The Elements of a Business Plan
A business plan is not only a way to develop ideas about the course of a business, it is also a retrospective tool which can be used to evaluate progress and a vehicle for raising money. As both a pragmatic and forward looking document, business plans must be both accurate and “convey a senses of excitement and optimism.”
The Ernst & Young Business Plan Guide by Brian Ford
Business plans are living documents and iterative in nature because assumptions change, the market changes, and the planners’ understanding of their customers and business evolves. The process of writing a business plan can involve just the founders of a company or all layers of large corporation. It is the first incarnation of a strategic plan, and, as such, it can be used to test assumptions about business strategies and approaches to market problems.
Business plans typically contain the following sections:
- Table of Contents
- Executive Summary
- General Company Description
- Products and Services
- Marketing Plan
- Operational Plan
- Management and Organizatoin
- Structure and Capitalization
- Financial Plan
An executive summary should encapsulate the entire plan. The Ernst & Young Business Plan Guide recommends establishing your differentiating elements in the executive summary. The authors acknowledge that “while you must have a grand vision, focus on the things you can do” in the executive summary. Clarity on specific goals and accomplishments is also important to set the stage for the rest of the plan. Because it is such an important element of the plan and may need to stand on its own, the guide suggests writing the executive summary after completing the rest of the plan.
After describing the product or service, the next business plan element is the marketing strategy. The purpose of the marketing section is describe how the business will “manipulate and react to market conditions to generate sales”. The authors stress that even the best products and services can fail if market need is not present or if demand cannot be generated. A marketing plan can be broken down into subsections into several subsections:
- Market definition and opportunity
- Marketing strategy
- Market research
- Sales forecasts
The goals for this section are clearly establishing a need and market for the business and identifying how sales will be generated.
For an alternate approach, try this pitch deck outline:
The Ernst & Young Business Plan Guide offers a classic approach to a business plan. Business plans are most frequently written to obtain funding and are designed to document the course of a company on annual or multi-year basis.
The book advises entrepreneurs to establish clear goals, but be flexible as new information comes to light.