The Components of a Business Plan

Drafting a business plan is an important step in securing outside funding from investors. While some prospective new business owners might find the process difficult, this need not be the case. Here are three components which most business plans should include, in one form or another:The Marketing Plan
The marketing plan should describe the marketing strategy, the marketing mix, target market(s), and customer segmentation in detail. It should explain how the product or service will make use of the 4 P’s of marketing (product, promotion, place, and price) to convert prospective customers into new buyers and users of the firm’s offerings, as well as retain them for the long-term. A good marketing plan is not a static document, but one which may need to be re-worked several times to find a profitable strategy which meets the new business’ goals.

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The Operations Plan
An operations plan should explain how customer needs will actually be met on a day-to-day basis, including the actual creation of the product or service, and its final delivery to the customer. Some business plans may have a relatively short operations section (such as for a manufacturing firm which supplies wholesalers and retailers), however, any differences from standard practice within your industry should be explained in enough detail, so investors know what they might expect, or why you plan to achieve the results set forth in your plan. Firms which are more devoted to manufacturing or other production as the chief part of their operations might include information about quality control initiatives (Six Sigma, Total Quality Management, etc.) which are typical for their business in this section as well.Pro Forma Financial Statements
Pro forma financial statements show the projected financial results a new business expects to achieve, preferably for each of a different set of economic conditions (good, fair, or poor). The statements should include income statements, balance sheets, and cash flow statements, for at least a five-year period into the future. These should also include a detailed break-even analysis, which will explain the returns investors can expect, based on typical rates of return for similar firms in the same industry.

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In short, by including a marketing plan, operations plan, and pro forma financial statements within your business plan (among other elements), it will look more like other typical, readily accepted plans. While this alone is generally not enough to win over investors, it is one of the right steps in doing so.Copyright 2010, by Marc Mays
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Why SEO is a Natural Component to Any Marketing Plan

A well-organized marketing strategy is a central component to any business plan and is essential to the success of every venture. Whether your business is solely online, or is a brick and mortar enterprise, every company must include a well-designed, search engine optimized website in their marketing plan. This key ingredient to your success is vital as the age of using yellow pages to determine where to find the products and services we need has come to a conclusive end.Creating a functional, user-friendly website with well-written search engine optimized content is a natural component to any marketing plan and should be the cornerstone of your promotional efforts. Search engine optimization (SEO) is both effective and cost-effective as a marketing tool and offers the possibility of a return that is far greater than the initial investment.

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Traditional media marketing, although still popular, is exorbitantly expensive and can be cost-prohibitive for smaller businesses or newly established companies. However, over the past several years, smart entrepreneurs have changed the way that businesses look at marketing by showing the effectiveness of search engine optimization as an inexpensive, highly successful marketing tool that outpaces traditional media marketing at every turn.Affordable, effective search engine optimization naturally targets your potential customers and clients, which draws your ideal audience to your virtual storefront. Because search engine optimization will provide improved page ranking in major search engines – the search engines that your target audience is using – there is no significant risk when investing in this form of marketing. This is not the case with traditional media marketing, which comes with a significantly higher price tag and no guarantee of a return.Therefore, using search engine optimization as a central component of your marketing strategy, will allow you to reduce your reliance on other forms of marketing and trim down your overall marketing budget. SEO provides for streamlined marketing efforts that are far less costly than other advertising methods and allows business owners to take full advantage of search engines, allowing them to do much of their website’s marketing for them.Essentially, you can throw a bunch of money at conventional marketing methods and take a wait-and-see approach to determine their effectiveness, or you can dedicate your marketing dollars to search engine optimization, which is guaranteed to increase traffic -and the right traffic – to your website. Optimizing your website with the keywords and search terms that your customers use when conducting online searches for the products or services that you provide will undoubtedly bring your target audience directly to your website, which will naturally improve your conversion rate and increase your customer base.

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Take control of your marketing efforts, and your marketing budget, and position yourself to experience an immediate increase in traffic to your website. Take advantage of the benefits that search engine optimization provides as a cost-effective marketing tool and enjoy a higher rate of return on a smaller initial investment.

SEO – The Components of A Business Plan

Websites that are popular, that are functional and that have high page rankings are not ones that were done in a “fly by night” manner. They were constructed from a solid business plan Not sure how to write a business plan? One really good place to look is on your local or federal government websites. They bend over backwards to spell out the process for you.Whether your site is big or small you still should create a plan that outlines your goals, expected costs, marketing plan and exit strategy. A business plan is your road map for how you expect to succeed and how you’ll measure success.

