Generally, there are seven major components that make up a business plan. They are:
1. Executive summary
2. Business description
3. Market strategies
4. Competitive analysis
5. Design and development plans
6. Operations and management plans
7. Financial factors
The business description usually begins with a short description of the industry. When describing the industry, discuss the present outlook as well as future possibilities. You should also provide information on all the various markets within the industry, including any new products or developments that will benefit or adversely affect your business. Base all of your observations on reliable data and be sure to footnote sources of information as appropriate. This is important if you're seeking funding; the investor will want to know just how dependable your information is, and won't risk money on assumptions or conjecture.
When describing your business, the first thing you need to concentrate on is its structure. By structure we mean the type of operation, i.e. wholesale, retail, food service, manufacturing, or service-oriented. State this right away in the description, along with whether the business is new or already established.
In addition to structure, legal form should be reiterated once again. Detail whether the business is a sole proprietorship, partnership or corporation, who its principals are, and what they will bring to the business.
You should also mention who you will sell to, how the product will be distributed, and the business's support systems. Support may come in the form of advertising, promotions, and customer service.
Once you've described the business, you need to describe the products or services you intend to market. The product description statement should be complete enough to give the reader a clear idea of your intentions. You may want to emphasize any unique features or variations from concepts that can typically be found in the industry.
In fact, the investor will be looking for any proprietary information that will set your concept apart from the crowd. Most investors call this the "USP" or Unique Selling Proposition. Almost every business has one. It can be a patented product or a trade secret like Kentucky Fried Chicken's recipe.
Be specific in showing how you will give your business a competitive edge. For example, your business will be better because you will supply a full line of products; competitor A doesn't have a full line. You're going to provide service after the sale; competitor B doesn't support anything he sells. Your merchandise will be of higher quality. You'll give a money-back guarantee. You'll provide parts and labor for up to 90 days after the sale. Competitor C has the reputation for selling the best French fries in town; you're going to sell the best Thousand Island dressing.
Now you must be a classic capitalist and ask yourself, "How can I turn a buck? And why do I think I can make a profit that way?" Answer that question for yourself, and then convey that answer to others in the business concept section. You don't have to write 25 pages on why your business will be profitable. Just explain the factors you think will make it successful, like the following: it's a well-organized business, it will have state-of-the-art equipment, its location is exceptional, the market is ready for it, and it's a dynamite product at a fair price.
If you're using your business plan as a document for financial purposes, explain why the added equity or debt money is going to make your business more profitable. Show how you will expand your business or be able to create something by using that money. How will the money help your business?
Show why your business is going to be profitable. A potential lender is going to want to know how successful you're going to be in this particular business. Factors that support your claims for success can be mentioned briefly; they will be detailed later. Give the reader an idea of the experience of the other key people in the business. They will want to know what suppliers or experts you've spoken to about your business and their response to your idea. They may even ask you to clarify your choice of location or reasons for selling this particular product.
The business description can be a few paragraphs in length to a few pages, depending on the complexity of your plan. If your plan is not too complicated, keep your business description short, describing the industry in one paragraph, the product in another, and the business and its success factors in three or four paragraphs that will end the statement. While you may need to have a lengthy business description in some cases, it is our opinion that a short statement conveys the required information in a much more effective manner. It doesn't attempt to hold the reader's attention for an extended period of time, and this is important since there will be other plans that the investor will need to read as well. If the business description is long and drawn-out, you will lose the reader's attention, and possibly any chance of receiving the necessary funding for the project.
Part two of seven. Tomorrow, we'll cover market strategies. Tips are updated daily at 8:30am PST or 11:30 EDT.