Whether you’re just getting started or are well established, you need a business plan. The key elements of your business plan, as described in this article, can help you build your business and convince lenders that you understand all that running a business entails. An effective business plan provides a solid roadmap to help you chart your path toward business success.
Elements of a business plan
Writing a business plan may seem daunting, especially given that each of the elements is a complex document in itself. However, developing a business plan is vital in helping your business launch, grow and thrive.
Business plans are as varied as businesses themselves, but they all comprise these seven elements:
- Executive Summary
- Business Description
- Market Analysis
- Organization Management
- Sales Strategies
- Funding Requirements
- Financial Projections
Although this section appears first, consider writing it after you’ve completed all the other sections.
Here’s why: the executive summary distills the information about your business. It summarizes the other sections of your plan. You may find it easier to write after you’ve worked out the details of your business plan and captured your thoughts accurately and succinctly.
Provide a clearly written, concise overview of your business plan. Draw readers in so they’ll want to learn more about your company.
Explain your short- and long-term business goals and how you operate. Describe your company and what it does, including
- the legal structure of your business (e.g., sole proprietorship, partnership, corporation, cooperative)
- your history, and the needs and demands you hope to satisfy
- an overview of your products, services, customers and suppliers
- a summary of company growth
Conduct market research about your competition and the state of the market as a whole. Include size and key demographics of targeted customer segments. Evaluate your competitors, highlighting their strengths and weaknesses. Identify where you fit in the market and the ways you surpass your competitors. Present your industry knowledge, along with conclusions based on your research. Include
- information on your core target market
- profiles of your ideal customers
- evidence that you’ve studied industry trends
Venture capitalists need to know that your team is tenacious and resilient: the right people in management are flexible and can adapt to changing situations. When laying out your organization management, include an organizational chart with descriptions of ownership, departments and key employees. Highlight each team member’s expertise and qualifications. List all advisors, including board members, accountants and lawyers.
Investors also need to know how you plan to raise money and make a profit. Summarize your sales and marketing strategy: describe the promotional strategies you’re currently using and the ones you plan to implement in the future. Describe your operations cycle—from procuring supplies through production and the delivery of your products and services. Identify labour sources and how many employees you have and plan to have.
If you haven’t already, identify your startup costs and operating costs. Complete the market analysis and set your short- and long-term goals. Once you’ve completed these steps, you’ll have an idea of the funding you need. Lay this out in both a best-case and a worst-case scenario. With the help of a professional accountant, you can assemble a timeline for prospective funders. This timeline can describe such things as getting premises and insurance, securing required permits or licences, and arranging regular supply.
Your accountant can also help you prepare the important financial statements you’ll need, including income statements, balance sheets and cash flow statements for the past three to five years.
Similarly, your accountant can help you prepare prospective financial information, including forecasted income statements, balance sheets, cash flow statements and capital expenditure budgets for the next five years. Include a brief financial analysis, with data and a ratio and trend analysis for all financial statements.
As mentioned, each of these sections can help you as you build your business. Time consuming as it may seem, you’ll be rewarded for your effort. You’ll have a clear vision for the future because you’ve taken the time to identify where you’ve been.
There are myriad resources to help you develop your business plan, including the team at Lift Legal.
The information on this blog and website is provided by Lift Legal for educational purposes only. It is intended to give readers a general understanding of the law, not to provide specific legal advice. Information contained in these pages should not be used in place of competent legal advice from a licensed, practising lawyer in Alberta. Furthermore, by using this blog and website, you understand that no lawyer-client relationship exists between you and Lift Legal.