it Specific: Be specific when outlining the benefits of your product or service in the value proposition; vague statements won’t convince investors that they should invest in you over other companies. 5) Know Your Competition: Research what other companies in your industry are offering and determine how you can differentiate yourself from them with a stronger value proposition. Knowing what they are doing will help you create an effective strategy to set yourself apart from the competition and maximize impact with investors. |
A products and services section in a business plan outlines the goods or services that a company offers. This section is important because it allows potential investors to assess whether your business is able to produce the goods or services you claim it can. It also gives investors insight into the potential profitability of your business. This section should be detailed enough that potential investors can understand what products or services you are offering. It should also provide information on any special features or benefits that customers can expect from your business. The description of the products and services offered should provide detailed information about each product or service offered by the company. It should also include information about pricing strategies and how they are determined. When including information about the types of products or services provided, also include how they differ from competitors', and why they are valuable to customers. Don't be afraid to be creative in describing your offerings; try using words that evoke emotion and showcase their value.
Revenue Model
A comprehensive business plan should include a revenue model that outlines how you expect your business to generate income and grow. A revenue model is an outline of how your business plans to generate income over time, typically in the form of projected sales or profits. Including a revenue model in your business plan assists others, including investors, to gain a better understanding of how your core business plans to generate income. There are several different types of revenue models that businesses may use, depending on their specific needs and industry:
Subscription Model: The subscription model is often used by companies that provide ongoing services such as streaming video or online storage. Customers pay a flat fee for access to the service and can cancel anytime they want. This type of model is good for businesses that rely on consistent monthly income and customers who tend to stay loyal over time.
Freemium Model: The freemium model is popular among software companies, where customers are able to use basic features at no cost while more advanced features require a paid subscription. This allows customers to try out the product before committing financially, while still allowing the company to earn some income from those who choose to upgrade.
Advertising Model: Businesses such as newspapers, radio stations, blogs, social media platforms and websites often rely on advertising as their primary source of income. This involves selling space on their website or platform to advertisers who can then reach their target audience directly through their products or services.
Retail Model: Retail businesses generate income by selling physical products or services directly to consumers either in-store or online. These businesses must invest in inventory, hiring staff, marketing campaigns and customer service initiatives to remain competitive in today’s market.
Market analysis and growth opportunity
Once you have identified which type of revenue model best suits your business needs, it’s time to analyze potential growth opportunities within each one. Your goal should be to identify areas where you can increase sales or reduce costs so that you can maximize profits over time. For example, if you’re using an advertising model then you could look into ways to increase traffic on your website or create more engaging content so that more people click on ads and generate more income for your company. But before settling on any one approach it’s important to research other companies in your industry and see what kind of success they are having with their revenue models. This will give you valuable insight into what works best within your specific market so that you can make an informed decision when it comes to writing your own. You should also pay attention to any new trends or emerging technologies in your industry so that you can adjust your model accordingly and keep up with the competition.
Competitive advantages
The next step is to explain any competitive advantages that make your company stand out from similar businesses in the industry. These can include anything from unique production methods or proprietary technology to specialized resources or relationships with key partners. Think about how these advantages give you an edge over the competition and discuss how they will benefit customers. The competitive analysis should provide an overview of the company's competitors and their strategies. It should also identify any potential areas of opportunity for the company to gain an advantage over its competitors. Think problem / solution scenario; what problems are you resolving for your clientele?
Customer persona
Adding information in your business plan can also include the addition of customer personas. Customer personas are profiles of your ideal customer based on market research and real data about your existing customers. These personas provide insight into who your target customers are, their goals, values, behaviors, and needs. They also help you identify segments within your customer base and create targeted messages for each segment. By adding customer personas to your business plan, you can ensure that you are signing marketing initiatives, products, services, and campaigns that appeal to the right customers and provide them with the best possible experience.
Organization and Management
Adding and operations and management component to your business plan can either be done as an embedded section on your document or as a separate plan. The operations or organizational plan should provide information about how the company will manage its day-to-day operations. This includes information about staffing needs, production processes, inventory management systems and quality control procedures.
