A business plan is essential for the company’s inception, growth, and overall success. The key elements of business plans provide the vision and the strategy for a business. Your business plan will clarify how you want to build your business, set timelines to reach your goals, show the critical members of your team, and explain how you will manage your finances.
An effective business plan has several key components, including a description of your product, leadership, market analysis, marketing plan, SWOT, operations, and financial projections.
Is the Executive Summary a key element of a business plan?
The Executive Summary is a key part of a business plan because it provides a short description of your business and the market it serves. You don’t need to dedicate more than a couple of paragraphs to the Executive Summary. Make sure it includes the name and location of the business, a brief description of your products or services, your mission and vision statements.
Why include your strategy in your business plan?
Strategy is a key element of a business plan. Start by replacing the old textbook business plan with your own success strategy. Place a strong emphasis on your business strategy and you develop a business plan. When you start a business or want to grow your business strategically, you must have a plan. The best business strategy starts with answering a long list of questions.
Use your business plan to describe the ideal business
You have to be very specific here. Nobody else can really answer this question for you. You know who you are. You know your own personality. You know what’s important to you. I have started a business in the past that was successful, yet I hated the business. It took me a year and a half to get out of it. I ended up selling the business not because it fails, but because I hated it.
Describing the business you want to start is a key element of your business plan:
- What does the perfect day look like to you? Let me give you an example. If you have a hard time showing up on time for meetings and being at a certain place at a certain time, you probably don’t want to build a business that requires a lot of face-to-face interactions. I know that in my business I don’t want to be sitting in meetings with clients. I prefer to take care of business online through email, chat, text, and social media. I understand this about myself, and it helps me build a business that supports that.
- Will your business enable you to live the life you want to live? If you desire to travel, you should create a location independent business instead of a brick-and-mortar business. I interviewed several successful location independent entrepreneurs who dread the idea of running a location dependent business.
- Do you want to build a company with employees or would you rather have a virtual team? There is no generic right or wrong answer here. My wife and I once owned a business where we had ten employees, and we didn’t enjoy it very much. With employees, it is difficult to scale up or scale down. It is tough to lay off people when business slows down, and it is even harder to hire the right employees. For us, a virtual team is a dream come true. We like the flexibility it provides us and the members of our team.
- How much money do you need? This has to be an exact amount. Be honest with yourself and calculate the exact dollar amount your business has to make to support your lifestyle.
After you honestly answered the above questions, it’s time to move on to developing the strategy that will get you there.
Originality is a key part of a business plan
Your business is unique, and the road to success will be unique too. Each entrepreneur is different, and each business is different too. It is true that there are similarities in business, but you must be able to develop your own unique business strategy. Avoid using business plan templates.
Describing the customer is a key element of business plans
You can’t finalize your product, set your pricing, define your marketing strategy without understanding your customer. One of your first tasks as an entrepreneur is to create an accurate customer profile. Understand who you want your customer to be. It will influence everything about your business from product development to packaging to pricing and sales.
The following will help you understand your customer and create your customer profile:
- Who is your customer?
- B2C – (demographics and psychographics) age, gender, location, income, education, occupation, buying patterns, values, beliefs, perceptions, lifestyle choices, etc.
- B2B – vertical, industry, business size, the number of employees, total revenue, location, maturity, the number of years in business, products or services offered, etc.
- How big is the market? Again, this must be a number.
- Lifetime Value (LTV) – This is an actual dollar amount or a range. Understanding this number is necessary so you can determine how much money you can afford to spend acquiring a new customer.
- Understand customer pain points.
- What is their buying process?
- What website(s) do they visit most?
- How does your product would improve their lives or businesses?
Keep in mind that your customer profile will change over time. Your customers’ interests, needs, and pain points will also change. Constantly monitor your industry and its relationship to its customers. It will help your business stay on track.
Describing your product is a key element of a business plan
Successful entrepreneurs build products with the customer. Entrepreneurs who fail to create products without the customer. They have an idea for a product roll up their sleeves. They are doers. They want to take action. Taking action without the appropriate thought process is a waste of time.
To answer the question “What is your product?“, you need to start with asking some questions:
- What problems does your product solve?
- What makes your product unique? Do you have any patents?
- In what ways is your product superior to your competition?
- How much does it cost to manufacture your product?
What makes competitor analysis a key element of business plans?
Entrepreneurs can learn more from the competition than any consultant, book, or advisor. Your competition has already figured out many of the questions the keep you up at night. Understanding your competition is one of the most important parts of building a successful business.
Describe how and what you will be offering:
- Cheaper or more expensively
- Faster or slower
- Larger or smaller
List your competitive advantages.
How to create a comprehensive competitor analysis:
- Who are your competitors?
- How many of them are there?
- What do they do well?
- What do they do poorly?
- What do their customers think about them?
- What can you do better than your competition?
- What is the likelihood of getting customers to switch from a competitor to your business? What are the costs involved? How long would it take to get customers to switch?
Sales and marketing are key elements of business plans
You can’t build a business without figuring out a way to profitably get more customers.
To build a sales and marketing strategy, you must answer questions like:
- How will you reach your customers?
- What marketing/promotional channels will you utilize?
- How will you determine the price of your product/service?
- What brand positioning do you desire?
- Are you going to develop strategic partnerships?
How much money will you need to start a business?
You need money to develop your product, sell it, and support your customers.
The business plan should answer important funding questions like:
- How much money do you need to build your business?
- How will you and on what will you spend?
- What are the projected revenues for the next 6-months, 1-year, and 24-months?
- What assets must you acquire and how much will they cost?
Financial projections are a key element of a business plan
Complete this essential element of your business plan after conducting a market analysis and setting goals for your company. It’s best to work on this part of your business plan with the help of a business accountant.
If you own an established business, include historical financial data such as cash flow statements, balance sheets, and income statements for the past three years.
Make sure that realistic prospective financial information is part of your business plan. This part of your business plan should include cash flow statements, capital expenditure budgets, balance sheets, and forecasted income statements for the next three to five years.
Also, provide a brief analysis of your financial data, featuring a ratio and trend analysis for all financial statements in the business plan.
Final thoughts on the key elements of a business plan
You can start a successful business that runs like a smooth money-making machine, dominating the market with a business plan. But, for a business plan to work, it needs to include essential elements.
The critical parts of a business plan will help you set goals around things like strategy, leadership, financial predictions, marketing, sales and beyond. In order to reach these business goals, your business needs an effective business plan.
Starting a business without a business plan can quickly become an unmanageable mess instead of a carefully planned process. It reduces the complexities of the tasks required to make your venture a success. Your business plan maps out all of the details surrounding your concept and strategy.
Ensuring that all of the important elements are included in a business plan can help you avoid crisis situations.