The Key Elements of a Successful Business Plan
Creating a business can also create a lot of stress. So much that articles get written expressly about how to deal with ‘startup stress’. Being at the outset of an undertaking as large as launching a business can carry unexpected challenges.
One of the ways to combat startup stress is to have a plan in place. A successful business plan can secure capital and it can also provide a structure to avoid burnout.
Planning also has a lot to do with preventing your business from suffering an early demise. Stats show that only 33% of business make it to their 10th year and beyond.
While some of the decisions you face will seem small, every piece is important for creating a solid business plan.
Successful Business Plan Elements
Unlike an elevator pitch or a cocktail napkin idea, a business plan needs to contain precise elements to show your dedication. This provides a map for you to adhere to when forming the business.
The following elements form the core of a business plan outline.
- Executive Summary
- Business Description
- Market Analysis
- Organization and Management
- Sales Strategies
- Funding Requirements
- Financial Projections
These elements of a business plan show investors and other backers that you understand the business. You demonstrate a mastery of where the business has come from and where it can go, showing your time and vision have some grounding.
A business plan itself isn’t an elevator pitch, but that doesn’t mean you shouldn’t be able to give one. The executive summary provides the bullet points for your overall plan. You want this to be a top-down look at the rest of the plan’s information.
For this reason, many entrepreneurs look to finish this part last. That way it can be a full summary of the other information in tight, concise, and inviting language.
Writing a guide in this section when you start helps keep the rest of the sections on target and then the executive summary can be re-written at the end.
A good way to start on an executive summary, and the business plan as a whole, is to conceptualize the three major points. These points are 1) identify a problem, 2) construct a solution, 3) consider how you convince consumers of your solution.
Who are you? What do you want to do? Why do you want to do it?
Answering these questions for yourself forms the cornerstone of describing your business to others. A firm understanding of what your company does and why you formed it provide fodder for your mission statement.
Staying motivated in the arduous task of creating a business derails many. To avoid this problem, be as clear as possible in forming your business description. This provides a touchstone for you to regroup when things get tough.
Knowing why you started the business and what its goals were at the outset can provide structure and a well to return to for future ideas. Everyone loves a humble beginnings story.
The business description should provide information about several components of your plan. These should include your overall business model. Consider touching on each of these points as well.
- Legal Structure
- Market Opportunities (to be expanded in the next section)
- Growth Projections
- Principals and Conduct
The more in-depth your descriptions on these points the clearer picture you form for backers. Don’t forget to register your business to establish legitimacy.
The legal structure covers options of where the business will operate. It also establishes a chain of responsibility.
The location information works in tandem with the legal structure. It also provides details on physical locations. These can be important for establishing retail traffic or supply deliveries.
Growth and market opportunities should summarize information that will be explored further. Bullet point information that will be covered in Market Analysis, Sales Strategies, and Financial Projections.
The principals and conduct should preview the corporate culture and best practices for employees. Summarize where these would overlap with key points of Organization and Management. There you can elaborate and detail nuances.
Keep in mind that a business doesn’t have to stay one thing. However, even a diversified and expanded business starts with a core.
If the business is a key, the market is the lock. Understanding the market enables you to forge the strongest and most enduring key.
Look at trends in the industry. Understand how the needs of customers are met. Compare your plan to existing businesses.
You don’t want to over compare. You aren’t trying to rebrand another company and just do what they do. You need to establish how you will stand out.
Keep in mind that standing out comes with risks. Be aware of what elements make another business successful and keep those while building in innovation. One of the worst ideas in business planning is to assume an older method is defunct simply because it is old.
Find the pros and the cons. Elaborate on both until you can discuss them fluidly and with accuracy. Starting out with a market analysis has proven results in successful businesses.
Profile your ideal customer and customer base. Keep in mind how and when the shifts in the core demographic have occurred in the industry over time.
Consider the spending habits and spending options of this customer base. Appeal to their wants and the psychology of want. Don’t give them just what they will accept, but provide something they wish for but don’t always feel they can obtain.
Organization and Management
Now is the time to introduce your team. Some say that the single most important factor leading to a successful business venture is the management team.
