BOSS Business Plan
A Roadmap to the Success for your Business
Components of a Good Business Plan
One day at the driving range, Chuck, the club pro, showed Brian a little device Chuck invented that he believed would help Brian with his game. Brian put it on, went out for a round and shot the best round of his life. Brian loved the device and figured that he can use his expertise in engineering to perfect it so it would benefit all types of golfers. He and Chuck decided to partner up and sell the device. Neither of them had much experience in the business world and didn’t know how to start.
Brian started by contacting his attorney and accountant. Unfortunately, neither of them was of much help. The attorney wanted to charge him a fortune to patent the device and all the accountant could do is talk to him about taxes. Chuck searched the internet, but that was of little use. What should they do now?
This story is not uncommon for many people who are considering starting their own business. Brian and Chuck really needed a business advisor who could help them determine what steps to take, whether additional capital was needed, and how to present their ideas to potential investors. But hiring someone to hold their hands through the process is simply cost-prohibitive for them. After doing some research, Brian and Chuck discovered that they needed something to help them tell their story and bring their ideas to market. In other words, they needed to have a business plan.
What exactly is a business plan?
A good business plan is a roadmap for the operation of your business. It serves as a planning, management, and communication tool for your business. It can be used to accomplish various tasks including attracting investors, obtaining funding, planning strategies, and organizing the management of the business.
As you can imagine, a vital document like this must be reliable. The information and data referenced must be accurate and trustworthy. In the end, this should be a living document that is constantly modified and updated as your business evolves and adapts to various market conditions.
A good business plan generally would consist of the following sections:
- Executive Summary
- Organizational Summary
- Personnel Background Summary
- Service and Product Information
- Market Analysis & Strategies
- Financial & Funding Summary
- Appendix
Below I will explain what each section should include and the significance of it.
Executive Summary
This is the section that should be drafted last because it should be a summary of all other sections. You can consider this section an overview of your business plan. It should touch upon all of the other sections lightly without going into great detail. After reading this section, a reader of the business plan should have a basic understanding of the fundamentals of your business. You can analogize this section with a cover letter in a job application. It should succinctly lay out what the business is about, why it is a good business, and provide some evidence of your claims. The goal is to paint a big picture for the readers while at the same time keeping them intrigued and interested in learning about the details of your company.
Organizational Summary
This part of the business plan should clearly describe your business organization. Consider this section as an introduction of your business. The goal of this section is to tell the readers everything about the business entity itself, including how it is legally structured, why it is in the business, what the business concepts and philosophies are, what the business mission and vision is, and what kind of business it conducts. It should also explain what the business’s internal organizational structure is, how it is managed, and the background story of the business including its history and track record.
The importance of this section is that it tells the readers what your business is all about. A well-drafted organizational summary shows the readers that the business described is legitimate and organized. It demonstrates that the whole business operation is carefully planned out and structurally designed to run efficiently to achieve the business goals. It provides not only a thorough inward looking aspect into your business, but also the outward looking vision. It would instill confidence into your audience for whatever purposes they are reading your plan, that this is a promising business and worth considering for those purposes.
Personnel Background Summary
After laying out the business concept and structure, this section introduces the key personnel and their qualifications. It is common knowledge that one of the most important factors for a successful business is the people who are running it. The key personnel are the backbone of a business. This section should clearly identify these people and describe each of their respective abilities and qualification, as well as the roles they play within your organization. It would also be helpful if you explain their respective responsibilities and authorities within the company. It is a huge credibility booster for your business if you have owners or managers who have impressive past accomplishments or great reputation within your specific industry to be heavily involved with the day to day operation.
Even if you are a start up business whose owners or managers do not have significant experiences within the industry, you can still gain considerable credibility and perception of management competency by having a well-established board of directors or advisors or other professionals as consultants. By having a well-written introduction of your key personnel, the readers are ensured that the business and management structure established in the previous section is best utilized at the optimal level by qualified individuals.
Service & Product Information
A business cannot be a business without providing some kind of services or products. In other words, the services or products that your business provides are the essence of your business. By proving that you have quality products and exceptional services, you are essentially raising the underlying value of your business.
However, depending on your industry, the key to drafting this section is to not simply lay out a list of all the products or services that you provide, but to really show the readers the value and advantages of these products and services. For example, if you own a manufacturing business, you do not want to list everything you produce. Instead, focus on the abilities and the advantages of your manufacturing process, then go in details describing several of your signature products that can best represent the capabilities of your business.
