What are the elements a business plan? What are the components of a business plan? What makes a business plan attractive to investors, bankers and VCs? Well, you are going to find out in this article. From my experience as an entrepreneur and investor, I can confidently say that all business plans are not equal.
Investors and VCs are so used to being pitched almost on daily basis; in fact, they have tons of business plans to look at every day but what most people don’t know is that investors or VCs have limited time; hence they can decide if your business plan is worth it in less than five minutes.
Now what components and elements are VCs or investors looking to see in your business plan? What are the exact elements that hold their interest? I will share that with you.
Why These Components are Important in a Business Plan
The elements and components of a business plan are necessary tools or guide line which a good business man should be equipped with before starting a business. A good business plan is a blue print or a vision of the company. The elements and components of a business plan are also important so that regardless of the challenges and crises your business faces in the future; it will not falter or panic in the face of adversity.
The elements and components of a business plan enable business partners to confidently adjust to the times as smoothly as possible even with the onslaught of competition and emerging new businesses and markets.
9 Elements and Components of a Business Plan
The executive summary gives the outline of the plan’s key sections like your company’s mission and vision, brand profile, target markets, product and services, competition, marketing strategy and financial aspects. A good executive summary is engaging and brief, with just the first two pages convincing the reader to read on the entire business plan. In fact, your executive summary is the predominant factor that determines if your business plan will be read or dumped in the trash bin.
The Company description provides the profile of your company, its history, its drivers, what it does and how it operates. It is the company’s mission statement which is supposedly brief and direct to the point stating its purpose for business.
Target Market
The target market section identifies in detail; the customers of your company, the brands and the products. This identification of target market will very much affect other operations in the company like marketing, manufacturing and the likes.
It is important for market profiles to be specific because the success of the company will rely largely on how much this target market’s needs are identified and met. At this point, it is very important that you answer the following questions:
- Who are the customers of the company?
- What value does the company give to its customers?
- How does the company help its customers achieve such value?
The Competition Situation
Another important element of a good business plan is the competition analysis. To write a good business plan and successfully launch your startup, you must identify the competition of the business. This goes beyond the profiles of such competing companies and brands. It should also include their strengths and weaknesses.
This is where the need for a SWOT analysis comes into play. It is important to have a clear view of what the business is up against, so as not to be complacent. This section should be able to identify primary and secondary competitions, the difference between their value propositions from your company’s own value proposition, and the company’s competitive advantages and disadvantages.
Your Marketing strategy is another component of a business plan that addresses the five P’s of marketing; which are: product, price, person, place and promotion. Your company may have a good product but without an effective marketing strategy, everything is futile. To develop a good marketing strategy and plan, you need to answer the following questions:
- What are you selling?
- How much does it cost?
- What is the target market?
- How will the products be distributed?
- How will the target market know and be lured to the buy the products?
Yet another part of the elements and components of a business plan is the Operations segment, which describes the work flow of the business. It may not be detailed in the business plan but it should nonetheless have a structured view of the company’s working process.
Management and organization identifies the organizational structure of your company including the key managers. This part is very important especially in terms of seeking capital because investors will be interested in the background of the company’s management team and their corresponding salary scale.
Long-term development is another critical component of a business plan. It shows in detail, the long term plans of your company by considering its future profits and growth. It provides a timetable for these plans as well as the sensitivity or risk factors. This part of the plan provides visual graphs of what the business will be like one, three, five or more years from now.
Lastly, the elements and components of a business plan would not be complete without the financials. This part has a clear view of the financial projections of the company for the first few years of the business. This part includes income statements, anticipated profits, cash flow analysis and break-even analysis.
In conclusion, I want you to know that one of the underlying factor that makes a strong business plan is your “being precise or specific” with the details. Investors are busy people, so respect their time and hit the nail of the head but be sure you don’t omit important details or information.
- Go to Chapter 5: Preparing Yourself for the Business Planning Process
- Chapter 3: Understanding the Difference Between a Business Plan and a Strategic Plan
- Go Back to Introduction and Table of Content