Understanding a Business Plan and Structure
Why it is Important to Follow the Sequence
Questioning the basics is a common practice. Whether you are a student or a professional, doing things a certain way always makes us wonder what the outcome will be if a different route is taken. If you are writing an essay, you will not think of the conclusion first and then come to the introduction. Similarly, when writing a business plan, you will have to think about the sequence so that your audience can understand your motivation and needs at first glance. A business plan and structure play an important role in winning over an investor and here are the reasons why:
An Insight into the Future
A business plan is developed with the purpose of looking forward in time, mostly one to three years. It basically serves as a planning horizon with reviews and updates. Different types of organizations have a different business plan and structure, according to their business idea and the model they aim to introduce, however almost all business plans address the following fundamental questions:
- What will the business look like in one to three years, operationally as well as financially?
- How will the business ensure the desired financial and non-financial performance of the owners, management and key employees?
The future insight is important for a business plan and structure because it helps dictate a sequence in the content, from the vision to the financials and summary. If you look at the financials before anything else, you may not understand the true motivation behind the business idea that has led to the estimations.
Content of a Business Plan
The title page is very important, because it becomes the face of your business plan. It should include the name of your business, name/s of the owner/s or principal/s, address, contact information (phone numbers and email addresses), website, and the date of presentation. Remember, that the business plan should look professional. Adding pictures and borders to the business plan may appear unprofessional, however, a logo can be used.
Table of Contents
The table of contents will play a key role in defining the business plan and structure. Many investors and analysts straightaway go to the table of contents to see whether the business plan is complete. Not including the key headings of a business plan may raise a question on your credibility and attitude. A normal business plan and structure, includes the following sections:
- Executive Summary
- Business Description
- Products and Services
- Market Research and Plan
- Competitive Analysis
- Operational Plan
- Management and Organization
- Financial Estimations
- Supporting Documents
This can be referred to as your statement of purpose. It straight away tells your audience the purpose of the business plan, your business, the products and services, and what you require. Whether you are looking for a loan or a partnership, the benefits you are willing to share, and every other important piece of information should be addressed in this section. Make sure you do not exceed half a page when writing the executive summary as all the details will come later in the document.
This will include the industry profile, followed by a deep insight into the business you are planning to start. You must make sure you state which sector your business belongs to, and also explain the principles, mission, and vision of your business.
Products and Services
Under this heading, you will explain what you are going to offer to your target audience which will create a buzz in the market. A thorough description of the product or service, its need in the current landscape, its features, as well its edge over other products or services already in the market are an important part of the business plan.
Market Research and Plan
Market research is important, and therefore you must convince the audience that your research has turned out to be positive, and that you have identified a need for the product or service you are offering. Moreover, you will also have to address the traditional 4Ps of marketing, in addition to the segmentation and positioning strategy.
You can easily conduct a SWOT analysis for this section, but after you have identified your indirect and direct competition and figured out where you stand in comparison to them.
Operations and Management
This section should include the daily business functions that will run on a continuous basis. It not only highlights the logistics, but also the responsibilities of the management, and the expense and capital requirements related to the operations.
This should include your capital requirement for the first year in one sheet. In addition, there must also be a forecasted balance sheet, income statement, and cash flow chart for 3-5 years. Moreover, a list of financial ratios, as well as your estimated return on investment, must also be calculated.
Following the Sequence
The business plan and structure explained above is generally accepted universally. Even if you are planning to take your investment abroad, the case officer or business and financial analysts may be looking for the key sections of the business plan that are outlined above. You need to be very careful when drafting your business plan, because it not only needs to have a well-thought-out structure but also a convincing narrative to immediately grab the attention of potential investors.
Contrary to popular belief, writing an effective business plan is not an easy task. Although no one can understand your business idea better than yourself, it needs to be put down on paper in a way that will make it clear and concise, and convincing for investors and potential business partners. If you feel you may not be able to make your business plan adequately compelling if you draft it yourself, obtaining the services of a business plan writing consultant will prove to be a good decision, immediately, and in the long run.