4 Essential Elements of a Business Plan
A well thought out business plan is critical to the success of any new venture. The business plan not only identifies the goals of your business, but it also will outline the plans to execute those goals. It tells you both where you want to go as well as how you are planning to get there.
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Many people, though, have a limited view of the business plan and what it can do for them, and even question the need for a written business plan at all. It is more than just a document you can use to discuss financing with investors and lenders. It also provides an ongoing management tool that you can use to judge your current progress without losing sight of your ultimate destination. The business plan is a way to confirm to both yourself and others that you have given serious thought to your business idea, and that you aren’t acting recklessly. With this kind of proper planning, your business is more likely to succeed and grow.
Each company will have a different business plan, based on the varying factors of company age, size, and industry, but there are a few common core elements that are central to any effective business plan.
1. Background Information
Background Information is an important element of any business plan. Its purpose is to define the management and products that will make the business successful. You will include a summary of the business ownership structure, resumes of owners and management, a history of the business, and product information. This section will be shorter for a new, sole proprietorship and more extensive for a newly acquired business that has been around for years with a number of employees, but will always have that same purpose.
2. Marketing Plan
The Marketing Plan occupies a central place in your business plan. It includes research, strategies, and tactics, covering every aspect of marketing—it is more than just media advertisements. You’ll want to include product positioning, packaging, and pricing, as well as distribution and target customers. The marketing plan will also discuss how you will handle competitors, including how you will distinguish yourself from similar companies. Another part of the marketing plan must anticipate evolving marketing techniques. Over time, you will need to adapt to changes in the business environment, and the marketing plan will describe marketing alternatives. Changes can stem from product or service modifications, technology innovations, or changes in competition.
3. Operating Plan
The Operating Plan will outline the requirements for implementing and developing your business, including management philosophy, guidelines, and resources. Specific elements to address are people, capital, and facilities. You must determine your plans for funding the business, and to do this you must outline all your costs and expenses. To accurately judge and plan your business’s operations, include office space, equipment, computers, salaries, and all other necessary matters. Don’t forget: you not only need to outline the resources you need to start the business, but also what you plan to do as the business grows.
4. Financial Statements
The Financial Statements are the final element of a business plan, and a natural extension of the Operating Plan. They can include both historical and projected information, using the operating expenses details you developed in the previous section. With a business plan for an existing company, you’ll include between two and five years of historical financial results, while future projections ought to cover five years of data. A balance sheet, income statement, and statement of cash flows will be among the basic financial information, along with debt financing and repayment schedules. Your projections should be as accurate as possible, although they will obviously require estimates.
Related: 15 Reasons You Need a Business Plan
It takes a lot of time and hard work to develop a comprehensive business plan, but it will pay for itself down the road, helping you anticipate problems and set realistic expectations. Even if the plan ultimately proves to show that your business idea cannot succeed, it’s better to invest in the business plan at the outset and find that out than to start without any planning and lose everything. A successful business plan proves that the concept is sound and that you have the foundation to organize and start your business.
Did you create a business plan when you started your company? Do you feel it has been helpful?
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How To Write the Company Background Part of a Business Plan
Tell the story of your company's background
What To Include
Be creative, company background examples.
A crucial part of any business plan is spelling out your company history and telling your origin story to show potential teammates and investors how you landed on your business idea and why you are uniquely qualified to pursue it.
Sharing your business background goes far beyond simply telling a clever story of how you triumphed over adversity to launch your new business. What investors will care about is how your personal history, work experience, skills, strengths, and education will help you succeed in the business.
The background portion shows what you've already done to start executing and bringing your idea to life. Potential investors want to know you'll be able to return their investment with dividends in the years to come, and the background section can help.
- Company backgrounds share a bit about the market opportunity you are pursuing (and why you're pursuing it).
- Company backgrounds can be brief for new companies, while established corporations will have more developed backgrounds.
