ESSENTIAL ELEMENTS OF A GOOD BUSINESS PLAN

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busy Market busy PLAN Include Target Market Product Information
Business planning ideas from around the internet.
About edocr

Get publishing now!
busy Market busy PLAN Include Target Market Product Information
<p> 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
ESSENTIAL ELEMENTS OF A 
GOOD BUSINESS PLAN 
1073 Willa Springs Dr., Ste.2013 
Winter Springs, FL 32708 USA 
  
 Tel  +1 407 951 6750 
 Fax +1 321 400 1143 
  
dave@consultgsi.com  
www.consultgsi.com 
  
| 
  
| 
  
Table of Contents 
Business Plan Executive Summary ............................................................................................ 3 
Contents of the Executive Summary  ................................................................................ 3 
Market Analysis  ........................................................................................................................ 5 
Industry Description and Outlook  .................................................................................... 5 
Identifying Your Target Market  ........................................................................................ 5 
Market Tests  ..................................................................................................................... 6 
Lead Times  ........................................................................................................................ 6 
Competitive Analysis  ........................................................................................................ 6 
Regulatory Restrictions  .................................................................................................... 7 
Company Description  ............................................................................................................... 8 
Organization & Management  ................................................................................................... 8 
Organizational Structure  .................................................................................................. 8 
Ownership Information  .................................................................................................... 9 
Management Profiles  ....................................................................................................... 9 
Board of Directors' Qualifications  .................................................................................. 10 
Marketing & Sales Management  ............................................................................................ 11 
Service or Product Line  ........................................................................................................... 12 
Funding Request  ..................................................................................................................... 13 
Financials  ................................................................................................................................ 14 
Historical Financial Data  ................................................................................................. 14 
Prospective Financial Data  ............................................................................................. 14 
Appendix  ................................................................................................................................ 15 
A business plan should be a work in progress. That's because your business will evolve over 
time, and be influenced by outside factors such as the economy and local conditions. Even 
successful business owners should maintain a current business plan to ensure they remain 
knowledgeable on the elements that can affect continued success. 
 
 
Business Plan Executive Summary 
 
The executive summary is Part 1 of the business plan and is the most important section of 
your plan. It provides a concise overview of the entire plan, along with a history of your 
company. This section tells your reader where your company is and where you want to take 
it. It's the first thing your readers see; therefore, it is the thing that will either grab their 
interest and make them want to keep reading or make them want to put it down and forget 
about it. More than anything else, this section is important because it tells the reader why 
you think your business idea will be successful. 
 
The executive summary should be the last section you write. After you've worked out all the 
details of your plan, you'll be in a better position to summarize it--and it should be a 
summary (for example, no more than four pages in length). 
 
Contents of the Executive Summary 
 
 The Mission Statement -- The mission statement briefly explains the thrust of your 
business. It could be two words, two sentences, a paragraph, or even a single image. 
It should be as direct and focused as possible, and it should leave the reader with a 
clear picture of what your business is all about. 
 Date the business began 
 Names of the founders and the functions they perform 
 Number of employees 
 Location of the business and any branches or subsidiaries 
 Description of plant or facilities 
 Products manufactured/services rendered 
 Banking relationships and information regarding current investors 
 Summary of company growth including financial or market highlights (for example, 
your company doubled its worth in a 12-month period; you became the first 
company in your industry to provide a certain service) 
 Summary of management's future plans. With the exception of the Mission 
Statement, all of the information in the Executive Summary should be highlighted in 
a brief, even bulleted, fashion. Remember, these facts are laid out in-depth within 
the plan itself. 
 
If you're just starting a business, you won't have a lot of information to plug into the areas 
mentioned above. Instead, focus on your experience and background as well as the 
decisions that led you to start this particular enterprise. Include information about the 
problems your target market has and what solutions you provide. Show how the expertise 
you have will allow you to make significant inroads into the market. Tell your reader what 
you're going to do differently or better. Convince the reader that there is a need for your 
service or product, then go ahead and address your (the company's) future plans. 
 
To assist the reader in locating specific sections in your business plan, include a table of 
contents directly following the executive summary. Make sure that the content titles are 
very broad; in other words, avoid detailed descriptions in your table of contents. 
Market Analysis 
 
The market analysis section is Part 2 of the business plan. This section should illustrate your 
knowledge about the particular industry your business is in. It should also present general 
highlights and conclusions of any marketing research data you have collected; however, the 
specific details of your marketing research studies should be moved to the appendix section 
of your business plan. 
 
