- Planning Components
Planning is one of the most important aspects of management. A perfect plan can increase profits to their optimum levels. When it comes to making plans, one must keep several things in mind. These include the components of planning. Each component plays a big role in planning.
Components of planning.
The entire process of planning consists of many aspects. These basically include missions, objectives, policies , procedures, programmes , budgets and strategies .
This is one of the first components of planning. The mission of an organization basically dictates its fundamental purposes. It describes what exactly it wants to achieve. The mission may be either written or implicit from the organization’s functioning.
A mission statement describes who the products and customers of a business are. It shows the direction in which the business intends to move and what it aims to achieve.
Even the basic values and beliefs of the organization are a part of this. One can also understand its attitude towards its employees from the mission statement.
Many stakeholders of a business use its mission statement. Managers use it to evaluate their success and set goals. On the other hand, employees use it to foster a sense of unity and purpose. Even customers and investors use it to understand how the business intends to work in the future.
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Objectives represent the end results which an organization aims to reach. We can also refer to it as goals or targets. Not just planning but all factions of business management begin with the setting of objectives.
In terms of the types of objectives, they may be either individualistic or collective. They can even be long-term and short-term depending on their duration. They can also be general or specific in terms of their scope.
Managers of a business should lay down their objectives clearly and precisely. They must consider their mission and values before setting their goals. Furthermore, they must ensure that their objects for each activity are in consonance with each other.
Policies are basically statements of understanding or course of action. They guide the decision-making process for all activities of the organization. Consequently, they impose limits on the scope of decisions.
For example, a company might have a policy of always paying a minimum dividend of 5% of profits. So, when it decides to pay a dividend, the amount cannot be below 5%.
Just like the mission statement, even policies of an organization may be expressly written or implied. Managers make policies for all activities of a business, including sales, production, human resource , etc.
Policies should never be too rigid because that excessively limits functioning. Policy-makers must also ensure they explain policies to employees clearly. This will prevent any ambiguities that may arise. Policies must also change with time to suit new challenges and circumstances.
Procedures are some of the most important components of planning. They describe the exact manner in which something has to be done. They basically guide actions for activities that managers and employees perform.
Procedures also include step-by-step methods. Even rules regulating actions come within the ambit of procedures. The planning process must ensure that procedures are always practical. They should not be rigid and difficult to implement.
Budgets are plans that express expected results in numerical terms. Whenever an organization expects to do something, it can make a budget to decide on its target. Most activities, targets, and decisions require budgeting. For example, an income budget shows expected financial results and profits.
A programme is nothing but the outline of a broad objective. It contains a series of methods, procedures, and policies that the organization needs to implement. In other words, it includes many other components of planning.
For example, a business may have a diversification programme. Consequently, it will make budgets and policies accordingly for this purpose. Planners and managers can implement programmes like these at various levels.
A strategy in simple words refers to minute plans of action that aim to achieve specific requirements. Proper implementation of strategies leads to the achievement of the requisite goals. The nature of an organization’s values and missions will determine how it will strategize.
Solved Examples on Components of Planning
Consider the following statements and state which components of planning they refer to.
1) This component is expressed in numerical terms
2) All actions are limited by this component
3) This component basically shows the fundamental aims of the business organization
4) Even methods and rules are a part of these components of planning
5) This component may be long-term or short-term and even specific or general
Answers: (1) Budget (2) Policy (3) Mission (4) Procedures (5) Objectives
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Written by True Tamplin, BSc, CEPF®
Reviewed by subject matter experts.
Updated on June 08, 2023
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Table of contents, what is business planning.
Business planning is a crucial process that involves creating a roadmap for an organization to achieve its long-term objectives. It is the foundation of every successful business and provides a framework for decision-making, resource allocation, and measuring progress towards goals.
Business planning involves identifying the current state of the organization, determining where it wants to go, and developing a strategy to get there.
It includes analyzing the market, identifying target customers, determining a competitive advantage, setting financial goals, and establishing operational plans.
The business plan serves as a reference point for all stakeholders , including investors, employees, and partners, and helps to ensure that everyone is aligned and working towards the same objectives.