Competence in leadership and the ability to solve problems and direct effort can take even a bad idea and make it perform well.
Consider the analogy of a Formula 1 driver in a shoddy car versus a regular driver in a race car. No matter the power and speed of the vehicle, the experienced driver is still more likely to win, but also runs a much lower risk of serious injury.
In the same fashion, the management team and organizational structure can make your business work. A strong team also avoids losing time and money to major setbacks. No matter the power of the race car, an inexperienced driver is more likely to smash it on the first turn instead of finish the race.
This is also why effective managers can move from one business to another and make each work. Knowing how to forge connections along the supply chains, pick impactful marketing, and hire the right people, contributes to success.
A team of like-minded people that know how to handle a component of a business model and also how to challenge each other will outshine others. In the driving analogy, it is the equivalent of also adding the Formula 1 pit crew to the race.
Now its time to talk turkey or pork or whatever your particular go to for money may be. How are you going to turn your ideas into profit?
When creating a winning business plan you need to be clear how the end result creates dividends.
This section will elaborate on the price point of the product or service. Explaining how much you expect to get as a return from each unit explores several concepts.
The first, what price the market will bear, comes from your already existing market research. This number indicates the expectation of the market and the cost of a product to go from idea to consumer ready. It also includes your understanding of operating costs and expansion over time.
The second concept you need to express is the marketing plan. This will include your awareness of brand positioning. You will need to explain how you will break into the market and then show plans to expand or grow.
Express how you will use the most common techniques for marketing in the current field. A dedicated web and social media plan are common for this section.
A step-by-step layout of your goals for brand awareness and market saturation gives a thorough overview of your first several years. You want this section to underpromise and overdeliver rather than the other way around.
Consider your search engine optimization (SEO) strategy. Arriving at the top of search rankings early on means being seen as a leader in the field instead of a newcomer.
Search engine analytics change constantly. Make sure you highlight your social media and marketing director’s efficacy. Otherwise, note how you will outsource this crucial process to a responsible provider.
Customer interaction through forums and a community that lives online are other strategies to lay out in addition to the usual points. New media (if it can still be called that after 20 + years) isn’t the only game. Include your strategy for mailing, and local advertising (where applicable).
With all of the elements of how the business will succeed in place, it is time to put forth what it will cost to get started. This is a place where hedging your statements shows a more even-handed look at the possibilities.
While it may be tempting to plan for a lean and trouble-free launch, it is better to consider the highs and lows. The worst and best case scenario requirements show the practicality and reality of your dream. This leaves you out of the realm of being simply labeled a dreamer and better able to move forward on the action.
Timelines of stages of production and rollout give further reinforcement that you know the field and what it takes to get established. Be careful when establishing what each stage will cost, as stages of a startup can overlap in reality more than on paper.
Certain rules of thumb apply as to when to expect the business to stop needing money and start making money. Restaurants, for example, rarely see a profit before their fifth year.
Consider time needed for licenses and permits to be established and what the business will do if unable to gain a particular certification by a deadline. These types of setbacks can cost a lot in terms of stalling on construction or installation of equipment.
Of all the components of a business plan, projections should be the most reserved and detailed. Yes, you want the business to make money and turn a profit quickly and in perpetuity.
What you don’t want to do is start spending money that doesn’t exist.
For a business that has shown some early success and is looking to expand, you want to be specific in explaining the reasoning behind the ups and the downs. For a new business, the information of growth in revenue and presiding market trends should be included.
Include projections from your sales strategies and combine these with market growth numbers. Crunch the numbers and explaining what you see, not what you hope to see. Even though these are projections, and essentially guesses, that doesn’t mean all guesses are equal.
By following the data and giving a result, rather than hoping for a result and massaging the data, you show more strength and confidence in your plan.
Forging a successful business plan takes dedication and research. It also takes confidence and drive to create a future for yourself. In many ways, you sell yourself when you sell your business plan.
The business plan gets the ball rolling, but it isn’t the only thing you will need to create to make a business successful. Information and constant updates on the business world and your markets will ensure your plan can adapt in the future.