This section should include: an industry description and outlook, target market information, 
market test results, lead times, and an evaluation of your competition. 
 
Industry Description and Outlook 
 
This overview section should include: a description of your primary industry, the current 
size of the industry as well as its historic growth rate, trends and characteristics related to 
the industry as a whole (i.e., What life cycle stage is the industry in? What is its projected 
growth rate?), and the major customer groups within the industry (i.e., businesses, 
governments, consumers, etc). 
 
Identifying Your Target Market 
 
Your target market is simply the market (or group of customers) that you want to target (or 
focus on and sell to). When you are defining your target market, it is important to narrow it 
to a manageable size. Many businesses make the mistake of trying to be everything to 
everybody. Often times, this philosophy leads to failure. 
 
In this section, you should gather information which identifies the following: 
 
 Distinguishing characteristics of the major/primary market you are targeting. This 
section might include information about the critical needs of your potential 
customers, the degree to which those needs are (or are not) currently being met, 
and the demographics of the group. It would also include the geographic location of 
your target market, the identification of the major decision-makers, and any 
seasonal or cyclical trends which may impact the industry or your business. 
 Size of the primary target market. Here, you would need to know the number of 
potential customers in your primary market, the number of annual purchases they 
make in products or services similar to your own, the geographic area they reside in, 
and the forecasted market growth for this group. 
 The extent to which you feel you will be able to gain market share and the reasons 
why. In this research, you would determine the market share percentage and 
number of customers you expect to obtain in a defined geographic area. You would 
also outline the logic you used to develop these estimates. 
 Your pricing and gross margin targets. Here, you would define the levels of your 
pricing, your gross margin levels, and any discount structures that you plan to set up 
for your business, such as volume/bulk discounts or prompt payment discounts. 
 Resources for finding information related to your target market. These resources 
might include directories, trade association publications, and government 
documents. 
 Media you will use to reach your target audience. These might include publications, 
radio or television broadcasts, or any other type of credible source that may have 
influence with your target market. 
 Purchasing cycle of your potential customers. You will need to identify the needs of 
your target market, do research to find the solutions to their needs, evaluate the 
solutions you come up with, and finally, identify who actually has the authority to 
choose the final solution. 
 Trends and potential changes which may impact your primary target market, along 
with key characteristics of your secondary markets. Just like with your primary target 
market, you would again want to identify the needs, demographics and the 
significant trends which will influence your secondary markets in the future. 
 
Market Tests 
 
When you are including information about any of the market tests you have completed for 
your business plan, be sure to focus only on the results of these tests. Any specific details 
should be included in the appendix. Market test results might include: the potential 
customers who were contacted, any information or demonstrations that were given to 
prospective customers, how important it is to satisfy the target market's needs, and the 
target market's desire to purchase your business' products or services at varying prices. 
 
Lead Times 
 
Lead time is the amount of time between when a customer places an order and when the 
product or service is actually delivered. When you are researching this information, 
determine what your lead time will be for the initial order, reorders and volume purchases. 
 
Competitive Analysis 
 
When you are doing a competitive analysis, you need to identify your competition by 
product line or service as well as by market segment; assess their strengths and 
weaknesses, determine how important your target market is to your competitors, and 
identify any barriers which may hinder you as you are entering the market. 
Be sure to identify all of your key competitors for each of your products or services. For  
each key competitor, determine what their market share is, then try to estimate how long it 
will take before new competitors will enter into the marketplace. In other words, what is 
your window of opportunity? Finally, identify any indirect or secondary competitors which 
may have an impact on your business' success. 
 
The strengths of your competitors are also competitive advantages which you, too, can 
provide. The strengths of your competitors may take many forms, but the most common 
include: 
 An ability to satisfy customer needs 
 A large share of the market and the consumer awareness that comes with it 
 A good track record and reputation 
 Solid financial resources and the subsequent staying power which that provides 
 Key personnel 
 
Weaknesses are simply the flip side of strengths. In other words, analyze the same areas as 
you did before to determine what your competitors' weaknesses are. Are they unable to 
satisfy their customers' needs? Do they have poor market penetration? Is their track record 
or reputation not up to par? Do they have limited financial resources? Can they not retain 
good people? All of these can be red flags for any business. If you find weak areas in your 
competition, be sure to find out why they are having problems. This way, you can avoid the 
same mistakes they have made. 
 