Importance of Business Planning
Business planning plays a critical role in the success of any organization, as it helps to establish a clear direction and purpose for the business. It allows the organization to identify its goals and objectives, develop strategies and tactics to achieve them, and establish a framework of necessary resources and operational procedures to ensure success.
Additionally, a well-crafted business plan can serve as a reference point for decision-making, ensuring that all actions taken by the organization are aligned with its long-term objectives.
It can also facilitate communication and collaboration among team members, ensuring that everyone is working towards a common goal.
Furthermore, a business plan is often required when seeking funding or investment from external sources, as it demonstrates the organization's potential for growth and profitability. Overall, business planning is essential for any organization looking to succeed and thrive in a competitive market.
Business Planning Process
Step 1: defining your business purpose and goals.
Begin by clarifying your business's purpose, mission, and long-term goals. These elements should align with the organization's core values and guide every aspect of the planning process.
Step 2: Conducting Market Research and Analysis
Thorough market research and analysis are crucial to understanding the industry landscape, identifying target customers, and gauging the competition. This information will inform your business strategy and help you find your niche in the market.
Step 3: Creating a Business Model and Strategy
Based on the insights from your market research, develop a business model that outlines how your organization will create, deliver, and capture value. This will inform the overall business strategy, including identifying target markets, value propositions, and competitive advantages.
Step 4: Developing a Marketing Plan
A marketing plan details how your organization will promote its products or services to target customers. This includes defining marketing objectives, tactics, channels, budgets, and performance metrics to measure success.
Step 5: Establishing Operational and Financial Plans
The operational plan outlines the day-to-day activities, resources, and processes required to run your business. The financial plan projects revenue, expenses, and cash flow, providing a basis for assessing the organization's financial health and long-term viability.
Step 6: Reviewing and Revising the Business Plan
Regularly review and update your business plan to ensure it remains relevant and reflects the organization's current situation and goals. This iterative process enables proactive adjustments to strategies and tactics in response to changing market conditions and business realities.
Components of a Business Plan
The executive summary provides a high-level overview of your business plan, touching on the company's mission, objectives, strategies, and key financial projections.
It is critical to make this section concise and engaging, as it is often the first section that potential investors or partners will read.
The company description offers a detailed overview of your organization, including its history, mission, values, and legal structure. It also outlines the company's goals and objectives and explains how the business addresses a market need or problem.
Products or Services
Describe the products or services your company offers, emphasizing their unique features, benefits, and competitive advantages. Detail the development process, lifecycle, and intellectual property rights, if applicable.
The market analysis section delves into the industry, target market, and competition. It should demonstrate a thorough understanding of market trends, growth potential, customer demographics, and competitive landscape.
Marketing and Sales Strategy
Outline your organization's approach to promoting and selling its products or services. This includes marketing channels, sales tactics, pricing strategies, and customer relationship management .
Management and Organization
This section provides an overview of your company's management team, including their backgrounds, roles, and responsibilities. It also outlines the organizational structure and any advisory or support services employed by the company.
The operational plan describes the day-to-day operations of your business, including facilities, equipment, technology, and personnel requirements. It also covers supply chain management, production processes, and quality control measures.
The financial plan is a crucial component of your business plan, providing a comprehensive view of your organization's financial health and projections.
This section should include income statements , balance sheets , cash flow statements , and break-even analysis for at least three to five years. Be sure to provide clear assumptions and justifications for your projections.
Appendices and Supporting Documents
The appendices and supporting documents section contains any additional materials that support or complement the information provided in the main body of the business plan. This may include resumes of key team members, patents , licenses, contracts, or market research data.
Benefits of Business Planning
Helps secure funding and investment.
A well-crafted business plan demonstrates to potential investors and lenders that your organization is well-organized, has a clear vision, and is financially viable. It increases your chances of securing the funding needed for growth and expansion.
Provides a Roadmap for Growth and Success
A business plan serves as a roadmap that guides your organization's growth and development. It helps you set realistic goals, identify opportunities, and anticipate challenges, enabling you to make informed decisions and allocate resources effectively.
Enables Effective Decision-Making
Having a comprehensive business plan enables you and your management team to make well-informed decisions, based on a clear understanding of the organization's goals, strategies, and financial situation.
