10 Important Components of a Successful Business Plan
A business plan is essential for the inception, growth and overall success of a company. These plans provide a business with a vision for the future and a clear strategy for how to expand. There are several essential components of an effective business plan, and understanding each of these components can help you create a plan that leads your company to success.
In this article, we explore why business plans are important and the 10 essential parts of a business plan you should include when developing one for your organization.
Why are business plans important?
Business plans are important for several reasons, with one of the most prominent reasons being that they provide a clear outline of action for companies to take to reach their goals. These plans can give an organization clarity about how viable their company is and what is needed to grow and prosper. Business plans help establish specific steps that companies must take to start their business and promote their success.
Business plans are also important because they:
Provide insight as to what resources are needed to reach goals
Establish a clear timeline of when a company can expect to achieve goals
Can help a company determine the steps to take to expand into a new market
Offer a clear way to track progress as a company grows
Enable business owners to predict and plan for potential risks
Allow investors to see the viability of a company
10 essential components of a business plan
Effective business plans must contain several key components that cover various aspects of a company’s goals. The most important parts of a business plan include:
Market analysis and strategy
Marketing and sales plan
Management and organization description
Products and services description
Financial projection and needs
Exhibits and appendices
1. Executive summary
The executive summary is the first and one of the most critical parts of a business plan. This summary provides an overview of the business plan as a whole and highlights what the business plan will cover. It’s often best to write the executive summary last so that you have a complete understanding of your plan and can effectively summarize it.
Your executive summary should include your organization’s mission statement and the products and services you plan to offer or currently offer. You may also want to include why you are starting the company if the business plan is for a new organization.
2. Business description
The next part of a business plan is the business description. This component provides a comprehensive description of your business and its goals, products, services and target customer base. You should also include details regarding the industry your company will serve, and any trends and major competitors within the industry. You should also include you and your team’s experience in the industry and what sets your company apart from the competition in your business description.
3. Market analysis and strategy
The purpose of the market analysis and strategy component of a business plan is to research and identify a company’s primary target audience and where to find this audience. Factors to cover in this section include:
Where your target market is geographically located
The primary pain points experienced by your target customers
The most prominent needs of your target market and how your products or services can meet these needs
The demographics of your target audience
Where your target market spends most of their time, such as particular social media platforms and physical locations
The goal of this section is to clearly define your target audience so that you can make strategic estimations as to how your product or service will perform with this audience.
4. Marketing and sales plan
This part of your business plan should cover the specifics of how you plan to market and sell your products and services. This section should include:
Your anticipated marketing and promotion strategies
Pricing plans for your company’s products and services
Your strategies for making sales
Why your target audience should purchase from your company versus your competition
Your organization’s unique selling proposal
How you will get your products and services in front of your target audience
5. Competitive analysis
Your business plan should also include a detailed competitive analysis that clearly outlines a comparison of your organization to your competitors. Outline your competitors’ weaknesses and strengths and how you anticipate your company to compare to these. This section should also include any advantages your competition has in the marketplace and how you plan to set your company apart. You should also cover what makes your business different than other companies in the industry, as well as any potential issues you may face when entering the marketplace if applicable.
6. Management and organization description
This section of your business plan should cover the details of your business’s management and organization strategy. Introduce your company leaders and their qualifications and responsibilities within your business. You can also include human resources requirements and the legal structure of your company.
7. Products and services description
Use this section to further expand on the details of the products and services your company offers that you covered in the executive summary. Include all relevant information about your products and services such as how you will manufacture them, how long they will last, what needs they will meet and how much it will cost to create them.
8. Operating plan
This part of your business plan should describe how you plan to run your company. Include information regarding how and where your company will operate, how many employees it will have and all other pertinent details related to your organization’s operations.
9. Financial projection and needs
The financial section of your business plan should detail how you anticipate bringing in revenue and the funding you’ll need to get started. You should include your financial statements, an analysis of these statements and a cash flow projection.
10. Exhibits and appendices
The final section of your business plan should include any extra information to further support the details outlined in your plan. You can also include exhibits and appendices to support the viability of your business plan and give investors a clear understanding of the research that backs your plan. Common information to put in this section includes:
The 4 Key Components of a Business Plan (and Why They’re Important)
When you apply for a job, you get one shot — one resume and cover letter — to present to a potential employer and hope, out of hundreds of applicants, they choose you to interview. A business plan is really no different.