If your target market is not important to your competition, then you will most likely have an 
open field to run in if your idea is a good one -- at least for a while. However, if the 
competition is keen for your target market, be prepared to overcome some barriers.  
Barriers to any market might include: 
 
 A high investment cost 
 The time it takes to set up your business 
 Changing technology 
 The lack of quality personnel 
 Customer resistance (i.e., long-standing relationships, brand loyalty) 
 Existing patents and trademarks that you can not infringe upon 
 
Regulatory Restrictions 
 
The final area that you should look at as you're researching this section is regulatory 
restrictions. This includes information related to current customer or governmental 
regulatory requirements as well as any changes that may be upcoming. Specific details that 
you need to find out include: the methods for meeting any of the requirements which will 
affect your business, the timing involved (i.e., How long do you have to comply? When do 
the requirements go into effect?), and the costs involved. 
Company Description 
 
The company description is Part 3 of the business plan. Without going into detail, this 
section should include a high level look at how all of the different elements of your business 
fit together. The company description section should include information about the nature 
of your business as well as list the primary factors that you believe will make your business  
a success. 
 
When defining the nature of your business (or why you're in business), be sure to list the 
marketplace needs that you are trying to satisfy. This should include the ways in which you 
plan to satisfy these needs using your products or services. Finally, list the specific 
individuals and/or organizations that you have identified as having these needs. 
 
Primary success factors might include a superior ability to satisfy your customers' needs, 
highly efficient methods of delivering your product or service, outstanding personnel, or a 
key location. Each of these would give your business a competitive advantage. 
 
 
Organization & Management 
 
Organization and Management is Part 4 of the business plan. This section should include: 
your company's organizational structure, details about the ownership of your company, 
profiles of your management team, and the qualifications of your board of directors. 
 
Who does what in your business? What is their background and why are you bringing them 
into the business as board members or employees? What are they responsible for? These 
may seem like unnecessary questions to answer in a one- or two-person organization, but 
the people reading your business plan want to know who's in charge, so tell them. Give a 
detailed description of each division or department and its function. 
 
This section should include who's on the board (if you have an advisory board) and how you 
intend to keep them there. What kind of salary and benefits package do you have for your 
people? What incentives are you offering? How about promotions? Reassure your reader 
that the people you have on staff are more than just names on a letterhead. 
 
Organizational Structure 
 
A simple but effective way to lay out the structure of your company is to create an 
organizational chart with a narrative description. This will prove that you're leaving nothing 
to chance, you've thought out exactly who is doing what, and there is someone in charge of 
every function of your company. Nothing will fall through the cracks, and nothing will be 
done three or four times over. To a potential investor or employee, that is very important. 
Ownership Information 
 
This section should also include the legal structure of your business along with the 
subsequent ownership information it relates to. Have you incorporated your business? If so, 
is it a C or S corporation? Or perhaps you have formed a partnership with someone. If so, is  
it a general or limited partnership? Or maybe you are a sole proprietor. 
Important ownership information that should be incorporated into your business plan 
includes: 
 
 Names of owners 
 Percentage ownership 
 Extent of involvement with the company 
 Forms of ownership (i.e., common stock, preferred stock, general partner, limited 
partner) 
 Outstanding equity equivalents (i.e., options, warrants, convertible debt) 
 Common stock (i.e., authorized or issued) 
 
Management Profiles 
 
Experts agree that one of the strongest factors for success in any growth company is the 
ability and track record of its owner/management team, so let your reader know about the 
key people in your company and their backgrounds. Provide resumes that include the 
following information: 
 
 Name 
 Position (include brief position description along with primary duties) 
 Primary responsibilities and authority 
 Education 
 Unique experience and skills 
 Prior employment 
 Special skills 
 Past track record 
 
Industry recognition 
 Community involvement 
 Number of years with company 
 Compensation basis and levels (make sure these are reasonable -- not too high or 
too low) 
 
Be sure you quantify achievements (e.g. "Managed a sales force of ten people," "Managed a 
department of fifteen people," "Increased revenue by 15 percent in the first six months," 
"Expanded the retail outlets at the rate of two each year," "Improved the customer service 
as rated by our customers from a 60 percent to a 90 percent rating"). 
Also highlight how the people surrounding you complement your own skills. If you're just 
starting out, show how each person's unique experience will contribute to the success of 
your venture. 
 