Facilitates Communication and Collaboration
A business plan serves as a communication tool that fosters collaboration and alignment among team members, ensuring that everyone is working towards the same objectives and understands the organization's strategic direction.
Business planning should not be a one-time activity; instead, it should be an ongoing process that is continually reviewed and updated to reflect changing market conditions, business realities, and organizational goals.
This dynamic approach to planning ensures that your organization remains agile, responsive, and primed for success.
As the business landscape continues to evolve, organizations must embrace new technologies, methodologies, and tools to stay competitive.
The future of business planning will involve leveraging data-driven insights, artificial intelligence, and predictive analytics to create more accurate and adaptive plans that can quickly respond to a rapidly changing environment.
By staying ahead of the curve, businesses can not only survive but thrive in the coming years.
Business Planning FAQs
What is business planning, and why is it important.
Business planning is the process of setting goals, outlining strategies, and creating a roadmap for your company's future. It's important because it helps you identify opportunities and risks, allocate resources effectively, and stay on track to achieve your goals.
What are the key components of a business plan?
A business plan typically includes an executive summary, company description, market analysis, organization and management structure, product or service line, marketing and sales strategies, and financial projections.
How often should I update my business plan?
It is a good idea to review and update your business plan annually, or whenever there's a significant change in your industry or market conditions.
What are the benefits of business planning?
Effective business planning can help you anticipate challenges, identify opportunities for growth, improve decision-making, secure financing, and stay ahead of competitors.
Do I need a business plan if I am not seeking funding?
Yes, even if you're not seeking funding, a business plan can be a valuable tool for setting goals, developing strategies, and keeping your team aligned and focused on achieving your objectives.
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website , view his author profile on Amazon , or check out his speaker profile on the CFA Institute website .
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10 Essential Components of a Business Plan and How to Write Them
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A business plan is an essential document for any business, whether it’s a startup or an established enterprise. It’s the first thing any interested investor will ask for if they like your business idea and want to partner with you.
That’s why it’s important to pay attention when writing your business plan and the components inside it. An incomplete business plan can give the impression that you’re unqualified—discouraging investors and lenders.
A good business plan reduces ambiguity and communicates all essential details such as your financials, market analysis, competitive analysis, and a timeline for implementation of the plan. In this article, we’ll discuss the 10 important business plan components.
10 Important Business Plan Components
A comprehensive and well-thought-out business plan acts as a roadmap that guides you in making sound decisions and taking the right actions at the right times. Here are its key components and what to include in them.
1. Executive summary
The executive summary is one of the most important parts of a business plan. It’s the first thing potential investors will read and should therefore provide a clear overview of your business and its goals.
In other words, it helps the reader get a better idea of what to expect from your company. So, when writing an executive summary of your business, don’t forget to mention your mission and vision statement.
A mission statement is a brief statement that outlines your objectives and what you want to achieve. It acts as a guiding principle that informs decisions and provides a clear direction for the organization to follow.
For instance, Google’s mission is to “organize the world’s information and make it universally accessible and useful.” It’s short, inspiring, and immediately communicates what the company does.
A mission statement should be realistic, and hint towards a goal that is achievable in a reasonable amount of time with the resources you currently have or are going to acquire in the near future.
While a mission statement is more actionable and has an immediate effect on the daily activities of the company, a vision statement is more aspirational and has a much broader scope.
In other words, it highlights where the company aims to go in the future and the positive change it hopes to make in the world within its lifetime.
2. Company description
The second component of your business plan is the company description. Here, you provide a brief overview of your company, its products or services, and its history. You can also add any notable achievements if they are significant enough for an investor to know.
A company overview offers a quick bird’s-eye view of things such as your business model, operational capabilities, financials, business philosophy, size of the team, code of conduct, and short-term and long-term objectives.
Products and services
The products and services part of your company description explains what your business offers to its customers, how it’s delivered, and the costs involved in acquiring new customers and executing a sale.
Company history is the timeline of events that took place in your business from its origin to the present day. It includes a brief profile of the founder(s) and their background, the date the company was founded, any notable achievements and milestones, and other similar facts and details.
