Writing a business plan is a challenging but essential step for every business start-up. A well-written business plan gives structure to your business and attracts lenders or investors. A business plan is equally as important as accessing funding for your business.
What are the key elements of a business plan?
Writing a business plan is not set in stone. However, specific elements need to be captured in your business plan. These pointers provide a 360 approach to business - from starting up, sustaining your business, financing, and making future projections for your business. This article provides a guide to writing a business plan which comprises of:
- Executive Summary
- Company Description
- Product or Service Line
- Market Research and Analysis
- Marketing and Sales
- Financial Analysis and Financial Projection
- Management and Staffing
Business Plan Element 1: Executive Summary
The executive summary section of your business plan is an important first element for your business which provides an overview of your business. It highlights and describes the nature of the business to be undertaken, key activities (services or products) of your business as well as the objectives of the business. Also, the business name may be included in this section. The executive summary section should not be a lengthy one but rather apt and comprehensive.
What details are to be captured in the executive summary section?
The executive summary should discuss the following;
- Concept of your business -what is the purpose of your business? i.e., the identified market gap and the solution to the identified gap
- The objective of your business - what does the business seek to achieve in its operations both short to long term? i.e. The solution
- Product or Service offering - the type or nature of service or products to be offered
- Target Audience - People who will need the service or product
- Market Competition - Who are your competitors? and how unique is your business that sets you apart from current players?
- Financial Statement - What is your proposed start-up capital and what are your revenue projections for the future?
- The team - The personnel needed to actualize the business idea.
Business Plan Element 2: Company Description
This section of your business plan should give a clear-cut overview of your company. Two main questions should be answered in this section; What does your company do? and What does the company stand for? Answering these questions introduces potential investors to the services of the company, the company's mission, and also the business model and structure.
Key components to include in the company description section are:
- The type of business - Is the business a privately owned venture, a partnership, a limited liability company, or a Not for Profit Organization?
- The Sector - Which industry or sector do you operate in? This is essential for understanding the standard of operations for your business.
- Mission and Vision Statement - Operational and future goals of the business
- Location - Venue or siting of the business
Business Plan Element 3: Product or Service Line
A product line is a group of products or services marketed under one brand and sold by the same company. This section of your business plan should provide a detailed insight into the products and services you plan to offer. In this section, you establish a clear-cut collection or category for all your products and services and the value they will provide to customers or clients. Simply put, you explain exactly what you are offering and how essential it is for the market. Specifically;
- Describe the product or service - provide a detailed explanation of how the product or service works, pricing information, and also how to access the product or services.
- Highlight features and benefits of the product: highlights the characteristics of the product and how it fulfills a customer's need. Also, the quality and functionality of the product or service should be emphasized.
- Outline the unique selling proposition: highlight the distinctiveness of the product from other existing products in the market. This could be informed by an identified gap in the market.
Business Plan Element 4: Market Research and Analysis
Market research and analysis are pivotal approaches to your business. It is important to know, no business operates in isolation, hence the need to understand the market within which you operate. The market analysis section of the business plan should provide a detailed synopsis of the market you intend to operate with enough data to support your analysis. The market analysis section should provide information on the industry, target customers, competitors, trends, demand, and other market variables for the product or services.
Why is it necessary to conduct a market analysis?
A market analysis outlines the strengths, weaknesses, opportunities, threats, and gaps in the business field. It is also used to estimate the revenue potential of the market, make financial projections, and analyze the level of competition. Analyzing the market requires understanding the following;
- Target Audience
Identifying a target audience is essential for businesses to
focus their marketing efforts. Moreover, it helps identify the
category of people who will need their product or service.
For example, if your company sells baby diapers, your target market will be nursing mothers.
- Potential Market Size (Value and Volume)
Estimating the size of your market helps you make revenue projections and measure your business's growth potential. The market size is the total number of potential buyers for a product or service and the potential sales that could be made by them. The details below provide a guide to estimating your market size;
- Define your target audience- which people will need or want the product or service?
- Estimate the number of target audiences in the market - The estimated number of target audiences should be informed by data, either secondary or market research.
- Determine your penetration rate - What percentage of the target audience would you want to capture for your business?
- Calculate the following;
~Market Volume - Multiply the number of target audiences by the penetration rate.
~Market Value (monetary value) - Multiply the market volume by your average unit selling price
Example: Assuming there are 10000 nursing mothers in the country
and we decided to target 10% of the mothers for our business and
sell each pack of baby diapers at GHC 30 cedis;
Market Volume = 10000 x 10% = 1000 nursing mothers
Market Value = 1000 nursing mothers x GHC 30 = GHC 30,000
- Competitive Analysis
Competitive analysis is a review of the level of competition in the market. It involves identifying and researching competitors to identify their strengths and weaknesses, marketing strategies, key features, pricing, and how to capitalize on their weaknesses. It should be noted that there are two main types of competitors:
~Direct competitors: businesses that sell the same products or services to the same target audience
~Indirect competitors: businesses in the same category that sell different products or services to solve similar problems.
Competitor analysis is essential for strategic planning, pricing, marketing, and distribution. It helps to understand the market, business strength, and how to reach customers.
Business Plan Element 5: Marketing and Sales
This section of your business plan is a build-up of the market analysis. In this section, you highlight how you intend to make sales i.e. get customers to buy your product and service. The key emphasis should be on the following;
- Marketing and Sales Plan:
- Marketing Strategy: clearly define the road map to be used to execute your marketing approach. The approach could be either traditional or digital (online). Further highlight what you want to accomplish with the marketing strategy to be employed. Keep in mind to adopt a marketing strategy that best fits your target audience, business objectives, and budget.
- Sales channel establishes the methods for selling the products or services. It involves using a direct or indirect approach to sell your products and services to consumers. The type of sales channels should be dependent on your target market as well as your capacity. A successful sales channel can successfully define the growth of your business and its revenue. The sales strategy you employ is key in defining the growth of your business.
- Pricing strategy: The price of your product represents the value you place on your products and services. A pricing strategy involves the approach that can be used to set prices for products and services. The pricing strategy could be penetration pricing, premium pricing, price skimming, etc. However, it should be noted that a well-defined pricing strategy attracts and gives customers confidence in your products. To establish the right pricing strategy, production cost, marketing, and industry condition (transportation, taxes, etc.), product quality, and profit margin should be considered.
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The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.