Note: This is the first of a three part series to educate business people on the basics, best practices and tricks of writing business plans.
It is a universally accepted fact that a business plan should exist long before the business itself. However there are those who jump into a venture without this essential document, causing their businesses to meet their ends before they flourish. If you haven’t developed your own business plan, you probably aren’t aware of what you’re missing. From defining your business objectives to determining a strategy to achieve them and all the way to testing new ideas and projects, your business plan can do it all.
If this motivates you to go ahead and draft your own business plan, this series is for you. To start you off on the right path, this installment will go over the main elements your business plan should have.
Part I: Elements of an Effective Business Plan
Since a business plan is essential for the success of any new organization, it is only logical to draft one carefully. Now the purpose of this document is to serve as a guideline for running a company efficiently. The size and scale of operations depends on the objectives set out. Another key reason for drafting a business plan is to raise funds for your business venture. With prospective data and analytical data documented, it is easier to raise funds from banks and other investors.
With that out of the way, here are the key components your business plan should have.
- Executive Summary – This is where you summarize the entire business plan, ideally capturing the imagination of your target audience and addressing their concerns.
- Mission Statement – A mission statement is used to identify priorities and define what the business aims to accomplish. This benefits the business in avoiding any confusion whatsoever, allowing you to focus on the main objective.
- Marketing Plan – The business plan also contains details about how you plan to market your products or services and in which market they will be aimed at. It also contains details of competitors operating in the same segment.
- Management Plan – The teams and their responsibilities are clearly stated here. This division of labor is introduced to make sure that there is an efficient production cycle within the organization. Details regarding previous projects and successes are also discussed in detail in this section.
- SWOT Analysis – A business plan is incomplete without SWOT analysis. The term is an abbreviation for Strengths, Weaknesses, Opportunities and Threats. By defining each aspect, the firm is able to allocate resources to products that are profitable to them in the long run using such a tool. Such a tool can determine various demographics that could influence its success. This will help convince investors to provide funding for the venture.
- Cash Flow Statement – This statement provides a picture of what the initial finances will look like and how money will come and go through the business. The idea is to communicate the cash needs before, during and after starting the business.
In addition to these, your business plan will need to abide by a few practices, but that is in the next article of the series.