If you’re a startup, you’ll probably not have much of a history to write about. In that case, you can share stories of the challenges your startup faced during its inception and how your team overcame them.
3. Market analysis
The market analysis section of your business plan provides an in-depth analysis of the industry, target market, and competition. It should underline the risks and opportunities associated with your industry, and also comment on the attributes of your target customer.
Demographics and segmentation
Understanding the demographics of your customers plays a big role in how well you’re able to identify their traits and serve them.
By diving your target audience into smaller and more manageable groups, you can tailor your services and products to better meet their needs.
You can use demographics such as age, gender, income, location, ethnicity, and education level to better understand the preferences and behaviors of each segment, and use that data to create more effective marketing strategies.
Target market and size
Understanding your target market lies at the core of all your marketing endeavors. After all, if you don’t have a clear idea of who you’re serving, you won’t be able to serve well no matter how big your budget is.
For instance, Starbucks’ primary target market includes working professionals and office workers. The company has positioned itself such that many of its customers start their day with its coffee.
Estimating the market size helps you know how much scope there is to scale your business in the future. In other words, you’re trying to determine how much potential revenue exists in this market and if it’s worth the investment.
The next step is to figure out the market need, i.e., the prevalent pain points that people in that market experience. The easiest way to find these pain points is to read the negative reviews people leave on Amazon for products that are similar to yours.
The better your product solves those pain points, the better your chances of capturing that market. In addition, since your product is solving a problem that your rivals can’t, you can also charge a premium price.
To better identify the needs of your target customers, it helps to take into account things such as local cultural values, industry trends, buying habits, tastes and preferences, price elasticity, and more.
4. Product Summary
The product summary section of your business plan goes into detail about the features and benefits that your products and services offer, and how they differ from your competitors. It also outlines the manufacturing process, pricing, cost of production, inventory, packaging, and capital requirements.
5. Competitive analysis
Unless you’ve discovered an untapped market, you’re probably going to face serious competition and it’s only going to increase as you scale your business later down the line.
This is where the competitive analysis section helps; it gives an overview of the competitive landscape, introduces your immediate rivals, and highlights the current dominant companies and their market share.
In such an environment, it helps to have certain competitive advantages against your rivals so you can stand out in the market. Simply put, a competitive advantage is the additional value you can provide to your customers that your rivals can’t—perhaps via unique product features, excellent customer service, or more.
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6. Marketing and sales plan
The marketing and sales plan is one of the most important business plan components. It explains how you plan to penetrate the market, position your brand in the minds of the buyers, build brand loyalty, increase sales, and remain competitive in an ever-changing business environment.
Unique selling proposition
A unique selling proposition (USP) conveys how your products and services differ from those of your competitors, and the added value those differences provide.
A strong USP will stand out in a competitive market and make potential customers more likely to switch to your brand—essentially capturing the market share of your rivals.
Your product might be unique, but if people don’t even know that it exists, it won’t sell. That’s where marketing comes in.
A marketing plan outlines strategies for reaching your target market and achieving sales goals. It also outlines the budget required for advertising and promotion.
You may also include data on the target market, target demographics, objectives, strategies, a timeline, budget, and the metrics considered for evaluating success.
Sales and distribution plan
Once people are made aware of your product, the next step is to ensure it actually reaches them. This means having a competent sales and distribution plan and a strong supply chain.
Lay out strategies for reaching potential customers, such as online marketing, lead generation, retail distribution channels, or direct sales.
Your goal here is to minimize sales costs and address the risks involved with the distribution of your product. If you’re selling ice cream, for example, you would have to account for the costs of refrigeration and cold storage.
Pricing is a very sensitive yet important part of any business. When creating a pricing strategy , you need to consider factors such as market demand, cost of production, competitor prices, disposable income of target customers, and profitability goals.
Some businesses have a small profit margin but sell large volumes of their product, while others sell fewer units but with a massive markup. You will have to decide for yourself which approach you want to follow.
Before setting your marketing plans into action, you need a budget for them. This means writing down how much money you’ll need, how it will be used, and the potential return you are estimating on this investment.