In this section, you should provide detailed information about the services or products of your business with the focus on the advantages you have. You also want to point out your disadvantages. This serves three purposes. First, it shows that an objective analysis has been done. Second, it shows that you understand the market and reasonably believe that the products or services can be successful despite of the disadvantages. Third, it gives you an opportunity to apply a solution or remedy to the disadvantages. It thus in turn demonstrates the management’s ability and problem solving skills.
In addition, make sure that this section is drafted with the potential customers in mind. Describe your products and services with an emphasis of the benefits that they can provide your customers. Justify the price point of your products and services by explaining the specific needs and affordability of your customers.
Lastly, solidify your products and services by identifying the major suppliers of the components and any quality control or certification process that goes into them. Provide any information you have regarding any applicable intellectual property such as copyrights, trademarks, or patents related to your products and services, and describe the research and develop process of them. Again, focus on the advantages you have over your competitors of these processes and write with the customers’ benefits in mind.
Market Analysis & Strategies
The target market of your business is where your customers are created. Your customers are the ones who pay you and keep your business alive. Your market is where your revenue is generated. No matter how unique or great your products or services are, without a market, it simply cannot survive. There is no way to stress enough how important this section is to your business.
With that said, it is understandable why it is vital for you to understand your market’s ins and outs. A thorough knowledge of your industry and market would give your business the ability to gain a share of it, strategize your operation, anticipate changes, and prevent disasters. The readers of your business plan understand this, and they want to see that you do as well. This is the section where you prove to them that not only you understand your industry and market, but also you know how to penetrate it.
In this section, you need to first demonstrate a deep understanding of your target market by providing various statistics of the potential customers such as geographical, demographical, financial, educational, preferential data. Research would have to be done and results supplied to support your claims within this section. In addition, you need to develop an analysis drawing from historical data projecting the likely growth, trends, and other characteristics of the industry and market. Next, address the restrictions and potential changes that might affect the market and the influence any major consumer groups within the industry might have upon your potential customers.
After establishing the foundation of your industry and market, you would need to lay out the plans to penetrate the market and gain a share of it. This part of the business plan is vital to the success of your business because it is the substance supporting the business structure and managerial personnel. Basically, the previous section demonstrates that the management of your business is capable. This section explains how their talents translate into the practical aspects of your business.
Your marketing strategies should be broad enough to cover all potential revenue yet specifically tailored to appeal to your target market. Describe all the details of your marketing plan. Did you conduct any market tests? How were your products or services received? Will internet marketing be utilized? Will you distribute printed pamphlets? Attach a copy of your marketing material to support it.
Aside from explaining how you would raise interests about your business, also include specifics about how you actually plan on closing the deals. Will you have an internal sales force? Will a call center be utilized? Are you hiring independent sales affiliates? What qualifications will you require from these people? You need to establish an executable strategy for your business in this section.
Financial & Funding Summary
This section provides the readers some concrete evidence of how your business has performed. The information in this section also provides the readers with the details of your business assets and liabilities. Generally, you need to provide a 12 month profit and loss statement, cash flow statement, balance sheet, and a breakeven analysis. In some instances, it may also be beneficial to include the owners’ personal financial statements to further support the financial health of your business.
A projection of your business’s financials would also have to be included. Generally, a 12 month projection would be sufficient but it is not uncommon to see projections as much as four years. The projections show your business’s potential and the likely future. The information would help demonstrate the possible revenue and profitability of your business.
Appendix
This is probably the easiest and most straight-forward section of your business plan, yet the importance of this section cannot be disregarded. This section is simply a compilation of supporting documents showing that your business is legitimate, the research has been done, and marketing materials have been prepared. Without these documents, the claims you made in the previous sections are empty and have no credibility.
Include a copy of all the business licenses for your company in this section. In addition, attach a copy of your articles of incorporation and/or other business formation documents. Supply a copy of the relevant market research articles, data, and results of market tests. The brochures and any other marketing materials should also be included if available. It may also be beneficial to include business bank statements, copies of leases and contracts, and resumes of the owner and key managers as well.
Drafting a business plan requires research and planning. If it is written with accurate and reliable information, it will definitely benefit your business. It is simply a process that cannot be skipped – do not start a business without one. However, do not let this deter you from starting your own business. It is recommended that you invest a small sum to consult with a business plan professional to get you started. In the end, relative to what you can lose if your business fails, this small investment will provide you with a useful guide on how to run your business and greatly reduce the risk of failing. Can you afford not to have a plan?
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