Have you ever heard of the elevator pitch? This phrase brings to mind two people in an elevator: One trying to engage the other with a description of their idea or business. This brief missive is meant to be especially enticing — to grab a busy person’s attention quickly, making them want to find out more and potentially even get involved.
We especially associate elevator pitches with trying to get funding for a business, like from an angel investor or venture capital firm. And as important as that initial first impression is, potential partners are going to expect you to be able to follow up with more substantial information and data to back up your initial persuasive introduction.
This is the purpose of a business plan — to provide a comprehensive overview about where your company started, where it is now and where you expect it to be in the future. Here are six essential elements of a business plan that’ll help you achieve this purpose.
Your executive summary is your elevator pitch in written form. It’s meant to be short and snappy while also conveying the key information stakeholders need to know to get a full sense of your organization. For instance, a busy potential investor may not have time to read a 15-page business plan, but they could sit down and digest a one- to two-page executive summary.
Think of your executive summary as your overall business plan condensed down to just a few pages of crucial bullet points. Pro tip: Write your business plan first then pull out the most important points to compile into a summary.
Here are some of the key points upon which your executive summary should touch:
- Business structure
- Target audience
- Marketing and sales campaigns
- Cash flow/revenue (past, present and future)
- Future plans
Now it’s time to start expanding on those key points contained in the executive summary. A good way to start your business plan is to describe your company: its internal structure, legal details, geographical location, channels of doing business, etc.
Another important aspect of describing your company include describing in detail its products and/or services — including your business’s unique sales proposition, or why your offerings are uniquely advantageous and appealing to customers.
You’ll also want to outline the structure of your company, introducing your leadership team and outlining what each employee brings to the table in terms of a track record.
The next section should answer the question, “Where does your business fit into the current market?” According to the U.S. Small Business Administration, you’ll want to touch on these finer points in your market and competitive analyses:
- Demand for your product/service offerings
- The size of the market and its change over time
- Your specific target audience
- A rundown of competitors operating within the same market
- Opportunities within the existing market
This section is very important because it demonstrates your preparedness for operating within today’s market as well as your understanding of what you’ll realistically face in terms of competition.
By this point you’ve laid out who constitutes your target audience, so now it’s time to talk about your specific strategies for reaching them.
The experts at The Balance SMB recommend focusing on “3 Ps” in this marketing portion of your business plan:
- Promotion: budget, ad campaigns, promotional efforts, PR, etc.
- Pricing: regular and promotional prices, up-selling and cross-selling tactics, etc.
- Placement: how your product will get from the manufacturer to the customer
Outlining the channels through which you plan to market and how much you will devote to each one is important here, so be sure you’ve crunched the numbers on those so you can include a breakdown. Here you will also need to demonstrate a complete, data-based understanding of your products and what it will take to fulfill orders. For instance, whether you plan to warehouse your products and handle the shipping yourself, or you aim to utilize drop-shipping from a third-party vendor, you should outline the costs and benefits of your fulfillment strategy.
Financial Projects & Capital Needs
As you can imagine, one of the most crucial segments of your business plan pertains to financial data — particularly financial projections for the future based on past and present performance. As one expert writes for Inc., credibility is key — potential investors and partners are looking for highly realistic, data-based projections for the next few years for metrics like revenue, sales by channel, expenses, etc.
Far from a static document you make once and reuse for months or years to come, you should be updating this section consistently to reflect the latest data available for analysis. Not only does updating it regularly help your business plan stay relevant — so you can show someone at a moment’s notice with confidence your figures are up to date — but it allows you to keep a close eye on your company’s projected performance.
Any effective business plan includes lots of supporting documentation — but including these in the main body of your business plan can hinder its cohesion and flow. So, there’s a special section at the end meant to serve as a catch-all for extra documents. This way, in the body of the business plan, you can write something like, “See Appendix, page 2,” and readers can choose to flip there immediately or wait until the end depending on their needs.
A thorough, well-crafted appendix will help the rest of your business plan stay streamlined. Examples of documents commonly found in appendices include graphs, resumes, legal documents, survey results, and more.
These are not the only essential elements of a business plan, but they do represent a solid start toward demonstrating to the world how your business operates and what makes it special. Ultimately, your business plan can be as unique as your organization itself, so don’t be afraid to customize which sections you include based on your company’s setup and goals.