A budget should be flexible, meaning that it should be open to changes as the market shifts and customer behavior evolves. The goal here is to make sure that the company is making the best use of its resources by minimizing the wastage of funds.
7. Operations plan
The operations plan section of your business plan provides an overview of how the business is run and its day-to-day operations. This section is especially important for manufacturing businesses.
It includes a description of your business structure, the roles and responsibilities of each team member, the resources needed, and the procedures you will use to ensure the smooth functioning of your business. The goal here is to maximize output whilst minimizing the wastage of raw material or human labor.
8. Management team
At the core of any successful business lies a dedicated, qualified, and experienced management team overlooking key business activities.
This section provides an overview of the key members of your management team including their credentials, professional background, role and responsibilities, experience, and qualifications.
A lot of investors give special attention to this section as it helps them ascertain the competence and work ethic of the members involved.
An organizational structure defines the roles, responsibilities, decision-making processes, and authority of each individual or department in an organization.
Having a clear organizational structure improves communication, increases efficiency, promotes collaboration, and makes it easier to delegate tasks. Startups usually have a flatter organizational hierarchy whereas established businesses have a more traditional structure of power and authority.
9. Financial Plan
Financials are usually the least fun thing to talk about, but they are important nonetheless as they provide an overview of your current financial position, capital requirements, projections, and plans for repayment of any loans.
Your financial plan should also include an analysis of your startup costs, operating costs, administration costs, and sources of revenue.
Once an investor has read through your business plan, it’s time to request funding. Investors will want to see an accurate and detailed breakdown of the funds required, and an explanation of why the requested funds are necessary for the operation and expansion of your business.
The appendix is the last section of your business plan and it includes additional supporting documents such as resumes of key team members, market research documents, financial statements, and legal documents.
In other words, anything important or relevant that couldn’t fit in any of the former sections of your business plan goes in the appendix.
Write a Business Plan Worth Reading
Starting a business is never easy, but it’s a little less overwhelming if you have a well-made business plan. It helps you better navigate the industry, reduce risk, stay competitive, and make the best use of your time and money.
Remember, since every business is unique, every business plan is unique too and must be regularly updated to keep up with changing industry trends. Also, it’s very likely that interested investors will give you feedback, so make sure to implement their recommendations as well.
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About the Author
Ayush is a writer with an academic background in business and marketing. Being a tech-enthusiast, he likes to keep a sharp eye on the latest tech gadgets and innovations. When he's not working, you can find him writing poetry, gaming, playing the ukulele, catching up with friends, and indulging in creative philosophies.
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Components Of Planning
In this tutorial, we will learn about the components of planning, which is a process that should be broken down into three separate, equally important parts: strategic thinking, long-range planning, and operational planning.
Planning is one of the most critical aspects of management. A perfect plan can increase profits to their optimum levels. When it comes to making plans, one must keep several things in mind. These include the components of planning.
The entire process of planning consists of many aspects. These include missions, objectives, policies, procedures, programs, budgets, and strategies.
It is a definitive statement of the goals of the organization that it has to achieve. It shows the way the management works towards the achievement of goals. The protective purpose of planning is to minimize risk by reducing the uncertainties surrounding business conditions and clarifying the consequences of related management actions. The affirmative purpose is to increase the degree of organizational success.
They are the results of every process undertaken in an organization and should be balanced appropriately. Targets can be individualistic or collective, short term or long term, tangible or intangible.
These help the managers during the decision-making process. Policies define the course of action that should be undertaken to determine present and future decisions. These are guides to thinking in decision making. They reflect and interpret objectives and guide decisions to achieve the goals. They establish a framework for planning programs.
They are a statement of expected revenue or losses of the organization. They create to control the financial activities of the enterprises. It is creating a plan to spend your money. This spending plan is called a budget. Creating this spending plan allows you to determine whether you will have enough money to do the things you need to do or would like to do. They earn and slowly sink deeper into debt every year.
These include a brief discussion of work to be carried out in a proper sequence to achieve the goals. A program is a complex structure of procedures, policies, methods, and rules, budgets, and other assignments. Budgets support these.
For example, a business may have a diversification program. Consequently, it will make budgets and policies accordingly for this purpose. Planners and managers can implement programs like these at various levels.
