Components of A Business Plan
Components of A Business Plan
Components of A Business Plan
1. Executive Summary
The executive summary is the summary of the entire business plan. It can only be
compiled when the business plan is finished. It provides a short overview over the basic contents
of the plan. The most important details should be easily comprehendible.
3. Product or Service
The product (or the service) is the heart of any company. Characteristics and stages of
development should be listed in the business plan. What makes the product one-of-a-kind, what
is its so-called unique selling proposition? The product description should be easily
understandable, even for laypersons. The question of what you want to accomplish should be
answered. This includes short-term and long-term goals and how you want the product to
develop. Should you be producing complex products, the individual stages of production need to
be listed. Is the product new or unusual, the functionality should be described in detail.
The product offer is critical and presents an opportunity to set yourself apart from your
competitors. The business plan should stress the difference between you and your competition
and what makes your product special. Your strategy for further development should not be
missing here.
The chosen price strategy is also of importance. Did you opt for high or low prices, or
even a threshold price strategy? Your business plan should demonstrate how your price strategy
secures cost recovery and at the same time sets you apart from your competitors. You should
therefore list the prices of your competitors for comparison. The price needs to be competitive,
which should be visible in the business plan. You should also elaborate on the composition of
your price, how high your profit margin is, and the minimum price of the product.
The distribution concept should be visible as an entity. Naturally, it has to match the
product, which should be demonstrated in the business plan. Every chosen channel of
distribution should be explained. Those that were not selected should also be listed, explaining
why they were not chosen. This shows that you have considered all options and weighed the
advantages and disadvantages of each choice.
Publicity is needed for making your product known. Which strategy is to be pursued and
why, is also part of the business plan
Some products and services can gain a high profile with the help of clever PR-strategies.
This should not be underestimated.
7. Legal form
A good business plan should also contain explanations about the chosen legal form of the
company. Which person or other coporation holds a part of the company? Why is the current
legal form the suiting the best? Are there any changes planned when growth is coming? This is
part of the business plan.
9. Capital requirement
The seed capital has to come from somewhere. No one founds a business withoutany
resources. In most cases, the equity capital is not enough. The business plan should therefore
show, which capital goes where and for what it is used. The reserve capital is also of importance.
Self-employed people or freelancers have to budget for their personal needs. Current as well as
prospective loans should not be forgotten.
The equity capital is one component of the finance plan. The amount you contribute
should be noted in the business plan, as banks appreciate it when personal resources support
new-business loans.
External funds and their amount and distribution are an important part of the finance
plan. Often the funding occurs through capital providers, such as investors or banks as loan
providers. (Public) subsidies are also external funds. Should you plan to claim such funds you
should include it in your business plan.
The so-called liquidity projection demonstrates financial solvency over a planned period.
There are benchmarks for every sector, which can help you orientate yourself. Here, you should
also mention the break-even point, meaning the point in time when you move from the red into
the black. Your business plan should also point out how you intend to get by until then.