In the previous post, I write about seven different meanings of a business plan. It is more about why the business plan is helpful for entrepreneurs. In the future, I plan series of posts about business planning that will have more details about preparing and writing as a part of your planning process. Now we will start with most crucial business plan elements.
In this post, I want to select the most critical business plan elements that will give you more proactive role as an entrepreneur or a person who plans to start a new company.
The intention is to look in a business plan more as a part of an overall planning process, not as a physical document, or something that you must write.
Business Plan Elements #1: Business Model
The business model is something that you as an entrepreneur will develop based on your initial business idea. Everything after this element in the planning process you will base on that model. It can be a simple piece of paper or napkin that you find around your hand when you come up with some good idea. This piece of paper later you can translate into the bigger paper with a better graph of the model.
Something that is more important is that business model is not based only on your entrepreneurial idea, it just starts from there. You must validate your business model with the reality – the market, or the customers that will use something from the company. Because of that, you start with the planning process immediately after the process of creation of the ideas.
Business Plan Elements #2: Products or Services
You have a business model, but business model without something that your company will exchange for money is nothing. Products and services will be subject that you will sell to your customers. They will be the things that will solve problems for your customer. Anyway, your idea starts with the problem that exists on the market.
Because of that, in the planning process, you as an entrepreneur must find and describe every aspect of the future products and services. You can answer these questions as a framework in the process:
- What will be the benefits for the customers?
- What features will have your products or services?
- How can you produce your products and services?
- What technology will you use to produce them?
- How will you sell those products and services?
- Who are the major competitors on the market?
- What are the features and benefits of your competitor’s products and services?
- What are the most important differences between your products and services and your competitors?
- Think about possible products and services you can introduce in the future.
Answering these questions you can have an essential framework for your products and services in the broader view.
Business Plan Elements #3: Required Finances
Every start-up needs money. You cannot go with an efficient planning process without financial plan included in the planning process. You need money to start the company, to grow it, to develop and implement new ideas, to pay daily activities, to make more money, etc.
You can have the best ideas incorporated in your business model, and develop on paper the best products and services, but if you cannot produce them and bring to the market, your company cannot start or cannot develop as you want and cover in your plan. Because of that, you must spend some time in planning required finances for each business venture in which you wish to enter.
In your planning process, you must answer following questions:
- How much money will I need to start my company?
- How much money will I need after startup before my business start making money?
- How much money I have to invest?
- Where can I find the additional money?
- What is my backup strategy for finances?
Business Plan Elements #4: Market Analysis as a part of planning process
Market analysis is a basis to see what’s happening outside of you as an entrepreneur and your business. It will give you answers that you didn’t know, and that you can incorporate into your business model, products, and services, financial planning and strategies. You must conduct market research if you want to build a company that will be close to the potential customers. This analysis must answer at least following questions:
- What are the target customers?
- How often will those customers purchase specific product or services?
- How much are they willing to pay for products and services?
- What is the dimension of the market that competitors serve?
- What is the price of the specific product or services of the competitors?
- What is the impression that we make with our marketing campaign?
Business Plan Elements #5: The Strategy Including Online Strategy
As a fifth element that you must cover in your planning process is the strategy. Without the strategy, entrepreneurs are as lost persons that in the space that looks like an infinite universe. A strategy is a tool that will give you eyes to see your path to the future success.
As you can see I stressed online strategy that must be part of an overall business strategy. When you make a strategy, you must think about the online presence of your company because more and more it is identified with your overall strategy.
Business Plan Elements #6: Break-Even Analysis
Break-even analysis is a very powerful tool for entrepreneurs. It simply tells you how much you must sell in a specified period to cover all costs. And everything above that point of sales quantity will be the profit. You can check the planned numbers and numbers from the break-even point and make necessary alignments in sales forecasting, financial, marketing activities, etc.
Business Plan Elements #7: Cash Flow Analysis
Will your business have enough money to finance business operations in a specified period? The cash flow analysis will answer this question. It is an essential part of each planning process, especially for the startup businesses.
Business Plan Elements: Profit-Loose Analysis
Will your business make profit or loose? When will company start to make a profit? These questions will be answered with profit-loose analysis. With this answer, you can align your financial planning process and will know what you must to take to ensure normal business operations.