The 4 Basic Components of Every Business Plan

a table of employees discuss a business plan proposal

For entrepreneurs that are looking to create a business from scratch or in need of a business loan to expand their current business, a well-constructed business plan will be vital.

Business Plan Basics

This structured layout of goals will not only attract potential investors, it will also improve the likelihood of a loan. Plans help the business owner and their employees have a clear vision of the future of the company. They also show outside parties exactly where the business stands financially and competitively. For those preparing proposals, here is a look at four basic components that every business plan should include.

1. Executive Summary and Company Description

The first two components of the business plan are often the most important when it comes to engaging the reader. The executive summary should be considered a snapshot of the business itself, as well as a general outline of the business plan. This includes the primary goal of the business, such as organizing assets, getting all team members on the same page, or acquiring new funds. The company description is an extension of the summary, but they are two separate sections. The description covers the name of the company, its products and services, the location of the business, the overall goals, and how it differs from the competition.

2. Sales and Marketing

While there should be a section covering the service or product line in detail, it is the sales and marketing information that will exemplify how your proposed business will be successful. For future businesses, this begins with a penetration strategy. This discusses how to enter the market and how the company will grow despite competition. It will also include details such as how customers will be reached and where supplies are obtained. It even goes so far as to declare which staff members will be in charge of each of these aspects.

3. Funding Request

For companies that are in need of a loan or other funding, this section is the most important. Those that are drafting business plans will need exact figures backed up by hard data. This begins with a look at the currently available funds and exactly how much money the business requests. The plan should take the form of a five-year projection to include any future funds that may also be necessary. Every dollar loaned or invested should have a clearly specific purpose, such as renting a building, purchasing supplies, website development, hiring a new employee, insurance, or acquisitions.

4. Future Projections

Future projections are the last section of the business plan. For this section, those working on the plan will need to collect a rather large amount of data. This may include information about the competition, the area of the business, the industry, and any other outside factors affecting the company. After considering the data, business plan writers make future projects based this data. Projections should take into account the growth of the business, any rising costs, an expanding customer base, and anything else that will influence the growth or decline of the company. An appendix typically follows this section, which includes additional information like resumes and charts.

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