10 Essential Business Plan Components
Business plans are critical to the success of any new venture. I believe that entrepreneurs should dedicate time to create them,
regardless if you’re searching for investors. Business plans serve as the framework for your company and provide benchmarks to see if you’re reaching your goals.
In my experience, they are key to helping you think through your business and keep you on track.
What I’ve learned as an entrepreneur and investor is that it’s important to outline your business plan carefully.
Consider all the variables so you don’t rush into anything and test your assumptions.
You should take some time to work with mentors, business partners, and colleagues on your plan.
Ask them to look for holes so you can adjust accordingly. Seeking input is a great way to get an objective view,
so don’t forget this step; it’s way too important.
As with most things in the business world, the size and scope of your business plan depend on your specific goals.
If you’re drafting it for investors, you should make the plan more detailed.
Be sure to keep in mind that potential investors might not be as familiar with your industry so you have to clearly explain your concept and where it fits in.
If you’re just developing the plan for you and/or business partners, it doesn’t have to be as detailed, but you should still outline your goals and how you want to reach them.
Likewise, if your product or service is not overly complex, your plan doesn’t have to be very lengthy.
For example, a business plan for a hair salon is not going to look anything like a plan for a biotech research company.
Need some help creating the right business plan for your company?
Take a look at the Small Business Administration, which has great resources for creating a plan for any business.
Although the exact structure of business plans vary, my personal requirements for plans that I create and plans that I review for potential investments include the following
- Mission statement and/or vision statement so you articulate what you’re trying to create;
- Description of your company and product or service;
- Description of how your product or service is different;
- Market analysis that discusses the market you’re trying to enter, competitors, where you fit, and what type of market share you believe you can secure;
- Description of your management team, including the experience of key team members and previous successes;
- How you plan to market the product or service;
- Analysis of your company’s strengths, weaknesses, opportunities, and threat, which will show that you’re realistic and have considered opportunities and challenges;
- Develop a cash flow statement so you understand what your needs are now and will be in the future (a cash flow statement also can help you consider how cash flow could impact growth);
- Revenue projections; and
- Summary/conclusion that wraps everything together (this also could be an executive summary at the beginning of the plan).
Remember, these are just my minimum components for reviewing a business plan, but they should give you a good guide.
If you’re looking for more insight, VC firm Sequoia Capital has a nice breakdown of what its partners look for in business plans.
Given how important this topic is, let’s revisit it next time and I’ll cover some additional business plan tips that I’ve found helpful in my own career.
Stay tuned for the next post and in the meantime, let me know your thoughts on how to best structure a business plan.