Board of Directors' Qualifications 
 
The major benefit of an unpaid advisory board is that it can provide expertise that your 
company cannot otherwise afford. A list of well-known, successful business 
owners/managers can go a long way toward enhancing your company's credibility and 
perception of management expertise. 
 
If you have a board of directors, be sure to gather the following information when 
developing the outline for your business plan: 
 
 Names 
 Positions on the board 
 Extent of involvement with company 
 Background 
 Historical and future contribution to the company's success 
Marketing & Sales Management 
 
Marketing and Sales Strategies is Part 5 of your business plan. Marketing is the process of 
creating customers, and customers are the lifeblood of your business. In this section, the  
first thing you want to do is define your marketing strategy. There is no single way to 
approach a marketing strategy; your strategy should be part of an ongoing business- 
evaluation process and unique to your company. However, there are common steps you can 
follow which will help you think through the direction and tactics you would like to use to 
drive sales and sustain customer loyalty. 
 
An overall marketing strategy should include four different strategies: 
 
 A market penetration strategy. 
 A growth strategy. This strategy for building your business might include: an internal 
strategy such as how to increase your human resources, an acquisition strategy such 
as buying another business, a franchise strategy for branching out, a horizontal 
strategy where you would provide the same type of products to different users, or a 
vertical strategy where you would continue providing the same products but would 
offer them at different levels of the distribution chain. 
 Channels of distribution strategy. Choices for distribution channels could include 
original equipment manufacturers (OEMs), an internal sales force, distributors, or 
retailers. 
 Communication strategy. How are you going to reach your customers? Usually a 
combination of the following tactics works the best: promotions, advertising, public 
relations, personal selling, and printed materials such as brochures, catalogs, flyers, 
etc. 
 
After you have developed a comprehensive marketing strategy, you can then define your 
sales strategy. This covers how you plan to actually sell your product. 
 
Your overall sales strategy should include two primary elements: 
 
 A sales force strategy. If you are going to have a sales force, do you plan to use 
internal or independent representatives? How many salespeople will you recruit for 
your sales force? What type of recruitment strategies will you use? How will you 
train your sales force? What about compensation for your sales force? 
 Your sales activities. When you are defining your sales strategy, it is important that 
you break it down into activities. For instance, you need to identify your prospects. 
Once you have made a list of your prospects, you need to prioritize the contacts, 
selecting the leads with the highest potential to buy first. Next, identify the number 
of sales calls you will make over a certain period of time. From there, you need to 
determine the average number of sales calls you will need to make per sale, the 
average dollar size per sale, and the average dollar size per vendor. 
Service or Product Line 
 
Service or Product Line is Part 6 of your business plan. What are you selling? In this section, 
describe your service or product, emphasizing the benefits to potential and current 
customers. For example, don't tell your readers which 89 foods you carry in your "Gourmet 
to Go" shop. Tell them why busy, two-career couples will prefer shopping in a service- 
oriented store that records clients' food preferences and caters even the smallest parties on 
short notice. 
 
Focus on the areas where you have a distinct advantage. Identify the problem in your target 
market for which your service or product provides a solution. Give the reader hard evidence 
that people are, or will be, willing to pay for your solution. List your company's services and 
products and attach any marketing/promotional materials. Provide details regarding 
suppliers, availability of products/services, and service or product costs. Also include 
information addressing new services or products which will soon be added to the  
company's line. 
 
Overall, this section should include: 
 
 A detailed description of your product or service (from your customers' perspective). 
You should include information about the specific benefits of your product or 
service. You should also talk about your product/service's ability to meet consumer 
needs, any advantages your product has over that of the competition, and the 
present development stage your product is in (i.e. idea, prototype, etc.). 
 
