If you’re a budding entrepreneur, don’t make the mistake of jumping into a business venture without proper planning. The reality is that about 50% of small businesses fail in their first four years, and lack of planning is one of the culprits behind this failure.
A business plan helps you start off in the right direction and maintain your focus through any stage of your venture. It gives you a good picture of how viable the business is, what you’ll need during its early stages, your advantages and how to maximize them, and the challenges you can expect to face and how to overcome them.
In addition, if you plan to apply for financing for your business, the bank or lender will ask for a business plan to evaluate your loan application.
These are the basic components of an effective business plan:
- Executive Summary
As the name implies, the executive summary is a brief but comprehensive overview of your business plan. It should give the reader a clear idea of what your business is all about and highlight the important points in the plan. While it appears on the top of the document, it’s best to compose this last when the other sections of the document have been laid out.
- Business Description
This section is where you’ll give a more detailed look at your business. It serves as a comprehensive business card that defines what your business is about, including the persons or entities behind it, the products or services you offer, your location, your target customers, and what you can offer to make your business attractive to your market. This is also a good place to discuss your weaknesses and how you plan to address them.
- Operations Plan
Your operations plan essentially describes your business model, or the framework by which your business will operate. It includes:
- The type of business you plan to have (whether a single proprietorship, partnership, corporation, or others)
- How to manufacture the products or create the services you plan to sell, from the procurement of raw materials to actual production to quality control and shipping
- The equipment, materials, labor, and subcontractors you will need
- How you plan to bill and collect payment for your products and services
- What your day to day activities will look like
- How you plan to keep records, including the hardware and software you’ll need
- Organizational Structure
This details the key functions in your organization and the persons responsible for each one. It is often presented as a chart that shows the hierarchy and scope of responsibility at each level of the organization. In addition to management and supervisory positions, your organizational structure should also include information about the number of employees you will need, the expected salaries and qualifications for each position, and the responsibilities and functions of each employee.
- Market Analysis and Marketing Plan
This part describes what your target market segment is, their behavior and preferences, how their needs are currently being addressed in the industry, and how your business can fill their needs and preferences. Include your pricing levels and marketing strategies, including advertising plans, distribution channels, packaging, and others.
- Financial Plan
This is a very important part of your business plan. Your financial plan should lay down how much money you’ll need to start the business and sustain it until such time that it can generate enough income to pay for itself. Generally, you should project your financial needs for at least one year from the start of your operations.
Your financial plan should also include your funding sources, such as a loan or a gift. If you’re applying for financing from a lender, they’ll want to see how much you need to borrow and how you plan to pay the loan back. The lender will also want to see the following:
- An income statement and balance sheet that detail your expected profits and expenses in the first year of operation
- A cash flow statement that shows how you plan to finance your operations
- A break-even analysis that outlines how much your business should earn to be profitable, and at what point you should consider keeping it going or closing it down
Should you use a business plan template?
If you’re venturing into business for the first time, creating a business plan from scratch can be quite intimidating. Using a ready made template can simplify the process and help you determine what information to include. The template may also prompt you to do the necessary research and analysis on the various factors to consider for your venture.
However, consulting with professionals is probably the better option. Not only can they make the process easier for you, you also get the benefit of receiving valuable guidance backed by knowledge and experience.
Need help in creating a business plan? Call us at +63.917.892.2337 or get in touch through this website.