While a full-length business plan has many components, most small businesses can simplify. By putting your focus on just four simple elements, you can create a basic business plan that will be effective for you and your business.
In this post, I’ll help you understand which components of a business plan are considered the most critical and why, as well as learn what to include in each of these sections.
If you’re feeling a little lost or overwhelmed, stay with me! By the end of this article, you’ll have a clear idea of what to focus on to create a business plan that actually works for you.
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A quick look at all the sections of a full-length business plan
While you only really need to focus on the most important components of a business plan, it helps to know what a full-length business plan looks like. So let’s take a quick look at all possible business plan sections before we go deeper into the four most important ones.
A full-length business plan includes the following sections:
- Executive summary
The first and most important section, summarizing everything you hope to accomplish with your business.
- Company legal description
Defines your company’s legal status.
- Products and services
Lays out the products and/or services you plan to offer to customers and clients.
- Marketing plan
Explains your plan for reaching, acquiring, and retaining customers for your business.
- Operations plan
Shows that you’ve thought through the logistics of actually operating your company, including hiring staff, shipping, storage, and more.
- Organization and management
The organizational structure of your company — what does staffing look like? Who manages which teams?
- Bios of key management
Highlights the experience and competence of the key leaders in your company.
- Personnel plan
A deeper dive into your plan for hiring and retaining the best staff to manage and run your company.
- Intellectual property and other key assets
What are the key assets your company has ownership of? Even if it’s just an idea that you have legal claim to, list it here.
- Financial plan
Lays out the cost of everything mentioned in the previous sections, plus your plan for funding to cover those costs.
Nitty gritty details that you can reference in other sections of your plan. This will include tables, charts, budgets, and other “hard” figures.
Which business plan sections do you think are the most important for an existing small business in most situations?
If you answered it all depends, you are a smart entrepreneur! It all depends on what you are trying to accomplish and who is your target audience.
That said, most small businesses can focus on just four elements for a basic business plan, which can help you stay focused and keep you from getting overwhelmed.
The 4 must-have elements of a business plan
After having written and reviewed hundreds of business plans, I feel there are four key sections used in almost all situations, and these are augmented by additional sections depending on the circumstances (That’s why we looked at all the sections of a business plan above).
The four most important business plan sections for a basic business plan are:
- Executive summary
- Marketing plan
- Key management bios
- Financial plan
Now, let’s look at each of these key business plan sections in detail.
1. Executive summary
This is one of the shortest components of a business plan, but the one you should spend the most time working on.
Whether your business plan is 5 or 30 pages, an executive summary section must recap all of the material in your plan in only two pages. The reason this section gets so much attention is that it might be the only section the reader looks at when making a decision to go forward or stop.
To paraphrase an old proverb, “You can tell the quality of a business plan from its executive summary.”
The executive summary is the ultimate elevator pitch where you introduce the idea for your business, provide background, talk about approach and results, and convey confidence that you will be successful.
When you get the reader excited about your business idea, they will be inclined to explore it further. In that sense, the executive summary is much more than a summary; it is your call to action.
What goes into your business plan’s executive summary section?
In the first paragraph, the executive summary should include a description of your business and the customer problem being uniquely solved so the reader understands what you are trying to achieve.
The next set of paragraphs — the marketing paragraphs — should include information about the size of the market, sales forecast, demographics of your potential customers and competition, and your competitive advantages.
Next are the operations, staffing, and management paragraphs. These demonstrate your or your management team’s leadership and industry experience, along with a few key details about the location, staffing, and operations of your business.
The financial section of the executive summary should include the projected income and cash generated during the first three years (or next three years) of your business. If you are seeking funding, you should also include a clear statement of how much money is needed to fund the project. And of this sum, show how much you will be investing yourself versus the amount being sought from the funder.
Remember — while the executive summary appears first in the business plan, it should be written last since it is the summary. A business plan is developed from the bottom up, so you need to work out all the details before you can write the summary.
