Understanding the Parts of a Business Plan






Having a solid business plan is so important when you decide to start a business. What's even more important is understanding it. From owner-operators to large more expanded companies, they all have a plan. Starting my own business in 2014 was, for full transparency, a beautiful disaster. I didn't really know what I was doing, where I was going, or really how to get there. All I knew is I wanted to get it going. I can reassure all of you, I did most of it backward and I didn't have much success at all for almost a year while I was still sorting it all out. The only plan I had was to get it going. There is so much more to it than that. 

The internet is amazing is all I have to say. Research is what has helped me the most over the past few years. Finding good resources and information on exactly what I am looking for is most important. In the article "The 10 Key Components of a Business Plan" there is so much useful information that would have helped me so much from the beginning of it all. I am sharing it with you so you don't have to struggle like I did. 

This article covers the 10 components of a business plan. I am here to tell you that having a business plan that starts with "I want to be my own boss" is great but that's not what this means. There is so much more to understanding it all than that. Breaking it all down into sections helps so much. 

While you are planning and communicating with other businesses and making the purchases you need to get it all off the ground, you have to know what it all means. 

I do think that all of this article is great and very easy to read but there are a few points that helped me more than the others. 

#4- Analysis of Customers

This is so important. You have to know who your customers are. 

The Customer Analysis section of your business plan assesses the customer segment(s) that the company serves. In this section, the company must convey the needs of its target customers. It must then show how its products and services satisfy these needs to an extent that the customer will pay for them.

The following are examples of customer segments: moms, engaged couples, schools, online retailers, teens, baby boomers, business owners, etc.

As you can imagine, the customer segment(s) you choose will have a great impact on the type of business you operate as different segments often have different needs. Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, include a discussion of the ages, genders, locations and income levels of the customers you seek to serve. With regards to psychographic variable, discuss whether your customers have any unique lifestyles, interests, opinions, attitudes and/or value that will help you market to them more effectively.
Whether you are selling a product or just looking for views. engagements, and readership, you have to know who you are reaching. Once you know who these people are, you can get more in tune with them. When you are reaching your preferred audience/customer base you will have so much more success.

#8- Management Team

The management team is very important. Finding people that specialize in their position will help all the way around. One of the key roles in any organization is that of the HR department. They are responsible for compensation and benefits, hiring and firing of staff, and keeping up to date with any laws that may affect the company and its employees. The language used for HR can be a little complicated, so it can be useful to keep this list of HR words to hand! It is important to get your staffing right. After all, you don't want your social media guy stuck in customer service or your purchasing crew stuck in editorials. Make sure the knowledge is used in the right area.

The Management Team section demonstrates that the company has the required human resources to be successful. The business plan must answer questions including:

Who are the key management personnel and what are their backgrounds?
What management additions will be required to make the business a success?
Who are the other investors and/or shareholders, if any?
Who comprises the Board of Directors and/or Board of Advisors?
Who are the professional advisors (e.g., lawyer, accounting firm)?
 
9. Financial Plan

One other very important part of the business plan is the finances. You want to make sure you have the right income/expense balance so you don't fall under; you may even make use of something like an sbir accounting service in order to take the pressure off yourself and benefit from the expert knowledge and skillset that comes with having a professional on board. Keeping everyone informed is the best way. You need to know what capital is available and what your goals are.

The Financial Plan involves the development of the company’s revenue and profitability model. It details how you generate income and get paid from customers, and includes detailed explanations of the key assumptions used in building the business plan model, sensitivity analysis on key revenue and cost variables, and description of comparable valuations for existing companies with similar business models.

One of the key purposes of a business plan is to determine the amount of capital the firm needs. The financial plan does this along with assessing the proposed use of these funds (e.g., equipment, working capital, labor expenses, insurance costs, etc.) and the expected future earnings. It includes Projected Income Statements, Balance Sheets (showing assets, liabilities and equity) and Cash Flow Statements, broken out quarterly for the first two years, and annually for years 1-5. Importantly, all of the assumptions and projections in the financial plan must flow from and be supported by the descriptions and explanations offered in the other sections of the plan. The Financial Plan is where the entrepreneur communicates how he/she plans to “monetize” the overall vision for the new venture. Note that in addition to traditional debt and equity sources of startup and growth funding that require a business plan (bank loans, angel investors, venture capitalists, friends and family), you will probably also use other capital sources, such as credit cards and business credit, in growing your company.


What is the most important part of a business plan for you? Check out the full article so you can see all of The 10 Key Components of a Business Plan.  

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