A business plan could be short, depending upon the nature of your business. On the other hand, it could be as long as several pages detailing each business operation and financial activity to be carried in the company. If you have a business plan for yourself and the team members, you can have a short one and restrict it to one or two pages.
But if you want each future business activity to be mapped out, then go for a lengthy one.
It is not surprising that you can find business plan templates and ideal descriptions on the internet or in the books for entrepreneurs. But this doesn’t mean you can print those templates and fill in the blanks. Each business is different, and hence, a business plan cannot be the same for each business type.
So, even if you fill in all the boxes in the business plan template available on the internet, you will still be looking at holes in the future. So, gather knowledge from reputable sources, ask your mentors and field experts, and craft a customized business plan that is concrete yet flexible.
Generally, there are seven to ten components in a business plan, and you can pick up in a way you want your business to thrive and flourish.
If you ask the basic yet essential components of a business plan, then they are enumerated as follows:
1. Mission statement/Vision of the business undertaking
This is the topmost component of a business plan. It answers the critical question of why you have started this business venture. Why are you giving it a try? What is your mission statement? Where do you see yourself in the business industry after a few years? It is often called the Executive Summary, wherein you can discuss what you would like to do during this particular business activity. The Small Business Administration says that it could be overwhelming for the entrepreneurs to write this section in the beginning, and so they can postpone it to the end when they are more confident about what to write.
2. A detailed description of the proposed company
Once you know why the business is to be started, the next task is to describe the undertaking you want to start. What are its objectives? What kind of business does it conduct, and who will be the target audience? Who are the stakeholders? To follow an old-school concept, you can conduct a SWOT analysis and write down the strengths, weaknesses, opportunities, and challenges involved while having your company. Just remember that you need to be specified about your proposed company and not note down something abstract as “The company generates substantial revenue.”
3. A detailed description of the organisation type and management levels
Once you know how your company looks, it is important to choose a certain type, such as sole proprietorship, partnership concern, or a corporate. Please note that there is no ideal organization type; it all depends on how you would like to set up an organization.
The next step is to outline the managerial levels and assign them responsibilities. This could be a bit challenging, so we suggest consulting a mentor or your team members. Remember that the appointments should be unbiased and true. If possible, draw an organizational chart as given in the management books.
4. Study the market and note down the strengths and challenges involved
You have a healthy company structure, and now is the time to know where you are currently operating. You can understand customer buying preferences when you evaluate the current market. How are the current companies making? Is there any chance you can stand out in the market due to your different products and services or a unique marketing strategy? While doing market analysis, you can determine your company’s position in the current market and figure out your target audience. Both of these factors are important to analyze which products or services you need to deal with and how to craft your marketing strategies.
5. Study of the existing competitors to evaluate their threat level
Even if we say to ourselves that we do not care about what others think of us, this cannot be applied to the business world. You have to know what others are doing, who is succeeding in the industry, which strategies are they putting into action, and how can we re-draft our approaches to beat them. It is true that our mission statement does not specify beating the rivals, but we have to keep an eye on them. You need to perform competitor analysis to show how your business can stand up for its own, leaving behind all the competition in the market.
6. The list of products and services your business will deal with
And here comes the vital component of a business plan – the products and services. You might be having an idea already in your mind, but you can alter it while doing the market analysis part. No worries about that! The more you understand customer behaviour, the better product or service you will offer to your target audience.
In this part, you should discuss and write down all the specifications of your product or service, how you would be sourcing the materials, the list of suppliers, the cost-effective strategy, durability, and how these products and services will fulfil the demand.
7. Financing options
How can you create a product with no money? That’s why the financing component is crucial and should not be taken for granted. Pen down the estimated amount of money you want to start a viable business and the sourcing options.
8. Sales and Marketing strategies
Both of these similar-looking terms are used interchangeably, but they are different from each other. You need to set sales targets in your business plan and define a well-defined sales strategy. When it comes to marketing, you should analyze the different ways you can reach the target audience. Do not forget to assign a budget for these two important activities.
9. Future projections
This component is about the milestones you want to achieve in your business life. You can create estimated costs for different business operations, including salaries to be paid to staff. You can also set financial goals on a monthly, quarterly, and annual basis to know whether you have achieved a milestone or not. Be as realistic as possible during this step. You should not aim for infinity, and remember that it is your first year of business operations.
So, these nine components are must-haves in a formal business plan. You can add more to this list but ensure that it aligns with the mission statement you specified in the beginning.