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The Elements of Your Business Plan

By Toolkit Staff | July 03, 2012

By its nature, a business plan requires you to project how events will turn out in the future. If the assumptions on which you base your planning are sound, the results of your operations may be very close to what you predicted. Over time, however, small deviations add up, and a plan that accurately predicted how your first few months would turn out will become increasingly inaccurate. So, how far out do you plan?

As a general rule, for an "average" business, a five-year plan is a reasonable starting point. The level of detail will drop as your plan covers periods further into the future. The cash flows that are tracked weekly or monthly during the first year of operation may be projected by quarter in the second year, and annually in the third through fifth years.

After you've considered the purpose of your plan and done some background preparation, it's time to consider the actual elements that you'll include in the written document.

A business plan customarily has certain elements or sections. The following list of plan elements are presented in the order in which they usually appear in the plan. But don't feel constrained to follow this exact format if another way makes more sense because of the nature of your business.

In any event, it pays to at least mention all the major issues listed below, even the ones that are relatively less significant to your particular business. Someone who's reading your plan will be more confident about your assessment of the situation if you identify such issues and resolve them, however quickly.

Common Components of a Business Plan

  1. Cover page -- identifies you and your business, and dates the plan.
  2. Table of contents -- makes it easy for readers to find particular documents.
  3. Executive summary -- this is arguably the most important single part of your document. It provides a high-level overview of the entire plan that emphasizes the factors that you believe will lead to success.
  4. Business background -- provides company-specific information, describing the business organization, history, and the product or service the business will provide.
  5. Marketing plan -- presents an analysis of the market conditions that the business faces, sets forth the marketing strategy that the business will follow, and provides a detailed schedule of marketing activities to support sales.
  6. Action plans -- shows how operational and management issues will be resolved, including contingency planning.
  7. Financial projections -- (and historical financial information, if you have it) demonstrate how the business can be expected to do financially if the business plan's assumptions are sound.
  8. Appendix -- presents supporting documents, statistical analysis, product marketing materials, resumes of key employees, etc.

You want your plan to look professional and be a useful tool. There are a number of things to do to ensure that is the case:

  • Print the plan on a high-quality paper. Print on one side of the paper only.
  • Use a typeface that is easy to read and a font size that is large enough to prevent eyestrain. This may require financial projections to be spread over several pages in order to maintain readability.
  • If those in your business use specialized language or acronyms, use them sparingly and be sure to define any terms that someone outside your area of expertise wouldn't readily know.
  • Keep the plan fairly short and concise. For most businesses, 15-30 pages will be sufficient. You can always provide additional detail in an appendix, if required.
  • Include samples of ads, marketing material and any other information that aids in the presentation of your plan.
  • Be certain to carefully edit the document. Spelling and grammar errors do not make a good impression.
  • Bind the plan so that it lays flat when opened. But don't go overboard on expensive binders, embossing, etc. Elevating the form of the plan over its substance can raise doubts among those reading the plan.
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