The 5 Critical Elements of a Good Business Plan

A detailed and well considered business plan is one of the crucial things your company needs for a successful 2015. It is incredibly important to get this plan right, and that means spending time and money on drafting it up correctly. Don’t cut yourself short as the more effort you put in, the more beneficial the plan will be for you.

If you’re creating a plan for potential investors, then the more detail you provide, the better. If the plan is just for strategic direction, then the finer details are not as important, however it is vital that you still put an adequate amount of effort into your plan. This article will provide some direction on 5 critical inclusions in your business plan, and just why it’s so necessary to have one.

Executive summary

The Executive Summary is the first part of your plan. It should be roughly one or two pages maximum, and contain all the important aspects of your business, stating the plan for 2015. It’s very important to get the Executive Summary right, as an investor will immediately jump to this part of the report. If the Executive Summary impresses them, they will then go on to read the more detailed parts of your report.

The summary should give an overview of what your company did in 2014, and what specific direction it will head towards in 2015. It needs to be the synopsis of your entire business plan, and include the size and scope of any market opportunities concisely and clearly.

The summary needs to sell your business and explain why this company in particular ranks above competition. You should of course briefly explain what your company does, however it is more important to draw the reader in and make them excited for the company’s year ahead.

Company analysis

This is where you provide a more detailed account of the company. The main objective of this section is to describe your business, adding in all the products and services that it provides. Be detailed on this aspect and include everything, explaining the margins for each product, and even perhaps the suppliers.

Data on what products are selling particularly well is a good addition, as well as comments on what products need more focus in 2015. The company analysis should give more details about the core of the business than the Executive Summary, so it should be lengthy and detailed. Make sure it is structured well and easy to follow, as the reader may know nothing about the company at all.

Adding in the management and ownership structure of the company allows the reader a better insight into your business. If the current structure is working for you, be sure to state so. A brief paragraph on the main decision makers in the business can add a personal touch to your business plan, and give a good outline of who exactly runs the company and what qualifications they have.

Market opportunity

An analysis of the market and where you sit in it is a vital aspect to add to a business plan. You need to look at the size of the market, perhaps giving a dollar amount as to how big it is, then stating how much of this you have secured. This can then lead to you sharing a positive goal regarding what percentage you want by the end of the year, and what marketing strategies you intend to use to achieve this.

In this segment it’s also important to talk about your desired target market. Discuss the age group and all forms of demographic this sells to, and how your company will target this market more. Perfect the target market, even if you are confident it is exactly as you’d like it, as social norms and trends change so fast you could be missing out on a good opportunity.

The second part of your market analysis should be what new marketing options you will utilise to grow your share of the market. Whether this will be an emphasis on social media, a focus on SEO, or improving email subscriptions, it is worth stating which avenues you intend to take. It can also be worth stating a yearly goal to demonstrate to the reader that you have a clear focus.

Competition

It is critical to be concise and completely realistic about the competition your business faces. Talk about your competitors openly, and narrow down your biggest rivals. Find out or estimate the share that these competitors control of the market and how you compare. Add a positive tone illustrating how your business will be bigger and better, but remain factual when outlining who dominates the market and how you compare.

Financial

The pinnacle of the business is how much money it’s making. This will likely be the biggest section in the plan, and should include your financial statements for the 2014 year, including your income, balance, and cash flow statements. Give details on expenses such as salaries, rent, and cost of goods sold. State all revenue sources and turn your data into graphs that are easily viewed and compared. The more detail you provide in this section, the better.

As this is a plan for the future, however, forecasts are more important than current information. Outline the turnover 2014 brought you, and how you intend to increase it over the next year. Develop a three year forecast and add emphasis on your predictions for profit. Details on how you intend to grow this revenue is equally important and could be something like ‘introducing a new product line’ or a ‘bigger marketing campaign’. In this section, outline any potential investments you may need and why you think you need them. If a substantial loan or expense is on the loom then acknowledge this and explain how you intend to tackle it. This will allow someone to really see the mechanics of your company. Remember to use simple language, as someone not-so-financially-literate could be interested in reading the business plan.

Developing a good business plan is incredibly important for outlining the year ahead and aiming for success. A plan adds clear direction to the company and allows investors to know exactly what the company is, how it is doing, and where it will be going. Once you’ve drafted your business plan, don’t just file it away! Use it as a guide for your employers, and build on it year after year to nurture a successful and prosperous company.