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The basic components of your business plan are — A summary outlining your goals and objectives. This summary clarifies your intentions and explains in a few paragraphs your short- and long-term goals for the company.- Your biography. This tells others who you are and how you came to be an expert or become passionate about what you have chosen to sell. This part of a business plan often reveals crucial keywords for SEO.- A persuasive pitch. This is a page of writing that describes product you plan to offer and a discussion how your product or service differs from everything else on the market. Writing this out can also help you come up with focused SEO keywords and keyword phrases.- An examination of your market potential. Traditionally, web entrepreneurs would buy web research report from sites such as Forrester Research that cost hundreds to thousands of dollars. However, you may be able to get some basic information simply by using the Web and its many search engines and directories to find information.

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– A marketing strategy. How intend to inform the world you’re open for business? Will you use online marketing tools to get your company listed on search engines and advertised on other Web sites or will you be writing articles and submitting them to ezines to improve your search engine rankings?- Create a business plan for you so that you don’t lose sight of your personal quest or vision. It is like a memo to yourself to keep your business on track and profitable.

Basics of Writing a Business Plan

Are you planning to open a new business? Do you lack ideas and skills on how to write a business plan? If yes, consider the tips and suggestions mentioned below.Regardless of the size and type of business you intend to open, it is vital for you to make a business plan. It is important for company’s to have one because it serves as your road map to success. It is an important document that details vital information, such as sales forecasts, management team, corporate expenses, cash flow and industry analysis.Whatever your intent of writing the document, it is important for you to bear in mind for whom you are writing the document for. Writing the document is equally important for established companies and start-ups because you cannot operate successfully until you planned your business carefully. Writing a clean and well-knit document is not that easy because not everyone had the skills and knowledge about business. If you can afford to hire a professional business planner, then do so because they are knowledgeable and well versed in business. You can surf the Internet to find ready-made business templates to help you with the task. You can also make use of ready-made business template software sold commercially.

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Because no two companies are the same, some ready-made business templates offered online are patterned in a standard format which covers the basic concepts of a business plan. If you do not have other options available, it is advantageous to you because it can help you in completing your task.Before you choose one template, you should first assess its viability and conformity to your needs. Be sure to select one which offers you high level of personalized layout and customization on the content that you like to incorporate.Basic components of a business plan:Executive summary – It gives a brief history of the business, its financing, its collateral and equity. It also presents the firm’s supply chain, business location, hours of operation, business structure and ownership structure.
Table of contents – It lists the major divisions of your plan.
Products and services offered – It details the type of products and services the company furnishes. It provides a short description of each product and services, its price, the anticipated changes and percentage of gross sales.
Market analysis – It presents the major industry trends, growth phase and the sector which you intend to penetrate. It also provides information on your target market, demographic makeup, market size and competition.
Market plan – It details how you intend to attract customers, to market your products and services, advertising and promotions.
Management and personnel – It provides information on the management team, key personnel and a short description of their experiences and backgrounds.
Financial data – It provides information on the financial status of the company. It includes its sources of funding, its cash flow projections, financial assumptions and balance sheet.

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With all the tips and ideas mentioned beforehand, you can write your own business plan.

Key Components of a Business Plan

The industry analysis section of a business plan is sometimes overlooked by entrepreneurs focused on the specifics of their business. However, this section offers an important opportunity for the business owner to step back and relate their planned business to the larger market it operates within. This is a chance to look at the attractiveness of the industry as it relates to new firms starting out, cost and revenue drivers which will be key determinants of the business’s financial situations, and trends and projections of where the industry as a whole is headed in the future.Industry AttractivenessIndustry attractiveness was famously broken down by Michael Porter using his “Five Forces” framework. Porter believed that the attractiveness of an industry, or potential profitability of a business in that industry, is to a large part determined by five forces: the bargaining power of suppliers, the bargaining power of customers, the threat of substitutes, the threat of new entrants into the industry, and the intensity of competitor rivalry. Ideally, these five forces are low, allowing a company in the industry to thrive. However, knowing the specifics of these five forces gives a company the chance to devise a successful strategy even when some of these forces are high.

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Cost and Revenue DriversBy knowing the key costs and revenue streams of a company in the industry, readers of your business plan are set to understand how you will compare to the industry at large. They would like to see you either follow industry norms or be clear about how and why you break from them, if you choose to do so. Not every business has to create entirely new revenue streams and you can be more successful in achieving funding if your plan instead shows how you will grab market share through methods similar to industry norms.

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Trends and ProjectionsFinally, examining research and reports on trends and projections for the industry you are in allows readers to understand how you will take advantage of or defend your company from these future forces. You should be clear that you understand your business will be dealing with the market situation one, five, and ten years in the future and not the exact market situation at the time of the plan’s writing. Don’t ignore powerful trends which you don’t feel are in your business plan’s favor. Potential funders will eventually hear about these and wonder why you did not present this information in your plan in the first place.