It is interpretative planning and very popular in the military since. It means deciding upon the enterprise’s goals and then carrying out a plan to achieve these goals. Strategic planning is an organizational management activity that use to set priorities, focus energy and resources, strengthen operations, ensure that employees and other stakeholders are working toward common goals, establish agreement around intended outcomes/results, and assess and adjust the organizations.
A strategy in simple words refers to minute plans of action that aim to achieve specific requirements. Proper implementation of approach leads to the achievement of the essential goals. The nature of an organization’s values and missions will determine how it will strategize.
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Business Planning: Definition, Objectives, Components, and Stages
Table of Contents
Business planning is important to do before starting a business. This is considered very important because it concerns the long-term success of your business.
Therefore, this planning should not be made haphazardly. As a businessman, you need to make it detailed and systematic.
So, what business plans do you need to prepare and how do you make them? Let's look at the explanation in this one article.
1. Definition of Business Planning
Business planning is the process of developing a strategy for running a business. This strategy acts as an action plan and business roadmap from start to finish.
In this plan, there are several parts that are quite crucial, including business goals and strategies, identifying the resources needed, how to manage these resources, up to the marketing strategy, and business evaluation.
2. 7 Purpose of Business Planning
Dilansir dari berbagai sumber yang ada, perencanaan usaha tidak terlepas dari berbagai tujuan penting yang turut andil dalam keberhasilan bisnis Anda. Diantaranya sebagai berikut:
2.1 Business Establishment Planning
The first purpose of having a business plan is to serve as a guideline to help you determine what you want to achieve, as well as a guide in making decisions when facing various problems or obstacles.
Later, these problems will be sorted by category and class, so that the solution can be more effective and not spread to other domains.
2.1 Define Vision and Mission
The vision and mission of a business are generally made at the start before the business runs. Through business planning, the business you run can be more directed and focused on the goals you want to achieve according to the vision and mission you hold.
2.3 Business Development Planning
Business risks are very likely to occur to business people, including those who have been in the business world before. So, this is where the role of business planning is needed to minimize the risk of failure and how to overcome existing challenges as business opportunities.
2.4 Minimizing the Risk of Failure
2.5 analyzing the market and competitors.
With careful planning, it will be easier for you to enter the market and conduct an analysis of competitors or business players in the same field. In this way, it will be easier for you to understand consumer desires and dominate the market.
2.6 Obtain More Profits or Profits
The main goal of a business is of course to make a profit from every sale or offer made. Business planning plays an important role in determining the appropriate sales strategy and is able to attract more consumers.
2.7 Predicting Business Outcomes
In addition to the six objectives above, having this plan can help you predict business results, such as profit, profit and loss, cash flow, and so on.
3. Business Planning Stage
When you are going to make a business plan, there are several stages that you need to fulfill so that the plan is in accordance with the operational needs of your business. The stages are as follows.
Image Source: Pexels/Christina Morillo
3.1 Do a Market Analysis
The first thing you need to do in the planning stage is to do a market analysis. Market analysis is an action to study various existing problems according to a predetermined market share.
So, make sure you have determined the product or service that will be offered before going into the field to conduct market and competitor analysis.
3.2 Calculate Production Costs
Calculating production costs can help you estimate the amount of capital needed to run a business. Look for complete information related to raw materials to production costs for your business.
Production costs are generally divided into two types. The first is fixed costs (investment costs) and the second is variable costs.
Investment costs are a number of costs that you need to prepare to start a business. The amount itself is relatively large because you need to buy various needs for your business operations for quite a long time.
Meanwhile, variable costs or non-fixed expenses are consumable costs with a nominal amount that can change, depending on the amount of production and other influencing factors.
3.3 Calculate Income
Recording incoming and outgoing cash flow is a crucial thing that you shouldn't underestimate. Calculate all existing income to estimate the profit you will get and determine the strategy or future steps.
3.4 Calculate Business Results
The results of the business can be calculated after you know your income and other expenses. The existence of this calculation will show a profit and loss statement from the business that you are running. You can also find out whether in the current condition you need additional funds or you need to reduce them.