2. Marketing plan
The number one issue for small businesses is reaching new customers. For many business owners, this is the most important section, and much time is devoted to developing it. For without demand, there are no sales.
A marketing plan has three main sections:
- Market analysis
- Competitive analysis
- Specific marketing actions
Market analysis section
There are two main purposes of the market analysis section. First is figuring out how big the market is: You need to know if there will be sufficient customers to buy your product or service so you can generate satisfactory revenue. The second is to describe your potential or ideal customer so you will know how to reach that market when conducting your outreach.
Competitive analysis section
The point of the competitive analysis section is to make sure you understand what you are up against.
This section should list about five competitors and their strengths and weaknesses. Some examples of things to cover when looking at your competitors are:
- Operating hours
- Return policy
- Marketing budget size (or a rough estimate)
- Brand reputation
- Product delivery policy (is it provided free, at cost, or not at all)
- Complementary products and services
- Buying quantities (which may equate to lower or higher costs).
Specific marketing actions
The specific marketing actions are developed in your marketing action plan, which is used to implement your business idea.
In other words, what are you going to do to drive traffic to your front door — both literally and figuratively? What five marketing steps you will be undertaking? For each of the five marketing steps, note the cost to implement (which, when totaled, becomes your marketing budget), if the items can be completed by you alone or whether you will need assistance, and the sales expectations (which when added together, become the sales forecast).
The marketing budget and sales forecast will be used in the financial forecasts in your financial plan section of your business plan.
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3. Key management bios
With a limited track record and usually few assets, the success of a small business is typically a bet on the owner. So this section must convince readers that the bet is a good one.
Include a one-page bio on each of the key people involved in your business. Write these bios in a style that demonstrates you’ve “been there, done that” and know how to do it again.
You want to demonstrate that you have the technical chops for the business as well as the leadership skills. Where there might be experience or skills gaps, mention how you plan to add others to the team to provide this expertise.
4. Financial plan
One of the final elements in your business plan is the financial statements. While the financial plan is a very important section, it’s appropriate for it to come last, because if the executive summary is a discussion of all that is to follow, the financial section is a recap of all that precedes it.
The products and services, marketing, operations and personnel sections demonstrate that the business idea is feasible, but it’s the financial section that demonstrates it is viable.
For many, tackling this section last is fine because it’s the one plan element that most entrepreneurs dread. They frequently feel like they have hit a wall when it comes to writing this section, and they blame it for holding up their business plan. Typically this is because they don’t understand it, are afraid of it, or have made it unnecessarily difficult because they haven’t carefully completed the rest of the business plan.
Don’t let this happen to you. If you feel stuck, seek guidance from a SCORE mentor or other free services as mentioned here.
Financial statements are charts with lots of numbers and few words describing what they are all about. Therefore, it is advisable to have an introductory page in your financial plan explaining in plain English the key assumptions and how each one was determined.
If you can convince the reader about the reasonableness of the assumptions, then the sale has already been made when they read the financial statements.
Key lessons on the 4 key components of a business plan
There you have it! Hopefully, by now you’re feeling better about what actually matters when it comes to outlining your own business plan.
Let’s revisit the top lessons we went over in this article:
- The executive summary, marketing plan, key management bios, and financial plan business plan sections are critical and should be included in all business plans.
- Additional sections can be added to these four when targeting specific purposes and audiences.
- It’s imperative to get readers excited about your business idea from the outset in the executive summary, or they may not read any further.
Next steps for creating your own business plan
- Choose which sections you need in your business plan. Be sure to include the four most important elements, and add any others from the beginning of this article that you think you might need.
- Sketch or outline what you will include in each business plan section
- Gather the information and data that support your business plan
- Use this info to fill out each section of your business plan
- Review each component of your business plan with trusted mentor, colleague, or friend
This is the second in a four-part series by Hal Shelton, SCORE small business mentor and author of The Secrets to Writing a Successful Business Plan. This post revealed four must-have sections of every business plan. Next, we look at when is the best time to revamp your business plan.
8 Key elements of a business plan you need to know
Debbie Austin FCCA explains the importance of business plans and what to include in yours.
