Completing the business planning process can be the difference between success and failure, between obtaining financing and being denied, between growing your business and floundering, or between knowing your competition and owning your competition. This blog provides a brief overview of the major sections of a sound business plan.
The executive summary is the most important piece of your business plan when you share it with lenders, investors, or employees. The executive summary is often the only piece of the business plan that is even read by these groups and, therefore, may be your only chance to form someone’s opinion of your business idea. You will need to keep your executive summary brief (no more than two or three pages) in order to keep the reader’s attention.
The executive summary should highlight the main points of each section of your business plan. Therefore, it should be the last piece of the business planning process. Consider modifying the executive summary when presenting your plan to different groups. For example, a lender is likely to focus on your financials.
Use the company overview to tell the story of your business. Provide some basic details of your business (business stage, business type, legal structure, location, etc.). Identify your products and services. Why will customers purchase your products instead of alternatives—what benefits will they receive? Describe the business opportunity. Why do you want to run this business (at this time, in this market, etc.)?
Market Analysis / Marketing Plan
While it is typically the largest and most time-consuming piece of the business planning process, the marketing section (market analysis and marketing plan) is often the weakest portion of a business plan. The research you conduct, and the action plan you develop based on that research, will teach you more about your business and customers and is the foundation of a sound, realistic business plan.
Identify and describe the industry in which your business will be operating. What does the industry look like right now? What trends or external factors are impacting what the industry will look like in the future?
Describe the market in which you will be competing.
Who is your customer? Far too many business owners believe that “everyone” wants to buy their products. The more specific you can be about your customers, the greater your chances for success. You will be able to better target your marketing efforts and make better use of your marketing budget. Be specific in terms of demographics, psychographics, and geography. This information will help you determine whether the market is large enough to support your business and whether there is a true need for your products or services.
Who is your competition? Many business owners also believe that they do not have any competitors. What other options do customers have to fulfill their needs? Once you identify your competitors, compare your business to them. What are their strengths and weaknesses? Be honest. You may be able to capitalize on their weaknesses or learn from their strengths. Why will customers purchase from you instead of your competitors?
Based upon your research, how will you market your products or services? What will your competitive strategy entail? Identify the different methods and media you will use and establish an action plan.
Lay out your organizational structure and describe the key personnel involved in your business. What role will each person fulfill, and what are their qualifications? Are there any skill gaps that need to be filled by an advisory board (legal services, accounting services, etc.)?
Be conservative and realistic with your financial plan. Thorough research, citation of resources, and disclosure of assumptions will improve your chances of success—both in obtaining funding and in operating your business. Unrealistic financial projections can easily ruin an otherwise-promising business plan.
For more information on—and resources for—business planning, visit the State of Ingenuity SourceLink Resource Library.
Content contributed by Ryan Pingel, State of Ingenuity SourceLink (Wisconsin/Illinois).
State of Ingenuity SourceLink is a proud affiliate of U.S. SourceLink, America’s largest resource network for entrepreneurs.