The operations and management component of the business plan should also include a description of how the company will measure its success, such as customer satisfaction or revenue goals. Furthermore, it should explain how the company will ensure that its processes are efficient and up to date with industry standards.
When adding an operations and management component to the business plan, entrepreneurs should consider the following:
- How will staff be recruited, trained, and managed?
- What will be the production process?
- How will inventory be tracked and managed?
- What quality control measures will be implemented?
- How will success be measured?
- What systems are in place to ensure efficiency?
Service or Product Line
When it comes to business planning, it is important to clearly describe the services or products your business will offer. In the description, you may want to include details such as the distinguishing features of your products or services, how they are different from competitors’ offerings, and why customers should prefer them. You should also consider if there will be any new products that you'll be introducing down the line that should be noted in your business plan. It’s also informative to include an outline of your pricing model. Explain how much customers will pay for each product/service, as well as other financial details such as discounts, payment plans, and more. Additionally, you should include a discussion about any price changes that may arise in certain circumstances or pricing strategies you intend to use based on different market conditions or trading regions.
Your target market should be analyzed when discussing your services or product lines. Ask yourself: what type of customers are you targeting? How do they interact with your product/service? Where do they buy it from? You need to determine who needs what you offer and how you can better reach them. This helps you gain insight into who your customer base is and the strategies needed to appeal to them. You may find access to prior research that may assist in the completion of this process, or you may have your own data which can be analyzed and documented.
Marketing and Sales
Business owners and managers need to include detailed information about their marketing and sales goals in their business plans or include a summary and reference separate marketing and sales plans. This information should include what is needed to achieve those goals, including objectives, strategies, profit outlooks, and measurable metrics. A marketing plan outlines the approach you will take to promote and position your product or service for it to be successful. A sales plan focuses on how you will generate leads, convert leads into customers, and turn customers into loyal repeat customers.
The goals of your marketing plan should be centered around brand awareness and customer education. You should identify who your target audiences are and create messaging that effectively communicates the USP (unique selling proposition) of your product or service. The marketing plan should outline how the company plans to reach its target market and how it will promote its products or services. It should also include information about advertising campaigns, public relations efforts and sales strategies. This plan should also describe who will be most likely to purchase your product or service and why. Consider demographic factors like age, gender, income level, location, interests, etc., as well as lifestyle considerations such as what motivates them to buy certain items.
Financial Projections / Financial Statements
When it comes to financial projections and statements, there are five main components that you should include in your business plan: budgeting, sales forecasting, profits and losses, cash flow projections, and balance sheets. These five components form the basis of any good business plan, so it's important to get them right. Financial projections should provide an estimate of expected revenues and expenses for the next three to five years based on current trends in the industry.
Budgeting: A budget is extremely important for keeping track of your finances, and it is one of the first things you should add to your business plan. A budget typically includes projected expenses and income over a specific period of time—typically a month or a year. Keeping an updated budget can help you make informed decisions concerning future investments, which could save you time and money in the long run.
Sales Forecasting: Sales forecasting is a critical aspect of financial planning since it helps gauge how lucrative your business will be. A sales forecast should include detailed estimates of future revenue generated by selling products or services over time. It's important to be realistic when making these estimates so you can accurately measure the success of your business.
Profits and Losses: This component of your business plan should explain how much money you anticipate making after considering all expenses incurred by running the operations of your business. This can include costs associated with purchasing products, payroll expenses, overhead expenses (rent, utilities, etc.), and other related costs. You should also include an estimation of expected return on investment (ROI) from any investments made into the company.
Cash Flow Projections: Cash flow is where most businesses find themselves struggling early-on. Having accurate cash flow projections will enable you to better understand how money moves through your organization and help keep everything running smoothly. Cash flow basically breaks down how much cash is coming into (revenue) and leaving (expense) your business over a specific period based on past performance, estimated future performance, and current assets.
