While there are numerous areas to focus on, this post will touch on the 10 most important elements of writing a business plan.
A business plan needs numerous characteristics that can boost confidence in the reader about the company’s goals and vision. Understanding what to include in a business plan helps you develop a practical document that benefits your company, its employees, and its potential investors.
Let’s talk more about the basic elements of writing a business plan
- What are the main elements of writing a business plan?
- Why writing business plans are important at every stage of your business
- The 10 most important elements of writing a business plan explained
- Using financial forecasting software for your business plan
What are the main elements of writing a business plan?
A well-written and detailed business plan is one of the most important documents for a business owner. It will give you guidance on where you’re going and how to get there. It should lay out a written roadmap for the company, from marketing, financial, and operational standpoints.
While every business is different, and their business plans are specific to their individual needs and goals, there are elements of writing a business plan that are universal.
- Executive summary
- Products and Services
- Market research
- Competitor analysis
- Pricing strategy
- Marketing & Sales plan
- Operations plan
- The Financial forecast
In our series that dives deeper into writing a business plan, we cover each of the above components in greater detail.
Why writing business plans are important at every stage of your business
While many assume that writing a business plan is only necessary or useful when starting a business, business owners can, in fact, use a business plan to their advantage at every stage of their company’s evolution.
Starting a business
When starting a business, a well-constructed business plan can help you turn your ideas and capital into a viable business. It can help you secure funding from lenders and investors while helping you identify strengths, weaknesses, opportunities, and threats that may guide you on your path.
Managing a startup business
During the management phase of your startup, a solid business plan can assist you in communicating your vision to your employees and external partners while helping you develop accurate financial forecasts that will allow you to compare planned versus actual performance.
Growing your business
When looking to grow, a comprehensive business plan can help you raise the capital you need to expand. It can also allow you to create a strategy to help manage growth while allowing you to take advantage of opportunities while mitigating identified risks.
Exiting your business
Business plans are even useful when it comes to wanting to exit your company. A business plan can help you develop a plan to transfer ownership, sell, or close your business. It can help you establish a transition timeline and process while helping you identify financial and regulatory requirements.
The long and short of it is that business plans need to change with the needs of the business they’ve been created for. While the details within your plans will differ based on your company’s life stage, the basic elements of writing a business plan, as we discuss them in this post, still apply.
The 10 most important elements of writing a business plan explained
A good executive summary is compelling and reveals the company’s mission statement along with a short description of its products and services. It should appear first when writing your business plan as it is meant to highlight what you intend to discuss through the rest of your document.
The executive summary section of your business plan should include the basics about your business, an elevator pitch, a description of your target market, a summary of how you’re going to reach your target market, a financial overview, and an introduction to your team – at the very least.
Keep it brief, but with enough detail to entice readers to learn more about your company.
Products and Services
A detailed breakdown of your products and services is intended to give a complementary but fuller description about the products that you are creating and selling, how long they could last and how they will meet existing demand.
This is where you should mention your suppliers, as well as other key information about expenses, possible profits, etcetera. Here is where you should list relevant information pertaining to patents and copyright concerns too.
A well-constructed explanation of your business model here will set the tone for the rest of your business plan.
A key area to focus on when writing a business plan is the market research, or market analysis, section. Here is where you would provide an overview of the market, showcasing your understanding of the ins and outs of the industry and how you plan to enter it.
Here, you would also describe your target customers, provide industry descriptions and statistics, supply market data for your products or services.
When writing a business plan for your startup or existing company, the competitor analysis is of utmost importance as it explains who your competitors are and how you plan to gain an advantage over your competitors while outlining the problems and strengths of your competition or how you expect your organization to compare.
It is important to be able to outline the short, mid and long-term goals of your business when creating your business plan. Remembering to keep your objectives measurable and achievable.
Keeping your objectives SMART (Specific, Measurable, Achievable, Realistic and Time-bound) is a good guideline. Objectives should be supported by the strategies you outline in your business plan and critically by financial forecasts from your financial plan. Refer to key statistics from your financial plan that support your ability to achieve your objectives.
When outlining your pricing strategy, you are provided with an opportunity to further outline your business model, listing the price points for your products and how you came to that decision.
You should be referencing your earlier market research to justify your decisions. Explain where your pricing sits compared to your competitors and whether you are targeting the premium or economy end of the market. There are a number of methods for deciding your price point and again you should outline which method you chose and why. You should also explain your profit margin for your products and services here.
Marketing & Sales plan
The marketing and sales planning section is exactly what it sounds like – where you describe how you intend to get your products and services in front of your target customers while answering how you will sell the products you are building or carry out the services you will be providing.
Here you should break down the steps that you will take to promote your products and the budget that you will need to implement your strategies while explaining how many sales reps you will need to hire and how you will recruit them and bring them on board, etc. While including your sales goals.
Your business must also outline how your organization is set up. Introduce your company managers here and summarize their skills and primary job responsibilities. An effective way could be to create a diagram that maps out your chain of command.
Here we are explaining how the business is going to run and operate day-to-day. You need to cover the less exciting (but just as essential) obligations you have as a business owner, such as taking out the right insurance, managing your staff and meeting legal requirements, etc.
The financial forecast
When writing an effective business plan, one of the most important elements is the financial forecast. In this section, you need to dive into the financial goals and expectations that you’ve set based on market research. You’ll report your anticipated revenue for the first 12 months and your annual projected earnings for the second, third, fourth and fifth years of business.
A financial plan is essential to any business plan. But it’s also essential to you as a business owner, to give you a solid grasp of your finances. Brixx has created a free Financial Projections Template that can be found in our article covering Financial Projections for a Startup business plan.
Depending on your business plan’s audience you may need to include documents that support your statements and/or figures in the plan. These might include important staff member CVs and detailed market/competitor research data. Be sure to not leave anything out as supporting documentation will take you a long way when seeking funding or support for your business.
Using financial forecasting software for your business plan
Brixx is a financial modelling tool that, using simple inputs, you can forecast the 3 key financial statements (Profit & Loss Statement, Cash Flow Forecast, and Balance Sheet)up to 10 years into the future. All the reports and charts generate simultaneously which is a serious time saver.
While many business owners choose to use a spreadsheet for creating their financial plan for their business, using a specialised software like Brixx can simplify the financial forecasting process.
If you find yourself needing a bit more than just a simple spreadsheet to plan the future, try our free trial. We also suggest that you take a look at our article “Excel And Google Sheets vs Software For Financial Forecasting” to help you decide which method would be best for your business.
Brixx also offers a Partner Program which is ideal for accountants, business coaches or advisors looking to manage multiple clients in tandem. Read more about it here: “Financial Forecasting For Accountants – The Brixx Partner Program”.