A business is an organization that offers products and services for profit. It can take a variety of legal forms, from sole proprietorships to corporations that provide shareholder equity.
To start a new business, you’ll need to write a plan. Whether you plan to seek investors or not, a business plan will help you identify clear, deliberate next steps.
Business Concept
The business concept lays the foundations or directions that shape a specific business entity. It defines the business model, plan and future of a company and provides an insight into how the company will capture value from its operations. It may also describe how it intends to deliver its products and services to the market.
The most important elements of the business concept are what the company is offering and who it serves, which should be clearly expressed in the startup description. It is also essential to mention how the company’s products and services are different from those of its competitors.
Some entrepreneurs include short bios of the management team with an emphasis on their professional experience, special talents and recognition. It is also important to provide information about key customers and any supporting documents that can help investors and bankers gain a deeper understanding of the company’s potential. This can include local permits, licenses and deeds; professional certifications; media clips; copies of patents and other intellectual property; customer contracts and purchase orders; and any other relevant information.
Market Analysis
Market analysis is a large part of the business plan process that takes a business idea and turns it into a commercially viable reality. It determines if there is an existing market for the product and shows potential investors and lenders that there is a reasonable chance that revenue forecasts will be met.
This section identifies the target market for your products or services and how you will differentiate yourself from competitors. Lenders and investors want to see that you understand your industry and are realistic about your business prospects.
You can use both a top-down and a bottom-up approach to estimate the size of a market and how big a share you expect your company to get. A top-down approach is easier and quicker to do, but it is not as accurate as a bottom-up method. It is important to use charts and graphs to make your market research data more visually appealing. This will help to make the information easy to digest and less intimidating for readers.
Financials
A business plan’s financial section includes current sales, expenses and profit figures for the company, a projected forecast of those numbers over at least the next year, and a description of the management team. It should also include any pertinent documents, such as local permits, deeds and licenses; professional certifications; media clips; and patent information. This section should also highlight the unique selling points of the business, emphasizing the ways in which it solves a problem or fills a gap in the marketplace differently than its competitors.
Be realistic in your financial projections; seasoned bankers and investors will spot inaccurate or overly optimistic numbers quickly. If you are seeking financing or investment funds, the financial section will also provide a clear outline of how your business is expected to generate enough profit to repay the loan or earn a reasonable return for investors. This is a critical area that will be evaluated thoroughly by potential lenders and investors.
Management Team
The management team section of a business plan details the high-level individuals who will run and manage the company. It includes brief bios and highlights their experiences and credentials that make them the right people to turn the business idea into a reality. It also discusses the structure of the management team and how ownership is divided. This information is important for potential lenders and investors as they want to know that the management team is committed to the business and has the skills and experience necessary to succeed.
It is helpful to correlate the current team members’ previous experience with their current responsibilities in the business to show how their past work can help them achieve present goals. This will boost their productivity and motivation. It is also helpful to include any board of advisers in the management team section. Advisory boards typically include 2 to 8 individuals who provide advice and guidance to the management team. They may be paid a salary or be offered options in the company.