4. 8 Components of Business Planning
After you understand the flow of business planning, then you need to understand what components are there. Quoted from various sources, there are at least 8 components of business planning that you need to know about, including the following.
4.1 Business Description
The first component is a business description. A business description is needed to be able to explain what business you are going to run as well as provide a broad picture of the business idea you have.
So, later stakeholders such as potential investors, business partners, and so on can more easily understand the business concept that you will run.
4.2 Marketing Strategy
The second is the marketing strategy. This component plays an important role in studying the strengths and weaknesses of competitors. That way you can find out what opportunities you can do to meet market needs and look for more opportunities.
4.3 Market Research
Market research is a component of business planning that can help businesses understand consumer desires regarding tastes and products needed. By doing market research you can find out the market segmentation that you will enter better.
4.4 Implementation in the Production Process
When you have successfully done the three things above, the next step is to implement the results of the research and planning that you have made, including implementing a business plan and monitoring business performance to ensure that the business develops according to plan.
4.5 Product Monitoring
Pay attention to how the products and services you make are well received or not by consumers. This aims to evaluate existing deficiencies and maximize sales.
4.6 Operational Management
Business planning is inseparable from operational management which includes the arrangement of alignment, use, and management of raw materials, and production processes, to the selection of quality human resources for the continuity of efficient business management.
4.7 Financial Planning
You need to calculate the estimated costs to start a business. The existence of this financial planning contributes to making it easier for you to find out the amount of capital, profit, loss, and other matters related to finance.
The last component of business planning is to evaluate. Evaluation is carried out to review the readiness of the plan that you made.
If the existing evaluation is deemed appropriate to produce positive results, then it is likely that the implementation process will go well and bring great benefits.
BFI friends, that's brief information about business planning. Making a strategy is not easy, but running a business without careful planning will make it difficult for you in the future.
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The 10 Key Components of a Business Plan
Written by Dave Lavinsky
Over the past 20+ years, we have helped over 1 million entrepreneurs and business owners write business plans. These plans have been used to raise funding and grow countless businesses.
Download our Ultimate Business Plan Template here >
From working with all these businesses, we know what the 10 elements in any great business plan. Providing a comprehensive assessment of each of these components is critical in attracting lenders, angel investors , venture capitalists or other equity investors.
Get started with a title page that includes your company name, logo and contact information, since interested readers must have a simple way to find and reach out to you. After that be sure to include the 10 parts of a business plan documented below.
What are the 10 Key Components of a Business Plan?
The 10 sections or elements of a business plan that you must include are as follows:
1. Executive Summary
The executive summary provides a succinct synopsis of the business plan, and highlights the key points raised within. It often includes the company’s mission statement and description of the products and services. It’s recommended by me and many experts including the Small Business Administration to write the executive summary last.
The executive summary must communicate to the prospective investor the size and scope of the market opportunity, the venture’s business and profitability model, and how the resources/skills/strategic positioning of the company’s management team make it uniquely qualified to execute the business plan. The executive summary must be compelling, easy-to-read, and no longer than 2-4 pages.
2. Company Analysis
This business plan section provides a strategic overview of the business and describes how the company is organized, what products and services it offers/will offer, and goes into further detail on the business’ unique qualifications in serving its target markets. As any good business plan template will point out, your company analysis should also give a snapshot of the company’s achievements to date, since the best indicator of future success are past accomplishments.
3. Industry or Market Analysis
This section evaluates the playing field in which the company will be competing, and includes well-structured answers to key market research questions such as the following:
- What are the sizes of the target market segments?
- What are the trends for the industry as a whole?
- With what other industries do your services compete?
To conduct this market research, do research online and leverage trade associations that often have the information you need.
4. Analysis of Customers
The customer analysis business plan section assesses the customer segment(s) that the company serves. In this section, the company must convey the needs of its target customers. It must then show how its products and services satisfy these needs to an extent that the customer will pay for them.
The following are examples of customer segments: moms, engaged couples, schools, online retailers, teens, baby boomers, business owners, etc.
