When writing your business plan, you must include necessary business plan components for it to be effective and coherent. Even if you're the only one who will see the plan, you need these to give you a comprehensive picture of where your business is headed. The good news is that there aren't many necessary components to worry about.
1. Executive Summary
Having an executive summary is not fluff. It's one of the necessary business plan components, because very few people will have an interest in reading your entire business plan in depth. If you plan to share your plan with potential business partners or investors, they need to get hooked in first. You hook them in the executive summary, which tells them the goals of your business and how you plan to achieve them. Include information, such as:
- A vision statement
- Your duties and responsibilities, as well as those of independent contractors you plan to hire
- List of products you sell or services you deliver
- Company history (explanation of growth and other key information about your business to date)
It's something that you can post in your home office or work area to keep you focused.
2. Business Description
People need to know what your business is about. A well written business description should captivate anyone who reads your business plan. The people reading it should walk away knowing exactly what your aims are in business, and how you plan to make money. The business description should include:
- Overview of how your business will succeed
- Factors that impact your business
- Customer needs that you plan to meet and how
- What your competitive advantage is
You can use that same business description as a basis for developing your elevator pitch. That's a short statement describing your business that you can verbalize in 60 seconds or less to anyone who asks, "what do you do?"
3. Market Analysis
After reviewing your executive summary, most people will review your market analysis plan. Even if it's tucked away in the middle of your business plan, it's the most important of all the business plan components. If there's no market for your business, you have no business. When writing the market analysis section, discuss the following:
- Size of the niche, growth rate and trends
- Target market (such as businesses, website owners, work-at-home moms)
- Market demographics
- Demands of prospective customers and how they are not being met
- Your plan to gain market share
- Competition analysis
As you write this section, your goal is to prove that there is a need for your products or services and that you have a competitive advantage to attract customers and beat the competition.
4. Financial Statements
Poor financial planning is the second reason why most businesses fail, with marketing being the number one reason. Your financial statements are a necessary business plan component, and they should be as detailed as possible. This section of your business plan should include:
- Income statements
- Cash flow statements
- Balance sheets
If you're already in business, then you should provide both historical and prospective financial statements.
Include these necessary business plan components, and you'll have a comprehensive plan that can be your guide to start and grow your business.