How to Structure Your Business Plan

Learning how to structure your business plan is one of the first skills every entrepreneur must learn.

The journey for every successful entrepreneur starts from this single document called the business plan.

This is not just a document. It is a guiding manuscript, an outline, a textual description of your idea, product concept, and startup vision.

It provides the readers an insight into the goals you are aspiring to achieve, how you are going to achieve them. And if they will be sustainable for future growth and profitability.

It will highlight your startup venture’s operational aspects, its functional requirements, and organizational breakdown.

Using it as a supporting document for strategic decision-making, it helps you showcase your startup venture to prospective investors.

The business plan also aids your pitch for the necessary funds needed to start and fuel the project.

In short, a well-drafted and comprehensive business plan can significantly improve your chances of raising investor capital. And becoming successful in your startup business.

Structuring an Effective Business Plan

Are you starting a new company, raising money for your entrepreneurial venture? Or do you want to expand your existing business?

Then you need to have a business plan.

No matter what the immediate use is for your business plan, here are the essential components that must be included.

That’s how you can make your business plan professional and effective for you, your audience, and your business.

1. Cover Page

It may sound small, but it says a lot about your professional approach as an entrepreneur.

Write down the name of the company, your (entrepreneur) name, and contact information.

2. Table of Contents

A convenient tool that is added for the readers to scan through the contents of the plan and jump to the exact section they are interested in.

3. Executive Summary

A business plan starts with an executive summary. This is a brief overview of the company and your plans.

The summary should be limited to one to three pages only, making it easier for someone to go through the text in very little time.

The purpose is to make the reader interested in the concept just by reading the executive summary.

It should be compelling, engaging and highlight the most attractive aspects of the document to keep the audience eager to know more.

In many cases, investors would first ask you only for the executive summary of the business plan.

If they find it prospectively attractive and you are able to ignite the spark, only then will they ask for the complete plan or a pitch deck. Or any other detailed information in the days to come.

Although it is the first part of the business plan, it is often easier to write it after completing the rest of the plan.

The executive summary should introduce your company, explain what it does, and lay out the basic purpose of your plan.

Everything should be written in a concise and precise manner. This is why you must take the time to understand how to structure your business plan.

Essential Components

• Name of the Company
• Business Overview – One-line overview of what the company does. You can consider this your value proposition.
• Problem – One or two lines about the need of the customer or the market problem you are targeting to solve with your offering.
• Solution – Concisely describe the product or service. Explain how it will solve the problem.
• Target Market – Let the audience know about your target segment or prospective customer. Mention the size of the target market to spark real attention.
• Competition – Is your specific need or problem being addressed by anyone else in the market currently? Mention substitutes and alternatives.
• Management and Team – Give a brief overview of your team members and what makes them the best people for the job.
• Financial Summary – Business is all about making money. Do not leave this portion out of your executive summary.
• Funding Requirements: If you need to raise capital for your project, make sure to add exactly what you are looking for from the investors. In general, it is best to avoid mentioning any terms or conditions at this point. You can eliminate this portion if you are not pitching for funds. Though you still need to understand your financial needs and how they will be met.
• Milestones and Traction – Every project should be divided into steps, goals, or future milestones. If you have already made some progress, mention it in the summary. If you have successfully done a pilot project or launched a prototype do mention its statistics. Understand the importance of numbers when learning how to structure your business plan.

 

Keep in mind that in fundraising, storytelling is everything. In this regard for a winning pitch deck to help you here, take a look at the template created by Silicon Valley legend, Peter Thiel (see it here) that I recently covered. Thiel was the first angel investor in Facebook with a $500K check that turned into more than $1 billion in cash.

Remember to unlock the pitch deck template that is being used by founders around the world to raise millions below.

4. Market Opportunity

The next section of the business plan is the market opportunity or niche. This includes the customer need or problem you want to solve, your solution, your customer, and the market itself.