- Company backgrounds can be more creative than other parts of your business plan that need to include industry jargon or marketing buzzwords.
The company background should include a brief history of the company. Your company background could be very brief at the beginning stages of starting up, but you can still detail what you want your company to be about and the origin of your idea. Focus instead on your personal history and the journey that led you to start your business in the first place.
In a traditional business plan, your company background (also called the "company description") follows the executive summary.
Sharing the origin of the idea is valuable because it shows how you think and how you were able to take an idea, craft it into something more detailed, and ultimately build a business out of it. Detailing your progress to date, including any relevant key milestones, is an important part of this, as is listing the problems you’ve faced so far (and how you've overcome them).
Describe the market opportunity you're pursuing and why. A business plan to open a pizza parlor is not particularly creative or original, but if your idea is built around a specific market that is not being tapped, you need to emphasize this and discuss your short-term plans for growth and for reaching that market.
Key topics to include are:
- Any existing experience or relationships with customers
- The market you plan to cater to
- Your educational background
- Other companies you’ve worked for and the roles you've held in those businesses
- Previous businesses you’ve started and their outcomes/current status
- Your technical skills
- Your areas of expertise in your industry segment
- Your areas of weakness or inexperience and how you plan to compensate for them
- Any relevant professional clubs or associations you belong to
Company backgrounds don't need to include technical details about your business structure, finances, or other information along those lines. That information will go elsewhere in the business plan.
Tell your story in a way that's more engaging than just another page that leans on industry jargon, buzzwords, and trite platitudes.
To illustrate your company's history, use images that show how you started. For example, you could highlight charts and graphs to draw attention to key milestones or incorporate customer testimonials or excerpts from news stories that featured you or your business. Take it a step further toward building connections with the people reading your company history by showing vulnerability and sharing some of your past failures (and the lessons you learned from them).
Remember to be concise and stick to just one or two creative approaches that best highlight your particular approach to business and your specific history. This section should be brief.
Here are some company background examples from familiar names.
The Coca-Cola Company
The Coca-Cola Company (NYSE: KO) is a total beverage company with products sold in more than 200 countries and territories.
Our company's purpose is to refresh the world and make a difference. Our portfolio of brands includes Coca-Cola, Sprite, Fanta, and other sparkling soft drinks. Our hydration, sports, coffee, and tea brands include Dasani, smartwater, vitaminwater, Topo Chico, Powerade, Costa, Georgia, Gold Peak, Ayataka, and BodyArmor. Our nutrition, juice, dairy, and plant-based beverage brands include Minute Maid, Simply, innocent, Del Valle, fairlife, and AdeS.
We're constantly transforming our portfolio, from reducing sugar in our drinks to bringing innovative new products to market. We seek to positively impact people's lives, communities, and the planet through water replenishment, packaging recycling, sustainable sourcing practices, and carbon emissions reductions across our value chain. Together with our bottling partners, we employ more than 700,000 people, helping bring economic opportunity to local communities worldwide.
The Home Depot
When The Home Depot was founded in 1978, Bernie Marcus ad Arthur Blank had no idea how revolutionary this new "hardware store" would be for home improvement and the retail industry. Today, we're proud to be the world's largest home improvement retailer. In 2,300 stores across North America, we aspire to excel in service—to our customers, associates, communities, and shareholders. That's what leadership means to us. That's The Home Depot difference.
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Nussbaum Center for Entrepreneurship. " Business Plan Outline ."
Small Business Administration. " Write Your Business Plan ."
The Coca-Cola Company. " About the Coca-Cola Company: Overview ."
The Home Depot. " Our Story ."
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How to Develop and Use a Business Plan
Digital library > building and inspiring an organization > business plans, "how to develop and use a business plan".
A well-prepared business plan is more than a necessary tool to seek funding. It should also be a functional road map for your growth strategyI
Making time for growing the business, tips to mesh marketing, sales, service, productivity boosters, understanding clears the air, doing a s.w.o.t. analysis for your company.