Start Your Business

9 Elements of an Effective Business Plan

Developing and sticking to a clear and detailed business plan can help lower the risk of not achieving your business goals.

9 Elements of an Effective Business Plan
 

Many small business owners focus first on the big idea, second on funding and third on … everything else. The foundation for any successful business, though, is a formally crafted, quantifiable and attainable business plan. Whether you're just starting out or have been running your business for years, be sure to include these nine components when developing your comprehensive plan.

1. Executive Summary and Company Description

The summary and description should explain your company and its mission, as well as any notable accomplishments. They should also succinctly outline near-term objectives and resources required to achieve those goals.

2. Solution Statement

Here's where you share why your business fulfills a need. Explain the challenges or problems faced by your client base (with supporting data or anecdotal evidence, if possible) and then outline the solutions provided by your business.

Tip: A "problem" can be as straightforward as: "This neighborhood doesn't have a good spot for children's haircuts, and my salon that serves the under-10 segment will change that."

3. Products and Services

Time to get down to the nitty-gritty details. Clearly describe the products and services your company provides. Include details about production and distribution, as well as any plans for future offerings.

4. Business Leadership/Personnel

If your business has multiple employees, use this section to outline the management structure and detail any future hiring needs. Provide brief bios of your leadership team, including relevant work experience.

5. Market Analysis

This section includes analysis and insights on your target market (demographics, income levels, etc.) as well as market trends, challenges and opportunities.

6. Competitive Audit

What other businesses exist in your space? Include relevant details (location, target customers, unique offerings). Use this section to demonstrate how your product, service or solution differentiates itself from competitors.

7. Goals and Objectives

What does the short-term future of your business look like? Write down what you hope to achieve (be specific) and how you plan to get there. Depending on your business model, these plans may include research and development objectives, distribution and marketing plans and your revenue model (aka "How this business will make money.")

Tip: Don't be afraid to get granular. Objectives without a detailed implementation strategy are still just dreams, so if your goal is to roll out one new product or gain four additional clients, provide the steps and actions you'll take to do so.

8. Financial Plan

If you're just launching your business, list all cash and non-cash assets (including sources of start-up funding) as well as anticipated short- and long-term liabilities, including any outstanding bills and loans.

If your business has been up and running for a year or longer, you should compile profit and loss information. This statement—which includes figures such as revenue, costs, operating expenses and income and tax information—should go back 3-5 years, if possible.

"Don't put together your plan alone. Don't sit in a room and do it by yourself and have nobody else review it. It's always great to have at least a few pairs of extra eyes on your business plan to validate it."—Brian Moran, founder and CEO of the business consultancy Brian Moran and Associates

9. Request

If your business plan includes a request for funding (from an individual, bank or organization), be clear and direct about your ask.

Once your plan is signed and sealed, however, the work isn't complete. Make sure your financial and legal advisors are familiar with the plan as well, and schedule regular times to revisit the plan and adapt if necessary.

Ready to Start Planning?

Visit SunTrust's Small Business Best Practices Guide for a straightforward checklist of best practices in six important areas of financial management, including starting your business.

This content does not constitute legal, tax, accounting, financial or investment advice. You are encouraged to consult with competent legal, tax, accounting, financial or investment professionals based on your specific circumstances. We do not make any warranties as to accuracy or completeness of this information, do not endorse any third-party companies, products, or services described here, and take no liability for your use of this information.

Related