Balance Sheets: A balance sheet is essentially a snapshot view of your company's financial health at a specific point in time. It includes both assets (cash, accounts receivable, inventory) and liabilities (debt) with explanations outlining why those numbers are relevant to the company's current state both financially as well as competitively in their respective market space/area. Balance sheets are useful for tracking key performance indicators (KPIs), such as profitability margins or equity ratios, allowing you to make smarter decisions about how to manage the finances of your business going forward.
Funding request information: If you are seeking funding from an investor, you may wish to include a section in relation to this discussing the amount of funding you require, what you are looking at doing with the funding and what returns the funding will provide the investor (e.g.; % of business). This information may also be included in an investment deck, where the business plan becomes a secondary document (or a reference document for). An investment deck is a type of presentation that is used to introduce a company or project to potential investors. It typically includes an overview of the company, its finances, its key selling points, and proposed objectives. The main purpose of an investment deck is to provide an investor with the necessary information required to decide about whether to invest in the company or project.
Combined with other components of your business plan, the addition of financial projections and statements provides all stakeholders, capital providers or potential investors an overview of how you think you will be able to develop sustainable growth strategies for your company’s long-term success alongside theoretical and modelled data around your expected financial performance. Budgeting, sales forecasting, profits and losses, cash flow projections, and balance sheets each play an important role for ensuring that you have sufficient funds for day-to-day operations as well as unforeseen risks ahead.
Supporting documentation / Appendices
The appendix section of a business plan should include any additional information that is not included in other sections of the business plan but may be valuable for investors, team members or other stakeholders to be aware of. When creating a comprehensive business plan, it is essential to include supporting documentation and appendices that give a clear explanation of your vision, objectives, and methodology for achieving them. This will provide an extra layer of credibility for potential investors, customers, or partners. It also gives an in-depth look at the company’s operations, allowing all parties to have an accurate picture of what you are trying to achieve. Appendices also allow you to be very specific with the information and data you wish to get across to stakeholders in the main business plan, while providing further information to more detailed data through references. As an example, it is easier to read and review a spreadsheet when considering detailed financial analysis as opposed to reviewing a static table in a word document that may only have a summary of the information required due to space available on the page.
The most common types of supporting documentation and appendices that should be included in your business plan could include:
Financial Statements: Financial statements are critical when providing information about the financial viability of your business. Include income statements, balance sheets, cash flow statements and projections. These statements should provide details on profitability, liquidity, solvency and overall financial position.
Business Description: Include a general description of your company as well as its products or services. Explain the structure of your company and its key personnel as well as any unique features that differentiate you from competitors.
Market Analysis: Provide an analysis of the industry in which you operate as well as a detailed look at the market you serve. Include information about current trends and a comparison to other brands in the market.
Strategy: Explain how you plan to reach customers effectively, such as through advertising or promotions. Describe your pricing strategy, sales initiatives and any other tactics that you believe will give you an edge over competitors. Also include information on how you plan to launch new products or services.
Competitor Evaluation: Evaluate the strengths and weaknesses of rival companies in order to better understand their strategies and how they might impact your own plans for success.
Legal Documentation: Include any legal documents such as lease agreements or patent information that are necessary components of your business plan.
Research & Development Plan: If research and development (R&D) is part of your strategy for gaining competitive advantage, provide detailed information on activities including objectives and spending estimates.
Operational Plan: This is a roadmap outlining how you will execute each step in achieving your objectives. Describe tasks such as production schedules, inventory management processes, personnel hiring practices, etc., as they relate to day-to-day operations.
Management Team: Detail the members who comprise the management team along with their credentials, experience, and expertise relevant to the business.
Supporting documents provide yourself, investors, or partners confidence in the viability of your company by providing tangible evidence of your goals, plans and strategies for success. Including comprehensive supporting documentation helps ensure that prospective partners or investors understand exactly what they are investing in when considering backing your business venture. It also provides significant transparency and allows you to create a more compact business plan focusing on the main important you are wanting to emphasize in relation to your business venture.