Components Required to Create a Solid Business Plan
To make anything a success, there must be a solid plan in place. From setting goals to allocating resources to achieve various business targets, to get to some place where you personally or professionally desire, a foolproof plan is a necessity. Businesses often take advanced planning for granted and don’t realise its value at the initial stage. However, as per Harvard Business Research, entrepreneurs who actually pen down formal plans on paper are 16% likely to achieve targets as compared to who do not practise this ideology.
While there have been numerous arguments about how entrepreneurs especially of small businesses must not exhaust too much time in creating lengthy plans v/s how a proper business plan eventually becomes a roadmap for a business’ success. Studies at Harvard Business Research have suggested that while latter has worked for most companies, start-up entrepreneurs with disruptive ideas are only 4% likely to plan. Apart from planning, factors like entrepreneurs’ background and experience have also played a significant role in the success of a business. Now before you start building your plan, it’s important to understand what makes the difference between a good plan and a bad plan.
|GOOD PLAN||BAD PLAN|
|Easily understandable||Exaggerated and Spilled Over|
|Realistic and Achievable||Undefined and Unachievable|
|Delegates Work, Sets Milestones, Defines Cost and other Financial Aspects, Sales and Marketing Strategy, Communication||No Working Sketch of The Execution|
Now that you have a clear understanding as to what makes a good plan for your business to achieve your targets, let’s look at the primary components that are required to create a solid business plan.
A good executive summary must contain the best highlights from your business plan. As the name suggests, this is nothing but a gist of the entire business plan which the entrepreneur has penned down. Apart from highlighting the key points from the full-fledged plan, an executive summary must also be crisp and clear. Since, it contains the summary of the plan, it is advised to create the executive summary in the end so that none of the points are missed. Internal plans which are required to be executed within the organisation need not have an executive summary. However, when the businessperson decides to show the roadmap of his venture to his associations, an executive summary would be of great help to summarise the company’s plan and way forward. These are the key points which must go in an executive summary; Name, place and contact details, nature and the industry in which the company would operate. Factors and advantages which will make you win in the market against your competitors, well defined marketing/sales plans, financial planning for minimum 3-4 years, a brief background about owners, their background, expertise and experience and of course, the execution plan.
This section must highlight some spectacular details about your company which will immediately catch the outsiders’ eyes. Essential details like, products/services which the company plans to sell, benefits and offers, why and how it’s better than the competitors in the market, company’s strengths, numbers which will show the company in good light leaving the outsider’s impressed, factors that show the flexibility of the company along with its achievements. The important pointers that must be in your company description are the name of the entity, type of ownership, business location and proposition, competitive advantage and company’s brief history. It is essential to mention your competitive advantages at several stages as it needs to get registered in the outsider’s mind with clarity without getting lost in the presentation process.
Products or Services
A detailed description of the product or the service your company deals with must be provided in this section. It is extremely important to let the outsiders to whom you’re presenting your business plan, to understand the specification of the product/service offered by you. A direct relation between your offerings and your customer is also crucial to establish, so that the opposite party knows that customer needs are your top priority. Make your product stand out and present them in a way which would have an element of surprise. You must be known by your product or service and your presentation of your business must have a recall value in the reader’s mind.
Whether or not you make a business plan for your company, a careful and a detailed analysis of your market where you plan to run your business is extremely significant. Not only does it give you clear understanding about the industry holistically, but also gives you insights about your competitors. Your sales and marketing strategies depend on how well you analyse your market as it will give you a clear picture of your target audience and communication design. Under the market analysis section, you must include, industry overview which will comprise of the details of the industry, rules and trends which it must have recently undergone, size and the projected growth. You must also include your target market, competition analysis, forecasting of your market share.
Business Strategy and Administration
Understanding the value proposition before drawing a business strategy is significant. From comparing the benefits which you’re offering against what your competitors are doing to assessing problems of your customers and how you intend to solve it, business propositions must be clear in your head to draw an effective strategy. This is what the business strategy and implementation section of a business plan must consist of; definitive measures to make your business meet market and consumer needs, competition analysis, pricing of your business offering and how well will you create awareness about your product/service in the market. You also need to define your sales strategy well and not confuse it with your marketing plan. While your marketing strategy helps create visibility to your business, sales strategy converts the potential leads to customers.
A strong management team forms the backbone of a company and thus it is important to hire workforce which is not just qualified but is skilled and can add value to your business. Any kind of mismatch can hamper the growth of your business as well as the employee, which might even put you down in the market. The management summary section must define the organisational structure clearly and assign the responsibilities accordingly. It must also comprise of the key management players who will be primary decision makers in the organisation structure. This helps define the roles, responsibilities, reporting and of course the cost projection.
Another crucial part of a business plan, meeting capital requirements and keeping a close watch on the cash flow is something that every company especially start-ups must look in to. Businesses must understand the difference between cash flow and profits. It’s not necessary that if profits are flowing in for a company, it means that it can suffice a company’s business functions. A financial summary must report a detailed analysis of your anticipated revenue for the first year and your annual projected earnings for the subsequent years for 5 years.