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What Is the Purpose of a Business Plan?
A good business plan serves as a roadmap for a small business, corporation, or non-profit. Step-by-step business planning prepares you for the challenges that may befall a new startup and provides an overview of how your company will conduct market research, grow market share, manage cash flow, build a management team, and create company values. A business plan also shows potential investors the inner workings of your business. Professional investors require an immense level of detail about business goals and operations before they open their checkbooks.
8 Elements of a Business Plan
While there is no fixed business plan template for every start-up, most will include some combination of the following:
- Executive summary: An executive summary serves as an overview of your entire business plan, from the company description to the business model. This summary might include a broad-strokes overview of your company's marketing plan, financial plan, and legal structure, but it will not go into detail.
- Mission statement: Your mission statement articulates how your company can uniquely serve your target audience, and it highlights the values you will uphold as you run the business. Potential investors consider the mission statement to gain understanding of what motivates the business's executive team.
- Overview of the market you serve: Identify the core customer base for your business and the ways that you can specifically serve their needs. Show insights from your market research, and break down the location, age, gender, and interests of your target audience. This is where you can articulate the value proposition you provide to the customer. Explain who you are serving and why they need your business.
- Description of your product: Show how your business ideas can manifest as actual goods and services. Describe what you will provide to the market, your pricing strategy, and any ancillary revenue streams that can come along with your core product.
- Comparison to the competition: This is sometimes known as a competitive analysis report. You'll need to know who is already serving your target market and what competitive advantages you have over them. Can you make a superior product? Can you beat them on price point? Can you attain higher profit margins? Can you devise better marketing strategies? Consider these important questions as you conduct your competitive analysis.
- Financial analysis and financial strategy: Your business plan should include your most up-to-date financial statements, cash flow statements, balance sheets, and tax returns. You should also articulate the cost structure of your business. If you aren't already profitable, how do you plan to be? When in the lifecycle of your business will that profitability begin?
- Human resources: Corporations and nonprofits are only as good as the people who work at them. Use your business plan to describe your workforce, including both their duties (job descriptions, areas of oversight) and their compensation (salaries, retirement plans, health care).
- Marketing strategy: How will you market your product to the public? Will you use television ads? Social media posts? Will you rely on word of mouth? Your marketing plan format should align with the habits of your customers.
How to Format Your Business Plan
The business plan template you use will depend upon your level of ambition as a company. A simple, one-page business plan may be sufficient for a small startup, but as your company grows and your sales forecasts improve, you will likely need to bring in outside investors; that's when a more robust business plan will be necessary. When presenting to investors, consider a standard business plan outline like this:
- An executive summary
- Your mission statement and company overview
- Your assessment of the market and the target customers you've identified
- Detailed descriptions of the goods and services you will provide
- Your marketing strategy and projected sales
- Your financial information, including startup costs, income statements, and cash flow projections
- Personal information about the company founders, including their contact information
Depending on how much you write, you may wish to include a table of contents to help investors and team members quickly find each section of your business plan.
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