What’s the Difference Between a Business Plan and a Marketing Action Plan?

Back during my short span as a business loan broker, reading financial statements and business plans was a daily affair. But for most business owners, a question that constantly came up was, what’s the difference between a business plan and a marketing action plan?If you’ve wondered the same thing here’s a short answer…Besides actual content, the primary difference that sets the two documents apart is the purpose of the document.A business plan is what you create when you want to wow investors and bankers to give you money. A marketing action plan is what you create when you want to wow customers and clients into giving you money.A good marketing action plan contains specific day-by-day marketing activities. This eliminates the guesswork of what to do today to bring in more clients, sell more to existing clients, and reactivate clients that may have drifted away.

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The best marketing action plans contain everything needed to implement the plan. Perhaps there are ready-made ads, sales letters, email campaigns, and so on. All you do is deliver the components to your ad agent, web designer, or fulfillment company or staff. Everything is done for you and already in place to roll out. You just need to get the ball rolling by putting the pieces in play.If you are looking to create a marketing action plan to increase sales and referrals, the 12 step business growth plan is a free white paper that outlines the steps in detail. The plan shows how any established company can make the maximum money in the shortest time possible.A business plan lacks this level of day-by-day marketing detail. Instead, common components of a business plan are:* Executive Summary
* Market Analysis
* Company Description
* Organization & Management
* Marketing & Sales Management
* Service or Product Line
* Funding Request
* Financials
* AppendixA company might also use a business plan to map out company goals and mission statements for internal use. Aside from these uses, a business plan is pretty much useless. The majority are fluff. And they fail to be action-oriented from a marketing perspective.

10 Tips to Write Great Business Plans

Writing a Business Plan is the first step to a start-up. The 10 points given below is an easy to follow approach to write a business plan.1. Plan the story well: It should tell a story to the investor. The flow of the plan and the highlights should be brought out well to ensure that the investor finds the flow interesting.2.The investor looks at numbers: Have you done your number crunching well. Any investor will look at income and expenditure numbers and the forecast for 5 years.3. Pictures speak more than words: Graphical information on important statistics and numbers are important. It gives a clear picture to the investors. Derive graphs from financial numbers and embed it in the document.

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4. An ideal Business Plan should be around 40 pages with the key sections as Non Disclosure agreement, Table of Contents, Foreward, Executive Summary, About the Company, The Market, Financials and SWOT Analysis5. The components of the Financial Plan should include Key Financial Figures, Assumptions, Analysis factors, Investment Criteria and Financial Requirement.6. The Executive Summary is a key component of the Business Plan. It should talk about the financial potential of the business, Key to success and the exit strategy that you are offering to your investors.7. A draw-down schedule and Project Schedule are important aspects of a Business Plan. The draw down schedule brings together, tasks, costs, & time demonstrating your competence & understanding of your project. It gives a weak wise break-up cost under different heads. The Project schedule gives a clear month wise implementation of the plan8. Hard numbers and statements like “Approximately $28.9 billion of private equity was invested in North America in the first half of 2006- This is up 37% on the same period last year ($21.1 billion) would definitely excite the investor. Do not forget to quote the source of the information.

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9. Wrap your business plan well. The document should be well designed to make it presentable to the investor. This can include a nice background design and quotes at the bottom of the page to give an example.10. Finally, submit your business plan with a well written cover letter that should essentially thank the investor for providing the opportunity to submit the plan and a brief overview of the plan.These 10 points can guarantee you success to some measure of receiving the funding or grant you have been desperately looking at to start your venture.

The Most Important Component of a Business Plan Usually Forgotten

Nothing has ever been easy about writing a successful plan which includes the following basic components:1. Executive Summary2. Company Summary3. Products and Services4. Market Analysis5. Strategy and Implementation Summary6. Web Plan7. Management Summary8. Financial Plan (includes your previous year taxes alone with a host of other reports and financial statements)9.?A business plan can be used for obtaining financing as well as a guide for the small business owner. When a business owner is truly honest with his/her business plan, they will usually know from the beginning, the chances for success.

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Too often the plan is written by a professional writer for the sole purpose of obtaining funding. Usually, the additional benefits which a business plan can provide are over looked.A good plan will enable a new business owner to know his business and himself. There is no shortage of people who have started working on a plan only to discover that maybe, just maybe, they’re not ready for entrepreneurship.Individuals who treat a plan with respect, can gain enormous insights into the business they are about to start or purchase.Not only should your plan be realistic, it should contain documentation to support the facts. The plan should provide information and engage the reader, regardless if it’s an investor or a banker, or your slowest thinking relative.But more than anything else, and most business plan writers don’t realize the importance of this step, is a good plan should include an exit plan. Exit plans should not be developed when you are under stress and not exactly sure what to do. The exit plan, can be modified as the years pass and your knowledge of the entity you created grows.

