The 5 Key Elements Of A Good Business Plan
22 January 2020
Although some Founders are sceptical about planning too far ahead for their businesses, preparing a solid business plan is necessary for many purposes.
As any founder knows, the only sure thing about running a growing company is change.
In fact, your business plan is perhaps the thing that will change most often throughout your entrepreneurial journey.
Although some Founders are sceptical about planning too far ahead for their businesses, preparing a solid business plan is necessary for many purposes, including, but not limited to:
- Raising finance through investment;
- Applying for a business loan;
- Budgeting for the long and short term;
- Gaining a deeper understanding of how your business works.
Perhaps even more important than preparing a business plan, is making sure that this is updated for each of the small and big changes that your company will go through as it grows and evolves.
Different companies require different types of business plan. Depending on your business model, your revenue structure and many other factors.
However, there are 5 elements of a business plan that are absolutely key to making sure that the reader understands how your company works and plans on growing.
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1. Executive Summary
The Executive Summary represents the reader’s first impression of your business
The Executive Summary is the first section of your business plan, and also the last one you should write. It represents the reader’s first impression of your business . As a result, it will likely define their opinion as they continue reading the business plan.
A good Executive Summary includes key facts about your business such as:
- Business & product description;
- Current positioning & targeting;
- Financial outlook & requirements;
- Past and future achievements & goals.
However, the most important function that a great Executive Summary serves is communicating to the reader why they should read the rest of the business plan , and why you want them to.
2. Business Overview
After the Executive Summary, a business plan starts with a comprehensive explanation of what your business proposition is and how it relates to the market where your company operates.
In this section of the business plan, you should explain precisely:
- what your company does;
- what are its products or services;
- in which market it operates;
- who are its customers.
When describing your business, you should make sure to that the reader knows what kind of market environment your business operates in, but also how it can thrive in such an environment from a competitive point of view.
For some very niche or particularly innovative sectors, this may mean that you need to inform the readers about specific market dynamics .
In these cases, make sure that you clarify what is considered ‘the industry standard ‘ in your sector, the selling points that current players are competing on and how your business is positioned relative to them.
Make sure to include:
- Your mission statement;
- The philosophy, vision and goals of your company;
- Your industry and target audience;
- The structure of your business, detailing your customers, suppliers, partners and competitors;
- Your products and services and the problem they solve;
- Unique Selling Point(s).
If the company already has a well-defined product or service, this section can be divided into Company Description and Products & Services .
3. Sales & Marketing Strategy
This section of the business plan requires a deep understanding of your market space and how your business positions itself within its niche and competes with existing players .
Within your Sales & Marketing strategy, you should outline:
- A definition of your target market – include its size, existing and emerging trends and your projected market share;
- An assessment of your market – this should summarise how attractive your target market is to your company and why, Porter’s Five Forces or the more recent Six Forces Model are useful tools to define this;
- Threats & Opportunities – you can use a SWOT Analysis to present these;
- Product/Service Features – once you have thoroughly described your product/service, make sure to highlight its Unique Selling Points, as well as any complementary offerings and after-sale services;
- Target Consumers – whether you’re a B2B or B2C company, it’s a good idea to include an ideal customer profile to describe exactly what niche(s) you are going to target;
- Key Competitors – research and analyse any other players inside or outside your market whose offering might compete with you directly or indirectly;
- Positioning – explain in a short paragraph how your company differentiates from your competitors and how it presents itself to your target niche;
- Marketing Plan & Budget – outline the marketing and advertising tactics you will use to promote your business, giving an overview of your brand and of the communication elements that support it;
- Pricing – explain how your pricing strategy fits within the competition and how it relates to your positioning;
A very common mistake that should be avoided is writing that you have no competition. Instead, you should show your efforts in researching your competitors and assessing how they could threaten your business .
4. Operations & Management
This section gives you the opportunity to explain to the reader how your company does things differently .
The people and processes that are allow your business to operate on a daily basis are the key to your competitive advantage . In fact, they help you build a better product, deliver it more efficiently or at a lower costs. Your Operations & Management must be able to successfully realise what you ‘promised’ in the previous sections.
