I’m surprised by the number of entrepreneurs I meet who don’t have a business plan, or who have one that’s terribly outdated. Some people think a business plan is only necessary if you’re seeking investors or a loan. In fact, a business plan is much more than a financing device. It’s a tool for organizing your business, for monitoring is progress, and for holding yourself accountable for its success.
Whether you’re preparing to launch a new venture or have owned your company for years, there’s never a wrong time to craft a business plan. There’s also no wrong time to review and update an existing business plan; it should be a living document that evolves to reflect the changes and growth of your company.
A business plan serves as a roadmap for the next three to five years of your company and should include these seven essential elements:
1. Executive Summary
Begin the document with a synopsis of the entire plan. Although it’s the always the first element of a business plan, the executive summary is written last. The one-page executive summary should include your mission statement, basics about when your company was founded and by whom, a description of your products or services, highlights of your growth so far, and a summary of how you want the business to grow.
2. Company Description
This is where you elaborate on what you do (and the product or service you offer), who you serve, and why you’re different (and better) than the competitors. Think of this section as an extended elevator pitch that will help readers understand the what and why of your business. Describe what your business does, how that satisfies a need in the marketplace, the specific types of customers you serve, and any competitive advantages that have made or will make you successful.
3. Market Analysis
Now it’s time do a deep dive into your industry. This is where you identify and provide details about your target market (size, historical and forecasted growth rates, demographics, needs, purchasing trends, etc.), and determine what share of that market you can capture.
4. Competitive Analysis
Here you’ll assess the competitive landscape in your target market. What are their strengths and weaknesses? What are they trying to achieve? How do they market their businesses? What are the barriers you must overcome to compete and what opportunities you can take advantage of? Use this area to formulate a strategy to stand out from the crowd.
5. Management & Operations
Lay out how your company operates. Include your organizational structure, ownership information, profiles of your management team, and number of employees. Even in very small businesses and sole proprietorships, you should include a detailed description of who does what in your business and provide background information for key players.
6. Marketing and Sales
Explain how you’ll find and create customers by defining your marketing and sales strategies. For marketing, discuss your communications strategy as well as how and where you’ll share your messaging. For sales, focus on who will handle sales (and how you’ll train any outside help) and what tactics you’ll use to identify, attract, and convert leads.
7. Financial Summary
Finish your business plan with information about your company’s financial health and future. You can include expected gross income or other financial predictions, but keep them grounded in reality. This is a good place to include income statements, cash flow reports, and balance sheets to outline your assets and liabilities. If you’re seeking funding, this section is critical and must be as current, accurate, and detailed as possible.
A business plan is an important planning tool, and provides a solid foundation for building a successful company. If you’ve been putting off writing one or if you haven’t updated yours in forever, carve out a few hours this month to dedicate to your plan. I promise you’ll finish the exercise with more clarity and confidence about the future of your business.
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