Information related to your product's life cycle. Be sure to include information about 
where your product or service is in its life cycle, as well as any factors that may 
influence its cycle in the future. 
 Any copyright, patent, and trade secret information that may be relevant. This  
should include information related to existing, pending, or anticipated copyright and 
patent filings along with any key characteristics of your products/services that you 
cannot obtain a copyright or patent for. This is where you should also incorporate  
key aspects of your products/services that may be classified as trade secrets. Last, 
but not least, be sure to add any information pertaining to existing legal agreements, 
such as nondisclosure or noncompete agreements. 
 Research and development (R&D) activities you are involved in or are planning to be 
involved in. These would include any in-process or future activities related to the 
development of new products/services. This section would also include information 
about what you expect the results of future R&D activities to be. Be sure to analyze 
the R&D efforts of not only your own business, but also that of others in your 
industry. 
Funding Request 
 
The Funding Request is Part 7 of your business plan. In this section, you will request the 
amount of funding you will need to start or expand your business. If necessary, you can 
include different funding scenarios, such as a best and worst case scenarios, but remember 
that later, in the financial section, you must be able to back up these requests and scenarios 
with corresponding financial statements. 
 
You will want to include the following in your funding request: your current funding 
requirement, your future funding requirements over the next five years, how you will use 
the funds you receive, and any long-range financial strategies that you are planning that 
would have any type of impact on your funding request. When you are outlining your 
current and future funding requirements, be sure to include the amount you want now and 
the amount you want in the future, the time period that each request will cover, the type of 
funding you would like to have (i.e., equity, debt), and the terms that you would like to have 
applied. 
 
How you will use your funds is very important to a creditor. Is the funding request for 
capital expenditures? Working capital? Debt retirement? Acquisitions? Whatever it is, be 
sure to list it in this section. 
 
Last of all, make sure that you include any strategic information related to your business  
that may have an impact on your financial situation in the future, such as: going public with 
your company, having a leveraged buyout, being acquired by another company, the method 
with which you will service your debt, or whether or not you plan to sell your business in   
the future. Each of these are extremely important to a future creditor, since they will  
directly impact your ability to repay your loan(s). 
Financials 
 
Financials is Part 8 of your business plan. The financials should be developed after you've 
analyzed the market and set clear objectives. That's when you can allocate resources 
efficiently. The following is a list of the critical financial statements to include in your 
business plan packet. 
 
Historical Financial Data 
 
If you own an established business, you will be requested to supply historical data related to 
your company's performance. Most creditors request data for the last three to five years, 
depending on the length of time you have been in business. 
 
The historical financial data you would want to include would be your company's income 
statements, balance sheets, and cash flow statements for each year you have been in 
business (usually for up to three to five years). Often creditors are also interested in any 
collateral that you may have that could be used to ensure your loan, regardless of the stage 
of your business. 
 
Prospective Financial Data 
 
All businesses, whether startup or growing, will be required to supply prospective financial 
data. Most of the time, creditors will want to see what you expect your company to be able 
to do within the next five years. Each year's documents should include forecasted income 
statements, balance sheets, cash flow statements, and capital expenditure budgets. For the 
first year, you should supply monthly or quarterly projections. After that, you can stretch it 
to quarterly and/or yearly projections for years two through five. 
 
Make sure that your projections match your funding requests; creditors will be on the 
lookout for inconsistencies. It's much better if you catch mistakes before they do. If you 
have made assumptions in your projections, be sure to summarize what you have assumed. 
This way, the reader will not be left guessing. 
 
Finally, include a short analysis of your financial information. Include a ratio and trend 
analysis for all of your financial statements (both historical and prospective). Since pictures 
speak louder than words, you may want to add graphs of your trend analysis (especially if 
they are positive). 
Appendix 
 
The Appendix is Part 9 of your business plan. This section should be provided to readers on 
an as-needed basis. In other words, it should not be included with the main body of your 
business plan. Your plan is your communication tool; as such, it will be seen by a lot of 
people. Some of the information in the business section you will not want everyone to see, 
but, specific individuals (such as creditors) may want access to this information in order to 
make lending decisions. Therefore, it is important to have the appendix within easy reach. 
The appendix would include: 
 
 Credit history (personal & business) 
 Resumes of key managers 
 Product pictures 
 Letters of reference 
 Details of market studies 
 Relevant magazine articles or book references 
 Licenses, permits or patents 
 Legal documents 
 Copies of leases 
 Building permits 
 Contracts 
 List of business consultants, including attorney and accountant 
 
Any copies of your business plan should be controlled; keep a distribution record. This will 
allow you to update and maintain your business plan on an as-needed basis. Remember, 
too, that you should include a private placement disclaimer with your business plan if you 
plan to use it to raise capital. 
</p>