Here, you must demonstrate how much you know about your business, so don’t leave out any relevant detail. Be concise but thorough, focus on two main points:
- Production or Service Delivery;
- Quality Control;
- Credit policies;
- Legal environment;
- Organisational Structure – this is an overview of all the people involved in your business and their position in relation to each other. You should detail the experience of the existing team, as well as the roles that haven’t been filled yet. Include advisors and non-executive directors . Investors and banks will also look at this section to get an idea of salary costs. As these are normally a significant cost centre, don’t overestimate your staff needs.
5. Financial Plan
Your Financial Plan is possibly the most important element of your business plan . This is especially true if the business plan is aimed at investors or lenders.
This section includes projections, budgets and goals that are unique to each business. In particular, you should focus on explaining the assumptions on which you based your forecasts , more than on the forecasts themselves. Every good Financial Plan will include:
- 12-month Profit & Loss Projection – A month-by-month forecast of sales, operating costs, tax and profits for the following year. Sometimes three years.
- Cash Flow Statement & Forecast – This financial statement tracks the amount of cash that leaves or enters the business at any given time.
- Breakeven Analysis – This is a cornerstone of your business plan. Here you should show what level of projected sales allows the business to cover its costs.
- Capital Requirements – This point is fundamental as it shows investors what their money will be spent on. It should contain a summary of all the expenses for big purchases and day-to-day running costs.
The Financial Plan is usually followed by the Appendices. Here you should include detailed spreadsheets and calculations used to prepare the financial statements.
We help Founders write a solid business plan by supporting them with financial planning and forecasting .
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The information available on this page is of a general nature and is not intended to provide specific advice to any individuals or entities. We work hard to ensure this information is accurate at the time of publishing, although there is no guarantee that such information is accurate at the time you read this. We recommend individuals and companies seek professional advice on their circumstances and matters.
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Key Elements of a Strategic Business Plan
A strategic business plan is a well-crafted, easy-to-follow document that conveys to you and your employees “the direction that your company needs to move in to accomplish your business objectives.” 1 Everyone from startup entrepreneurs to Fortune 500 CEOs needs strategic business plans to guide their businesses to the next level.
No matter your work setting or what your exact work objectives happen to be, to be effective, all strategic business plans should cover the following topics:
- The current state of the business
- A description of where the business needs to go
- An explanation of how the business can get there
Read on to learn what the key elements of a strategic business plan are that support these three topics and learn how to write a strategic business plan that can help boost your company’s success.
How to Write a Strategic Business Plan
Writing a winning business plan is easy when you know which key elements to include and why they are important to any well-written business plan. The most impactful—and actionable—plans tend to include the following sections:
- Executive Summary
- Mission Statement
- SWOT Analysis
- Goals and KPIs
- Initiatives 2
Now let’s take a closer look at these essential business plan elements and their purpose.
The Executive Summary
An effective executive summary “provides an overview of the most essential information in a business document.” 3 Well-written executive summaries quickly convey the main points of your plan but should be crafted to attract the attention of viewers in a way that helps convince them your plan is worth following and/or investing in.
While the function of the executive summary is universal, each summary can vary in length, depending on the industry and the audience you’re targeting; some summaries are merely memos; others are a paragraph or a whole page in length. Additionally, you may choose to have your summary appear in your table of contents or be a stand-alone front page to the rest of your plan with no formal introduction. As long as you make sure to choose the layout and length for your summary based on what works best for your audience, your summary will make the proper impact.
When writing this opening element of your plan, keep in mind traditional audiences of executive summaries tend to be busy business professionals who may not have time to read an entire strategic business plan document, no matter how well-composed. Having a short, precise summary at the beginning of your plan that’s easily digestible, even for the busiest stakeholders, is the best way to guarantee your plan will be understood by senior executives, investors, and lenders. 2
The Mission Statement
A mission statement lays out what your company stands for. By sharing this information in your business plan, you provide your audience with a better understanding of why your plan is important to the overall success of your company.
Great mission statements address:
- What your company does
- Who your company serves
- How your company serves them 4
Your mission statement should be written in a way that helps motivate each employee to work together towards the common goal listed in the mission statement.