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Do you want your business to support you in retirement? Do you want to sell the company or pass it on to your children? Do you want a lump sum payment? Or will you provide a payment plan for the new owners? What will be the tax consequences of your decision?Believe it or not, when you include an Exit Plan, a Lender will realize that you have thought about every facet of your business.

Business Plan Cash Flow Is Everything

Think of all the clich├ęs you have heard about the importance of cash. “Money talks; all else walks.” “Cash is king.” “In God we trust. All others pay cash.” There are likely a few others that apply. Put them all together and multiply them by a hundred. Now you can grasp an idea of how important a business plan cash flow analysis, or projection, is toward approval of a business plan.Whether your objective is to attract investment in your business venture, or advocate the launch of a new line of products and services in your current company, the business plan is the focal point of your case. The plan’s cash flow statement, necessary to demonstrate the plan’s viability, should contain a realistic and justifiable indication of your projected cash flow for the first few months, and possibly up to several years, with profitability goals clearly defined.

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Profitability is the long-term goal of any business, and business plan. But, it is still important for a business to project reasonable cash flow in the initial periods, to assure principles and investors that there is enough capital in the business to run it properly on its way to profitability. Otherwise, insolvency ends any hope the business can get to profitability, and no one benefits.Even with the best products and services, a business will not survive without getting the message out to buyers, whom you hope will agree with your value proposition. One pitfall to avoid is too much optimism in forecasting sales; however, predictions of sales for the first 3-5 years are important. The only way to justify the predictions, however modest or bold, is to present a believable, attainable marketing plan component to the business plan. Tangible programs for lead generation, sales follow-up, and feedback to assure quality lead generation must be displayed clearly in the plan.Perhaps the least visible component of the business plan, due to the perceived need to generate excitement surrounding sales, is the operational excellence that must be built into the plan to assure cash flow and profitability targets are met. That specifically refers to the act of realizing payment for services, or more plainly, managing accounts receivable. A quick list of the plan’s necessities of AR optimization follows:

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Prompt invoicing upon sale/shipping
Prepayment, whenever possible
Strict, but fair credit policies if required for expanding sales and market share
Clearly specified terms for payment
Discounts for early payment
Professional, prompt, and courteous follow-up on all slow or missed payments
Building the discipline of effective accounts receivables management into the business plan is as important as the marketing plan component. A business that generates plenty of sales can still fail due to poor cash flow management. The company has to be paid for the products and services, and fairly quickly, or run the risk of running out of cash.

Test Your Concept by Writing a Short Business Plan

Are you an entrepreneur looking to test a new business concept? Sure, you could write a complete business plan, only to find that the concept doesn’t work. Why not write a short business plan, get a handle on the key components to a business plan, and create an outline for a full business plan? This will provide you with an initial gauge on the concept, and tell you whether or not you should continue to develop it through the business planning process.An executive summary should run approximately 3 to 5 pages. I prefer to format it in double columns for easy reading and reference. It should cover all the key components to a full plan, including company concept, market positioning, marketing and promotion, operating strategy, and financial viability. It requires a basic level of research into the market and industry to determine size and basic trends, and some basic research into the financials so you can put together a mini 3 to 5 year P&L.

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Clearly, a short business or executive summary plan can’t take the place of a full business plan, and there will be considerably more due diligence ahead if you decide to move forward. But this format will at least give you confidence that your hard work will be worthwhile.The executive summary can also be used as a teaser document to distribute to potential investors. This will help you gauge interest and ability to secure funding. An interested investor might review an executive summary and then ask to see the full business plan.If you’re ready to get started writing a short business plan or executive summary, start by establishing your concept, mission, vision, values, and big picture goals and objectives. Next you can cover your industry and target market, and develop a mini marketing, promotion, and advertising plan. The operating strategy should cover management team, personnel plan, sales strategy, and location, production, distribution, if applicable. Finally, you will want to design a mini profit and loss that will show revenue potential, cost of goods sold, overhead costs (payroll, marketing, rent, insurance, phone and utilities, office supplies, etc), and profitability for the next three to five years. These are rough estimates, and should be as accurate as possible, but will provide an idea of the financial viability of your idea.

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Once you complete this process, you will have a solid handle on your business concept, and the ammunition with which to make an informed decision about writing a full business plan.