Everyone wants the perfect business; a money making, well oiled machine that’s leading in the market. If only it were as easy as just wanting it!
Being a potential business owner, you will set goals around things like profitability, productivity, and growth (just to name a few). In order to reach these goals amidst the daily meetings, phone calls and e-mails, you’ll need to create an effective business plan.
Starting a business can be a very complex process. Having a plan is important to the success of your venture as it maps out all of the details surrounding your concept and strategy.
If you’ve already started up and your business is growing, congratulations! Reviewing the key elements of a business plan can help you avoid crisis situations. Remember, your document is at the core of all that you do, that’s why we’ve written this post because it will be a key facet to helping you achieve your goals .
What should a business plan include?
The contents of a business plan
1. The executive summary
This is placed as number one on our list of components of a business plan, but it can easily be the final stage. That’s because sometimes it’s easiest to write your summary after you’ve covered all the other details.
A great summary is one of the key features of a business plan. It serves as an overview of your entire business and the elements surrounding it.
Be sure to outline succinctly the 5 “W”s (Who, What, Why, When, Where) as well as the mission statement. Think about why you started the business along with where you would like it to be in the future, how will you get there? Your mission statement is the start of creating a culture that people in your organisation will live and work by.
2. A description of the business
This section should contain details of things such as your goals and the customers you will service. What are the products and services you will offer to your customers? You’ll need to provide an overview of them and how they will address customers’ needs and wants?
3. The market(s) the business will operate in
You’ve come up with this great business idea , but how will it do in the market? Or, more importantly, what is the market for it? How well do you know the market? What does a typical buyer look like, what is their income level? Does the business have the hallmarks of disruptive innovation ?
This is the time to research and determine who your target market is and ask specific questions that relate to your product or service. Put you idea to the test. What have others done before you and what can you do differently and better? Analyse what information you’ve uncovered and outline it’s potential impact in your plan.
4. A SWOT analysis
Create a detailed list of your strengths, weaknesses, opportunities and threats. This needs to be done with an open and honest approach, keep emotions out of it, focus on being objective when analysing your business and those of your competitors.
Any strengths you uncover will represent internal, positive factors in your business that are within your control. Weaknesses are also internal, but are negative factors that need to be improved.
Both opportunities and threats are external factors. While opportunities will potentially positively impact on your business, threats represent negative factors beyond your control. For example, are there high barriers to entering the market? Does a competitor have the market cornered due to brand loyal customers? These could harm your enterprise, so you need to strategise for it in your plan.
5. The management team and personnel
Who will run the business, who are the directors in the business? What are the skills of the management team and how do their different responsibilities make maximum use of their abilities. What is the chain of command in terms of decision making?
Also use this section to identify how the management team, and taking on employees will help maximise strengths, while addressing identified weaknesses to help improve the business.
Finally, which of the UK’s business structures will you choose to operate through?
- Limited company
- Limited liability partnership
6. The products or services offered
In this section you need to detail what will be produced and how it will be sold. You should explain how your product or service will meet a particular need in the marketplace, and how you’ll get customers returning to make repeat purchases. Repeat custom is after all the lifeblood of many a good business.
Who will you rely on, in terms of suppliers, to help you assemble your products? What intellectual property, patents or copyright do you own, or might you be at risk of potentially infringing?
What is the branding to your business? What are the key messages you want to communicate with your target market and how will you go about reaching them? How will you achieve market share and at what cost in terms of your budget?
8. Let’s talk money: A financial plan
Ideas are great, but how will you make them a reality and sustain a viable business. Creating a financial plan will give you the opportunity to address your financial concerns and talk money, think about start-up costs, financial projections , funding and investor pitches.
You’ll need to list how much your start-up will cost, everything from stationary to leases should be outlined and balanced against your financial projections.
Don’t fear change, your business plan isn’t written in stone
It’s important to remember that your business plan isn’t written in stone. This is a document that you and your staff can improve and update as the business grows and changes. Your plan should be reviewed regularly.
Consider implementing a monthly review to track progress or make adjustments to your strategy. Accountability and motivation are key in making sure your goals are met, think about the people involved and what can you do to keep them inspired.
This post was created on 26/06/2018 and updated on 18/02/2022.
Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.