When adding this part to your strategic business plan, you may choose to write a combined vision statement and mission statement to define what your company does and what you want to achieve. Vision statements express the “goals the company has for the future, what the company wants to become and how it will achieve those goals.” 3
Don’t forget that mission statements, whether combined with a vision statement or on their own, should be kept current with your company’s present situation. Be sure to update your statement as often as is needed to keep pace with any evolutions or changes the company has undergone.
The SWOT Analysis
Another key element of a successful business plan is the SWOT analysis. SWOT is an abbreviation for:
- S: Strengths
- W: Weaknesses
- O: Opportunities
- T: Threats 5
This analysis portion of your strategic business plan is essential because it delivers a quick visual framework that evaluates your company's competitiveness and can, in turn, be leveraged for strategic plans. 4
Strengths and weaknesses are considered internal factors, affected by what is taking place within the company and changeable by the company itself. Threats and opportunities are external factors like market trends and industry regulations. While not directly controlled by your company, being aware of how external factors may impact your odds for success is critical to any business plan.
Use internal and external data for your SWOT data points. Consulting multiple sources and voices inside and outside of your organization creates a holistic SWOT analysis that will help you and your company see the bigger picture to follow for success.
Once your SWOT analysis is done, you will have new ideas, informed by a well-researched fact list, about your company’s position and state of preparedness for the future.
The Goals and KPIs
Next, you’ll want to craft a clear list of goals that you want your business to achieve. With any goal, be sure to define it as best as you can using qualitative, not just qualitative metrics, so that plan stakeholders know what they are striving for, what actions to take to get there, and how to measure progress and achievement. 6
Example goals include:
- Raising revenue 10% year-over-year
- Hiring more sales personnel by a certain date
- Reduce production expenses by 8% over the next five years
Example goal measurements, or KPIs (also known as key performance indicators), include:
- Sales revenue
- Number of new business partnerships
- Sales call volume
- Website orders
- Newsletter sign-ups
No matter what KPIs your company settles on for goal measurement, be sure to share them in the business plan. You should also include how you plan to put an effective KPI tracking and progress sharing system in place and which stakeholders are vital to each goal.
Make sure to write goals that are realistic enough for your team to attain but lofty enough to motivate the change you want stakeholders to bring about. Goals that inspire employees to work in a new direction, while promoting “buy-in,” will keep motivation high and help your company reach its goals.
The Initiatives
Once you’ve added your company mission statement, SWOT analysis, and your top goals and relevant KPIs, it’s time to create your plan’s initiatives. Business strategy initiatives are the planned actions your company employees will take to bring your overall strategic business plan to fruition. 7
To be achievable, initiatives should align with your goals, KPIs, and of course, your plan’s budget.
Example initiatives include:
- Launch a new homepage that is easier for customers to navigate
- Have all salespeople undergo new training for your newest product
- Eliminate a costly, redundant supply chain quality control step
Make sure your initiatives support your goals, bring you closer to achieving your overall business plan, and have assigned stakeholders and reasonable deadlines.
With all of the key elements in place, your strategic business plan will be well understood, well-received, and more easily acted upon leading to better business outcomes for you and your company.
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An online MBA from a top-ranked program can open up opportunities for positions with more responsibility and higher pay. The #16 Best Online MBA Program from the University of Kansas provides the skills and experience you need to redefine your career and create winning strategic business plans. 8
To learn more about what KU’s highly-rated online MBA has to offer you and your career, make an appointment with one of our admissions advisors today.
- Retrieved on February 2, 2022, from indeed.com/career-advice/career-development/elements-of-strategic-planning
- Retrieved on February 2, 2022, from miro.com/aq/ps/templates/strategic-planning/
- Retrieved on February 2, 2022, from indeed.com/career-advice/resumes-cover-letters/executive-summary-templates
- Retrieved on February 2, 2022, from indeed.com/career-advice/career-development/vision-vs-mission-statement
- Retrieved on February 2, 2022, from investopedia.com/terms/s/swot.asp
- Retrieved on February 2, 2022, from indeed.com/career-advice/career-development/business-goals
- Retrieved on February 2, 2022, from indeed.com/hire/c/info/creating-tactical-plans
- Retrieved on February 2, 2022, from usnews.com/education/online-education/university-of-kansas-OBUS0696/mba
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