As you can imagine, the customer segment(s) you choose will have a great impact on the type of business you operate as different segments often have different needs. Try to break out your target customers in terms of their demographic and psychographic profiles. With regards to demographics, including a discussion of the ages, genders, locations and income levels of the customers you seek to serve. With regards to psychographic variables, discuss whether your customers have any unique lifestyles, interests, opinions, attitudes and/or values that will help you market to them more effectively.
5. Analysis of Competition
All capable business plan writers discuss the competitive landscape of your business. This element of your plan must identify your direct and indirect competitors, assesses their strengths and weaknesses and delineate your company’s competitive advantages. It’s a crucial business plan section.
Direct competitors are those that provide the same product or service to the same customer. Indirect competitors are those who provide similar products or services. For example, the direct competitors to a pizza shop are other local pizza shops. Indirect competitors are other food options like supermarkets, delis, other restaurants, etc.
The first five components of your business plan provide an overview of the business opportunity and market research to support it. The remaining five business plan sections focus mainly on strategy, primarily the marketing, operational, financial and management strategies that your firm will employ.
6. Marketing, Sales & Product Plan
The marketing and sales plan component of your business plan details your strategy for penetrating the target markets. Key elements include the following:
- A description of the company’s desired strategic positioning
- Detailed descriptions of the company’s product and service offerings and potential product extensions
- Descriptions of the company’s desired image and branding strategy
- Descriptions of the company’s promotional strategies
- An overview of the company’s pricing strategies
- A description of current and potential strategic marketing partnerships/ alliances
7. Operations Strategy, Design and Development Plans
These sections detail the internal strategies for building the venture from concept to reality, and include answers to the following questions:
- What functions will be required to run the business?
- What milestones must be reached before the venture can be launched?
- How will quality be controlled?
8. Management Team
The management team section demonstrates that the company has the required human resources to be successful. The business plan must answer questions including:
- Who are the key management personnel and what are their backgrounds?
- What management additions will be required to make the business a success?
- Who are the other investors and/or shareholders, if any?
- Who comprises the Board of Directors and/or Board of Advisors?
- Who are the professional advisors (e.g., lawyer, accounting firm)?
9. Financial Plan
The financial plan involves the development of the company’s revenue and profitability model. These financial statements detail how you generate income and get paid from customers,. The financial plan includes detailed explanations of the key assumptions used in building the business plan model , sensitivity analysis on key revenue and cost variables, and description of comparable valuations for existing companies with similar business models.
One of the key purposes of your business plan is to determine the amount of capital the firm needs. The financial plan does this along with assessing the proposed use of these funds (e.g., equipment, working capital, labor expenses, insurance costs, etc.) and the expected future earnings. It includes Projected Income Statements, Balance Sheets (showing assets, liabilities and equity) and Cash Flow Statements, broken out quarterly for the first two years, and annually for years 1-5.
Importantly, all of the assumptions and projections in the financial plan must flow from and be supported by the descriptions and explanations offered in the other sections of the plan. The financial plan is where the entrepreneur communicates how he/she plans to “monetize” the overall vision for the new venture. Note that in addition to traditional debt and equity sources of startup and growth funding that require a business plan (bank loans, angel investors, venture capitalists, friends and family), you will probably also use other capital sources, such as credit cards and business credit, in growing your company.
The appendix is used to support the rest of the business plan. Every business plan should have a full set of financial projections in the appendix, with the summary of these financials in the executive summary and the financial plan. Other documentation that could appear in the appendix includes technical drawings, partnership and/or customer letters, expanded competitor reviews and/or customer lists.
Find additional business plan help articles here.
Expertly and comprehensively discussing these components in their business plan helps entrepreneurs to better understand their business opportunity and assists them in convincing investors that the opportunity may be right for them too.
In addition to ensuring you included the proper elements of a business plan when developing your plan always think about why you are uniquely qualified to succeed in your business. For example, is your team’s expertise something that’s unique and can ensure your success? Or is it marketing partnerships you have executed? Importantly, if you don’t have any unique success factors, think about what you can add to make your company unique. Doing so can dramatically improve your success. Also, whether you write it on a word processor or use business plan software , remember to update your plan at least annually. After several years, you should have several business plans you can review to see what worked and what didn’t. This should prove helpful as you create future plans for your company’s growth.
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