9 Key Elements of an Effective Business Plan

By March 14, 2021 Business Advice
business plan

For any entrepreneur starting a business, there are many necessary activities and documents to prepare to maximize success. 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.

According to Investopedia, “A business plan is a written document that describes in detail how a business—usually a startup—defines its objectives and how it is to go about achieving its goals. A business plan lays out a written roadmap for the firm from marketing, financial, and operational standpoints.”

What Your Business Plan Should Include

The Small Business Administration specifies 9 sections required of a typical business plan. We’ve defined each section below with a summary of what they include.

1. Executive Summary

This section is a concise description of what your business does, and the market needs it fulfills. Keep it brief, but with enough detail to entice readers to learn more about your company. The executive summary should include:

  • Your business name and location
  • Products and/or services offered
  • Mission and vision statements
  • The specific purpose of the plan (overview success factors)

2. Company Description

Provide a high-level overview of your business, your goals and objectives, what you’ve already achieved, the problems your business solves, ideal customers, and any other success factors. This is the place to brag about your company.

This section should also include a profile of the company, containing information like:

  • Location
  • Legal structure
  • Overview of products, services, customers, and suppliers
  • Highlights of financial and marketing aspects
  • Summary of your short- and long-term goals and plans for profitability

3. Market Analysis

Information in this section will be the summary of thorough market research. It should include analyses of the industry, target customer base, and competitors. Explain what success means in your industry, how competitors achieve goals, and how you can do it better. Details to include:

  • Industry description and statistics
  • Targeted customers, their demographics, and profile
  • Marketing data for your products or services (past, present, and future)
  • A detailed evaluation of competitors, including strengths and weaknesses

4. Organization and Management

This section defines how your company is structured and how it will be run. It should describe the legal structure of your business (C or S corporation, general or limited partnership, sole proprietor, or LLC).

Include an organizational chart that depicts the hierarchy of the company, separate departments, and who manages them. If you are governed by a board of directors, list them here. Include profiles of the executive team members. Identify any advisors you use, like accountants and attorneys. Briefly describe their roles and responsibilities, and how they contribute to the company’s success.

5. Services or Products

This section should describe in detail what your company offers in terms of products and services and how they benefit your customers. If your products are pending patents or copyrights, explain that here. Include costs, net revenue expected from sales, lifecycle data, research and development, and advantages over competitors.

6. Marketing Strategy

Describe your plan on how reaching target customers, getting leads, and making sales. Define the steps you will take to promote your product or service and the budget you allocate for it. Your marketing strategy is not stagnant; it should be reviewed periodically and evolve based on results.

7. Funding Request

This section is needed if you are planning to request funding for your business. Describe in detail how much money you need and for what purpose. Include plans and timelines for repayment of loans.

8. Financial Plan

This is an important section in your business plan, especially if you are soliciting funding for your business. It is meant to prove your company’s viability to investors. It identifies the ways in which your company generates revenues and highlights the key assumptions that govern your financial projections.

The financial plan should include documents that reflect your company’s financial forecast, like projected income statements, balance sheets, cash flow statements, and capital expenditure budgets.

Even if you don’t need funding in the near term, the information in this section is critical to developing budgets, planning expenditures, and making decisions. The financial statements will document the history of your financial status and track trends to use for better planning and decision making. Including charts and graphs is a great way to visualize this data.

9. Appendix

The last section of your business plan is the appendix, which can include supporting documents for the other sections of the plan. Legal documents, licenses, permits, credit histories, financial projections, customer lists, and more are some examples of documents that could be included.

Get Professional Assistance with Writing Your Business Plan

A business plan is critical to knowing the status, history, and projections of your company. It should be developed carefully and thoroughly.

Orcutt & Company can assist you in creating a business plan that meets your needs. We have a team of professionals who are experienced in all areas of small business accounting. Contact us today for more information.