This section is strategically the most important of the business plan and contains the marketing aspects of this proposition.

The key is to make your business stand out and differentiate from the crowd.

Readers who reach this portion have a basic idea of what your company does, (they have been through the executive summary).

But in this section, they will be further enlightened with detailed information on every aspect.

Essential Components:

The Problem

This section should start with the need or problem that exists in a market.

Highlight the primary focus of the issue or difficulty the customers are facing. Explain their pain and discomfort.

This should be followed by ways they are currently solving the problem.

And why these alternatives need to be substituted or taken over by your offering.

Make sure to mention their reason for not being the best. For example, the price, the usage, availability, or any other aspect.

The problem description is critical for a good business plan because without it you cannot offer a good solution.

The Solution

Now is the part where you describe your solution, product, or service. What it is and how it will be offered.

Highlight how it will solve the given problem effectively and better than the competitive offerings.

The Target Market

Let the reader know whom you are targeting. Pinpoint your target segments and describe their characteristics.

Investors want to know who will be buying your product and why.

The Competition

Immediately following your target market section, you should describe your competition. List down big names, if any.

Create a chart to show the market shares of competitors.

To make your market opportunity section more compelling, it is best to add supporting documents.

These may include market research, customer surveys, segment analysis, and even SWOT reports.

The critical element of the success of this section is to make your offering stand out and differentiate from the competition.

You need to focus on your competitive advantage and highlight it to the audience.

Future Products and Services

Enlighten the readers about your future goals and expansion vision. Investors are interested to know the long-term growth and profitability potential of your business venture.

5. Execution

The next section of your business plan is all about the execution.

It encompasses your plan of utilizing the available market opportunity and making a business out of it.

This section highlights the operational, functional, and sales aspects of your business.

When working out how to structure your business plan, make sure to include them.

Essential Components:

Marketing and Sales Execution

Make your audience understand how you plan to reach out to your potential customers.

Explain your selling mediums, distribution, and pricing mechanisms.

It is important that you mention if there is a need for making strategic partnerships, alliances, and other integration channels to execute your plan.

Four Ps of Marketing

• Positioning: Describe your plan for placing your product in the competitive market. Luxury, standard, low priced, accessible, local, or any other aspect that you want to identify your offering for.
• Pricing: Let the audience know how you are going to price your product or service. It will depend upon your position strategy as well.
• Promotion: Briefly but explicitly provide your readers an insight into your promotional campaigns. Highlight the communication and advertising channels you are going to adopt. Do not forget to mention your promotion costs and how you plan to create profits from them.
• Place: List down the areas or geographic locations your offering will be available to the potential target market. Also highlight your channels of distribution, like whether you will be retailing, franchising, dropshipping, etc.

Functions and Operations

No business can run without an operational plan. It is the administrative, managerial and functional breakdown of your business activities.

To the reader, you need to provide information about your mode of operations. If you are a manufacturer or even a service provider let them know about your facility, technology, and production capacity.

Highlight your sourcing, supplies, and fulfillment capabilities. Explain your organizational functions, departmentalization, and chart of systems.

6. The Company, the Management, and the Team

The investors are very much interested to know about your team.

They want to know who will be running the show and how. Human capital is much more critical than any idea itself.

Essential Components:

Team Members

In this section, you can highlight the current team members, their roles, job responsibilities, and areas of expertise.

If you need to hire new people, also mention details about their required qualifications and job descriptions. And the value they would be adding to your company.

Organizational Chart

Provide an organizational chart of the company for a better picture of your structure and internal communication.

Company Overview

Here you can add mission and vision statements, intellectual property or patents, the legal structure of the company, and ownership.

Also add the place of business, and history if any. As well as notable highlights about your accomplishments so far.

7. The Financials

Investors are interested to know your financial status in the current scenario and the future.

Many entrepreneurs find this section the most intimidating one. Drafting and analyzing business financials is not easy for everyone.

You can ask an expert to prepare them for you. Or if you have the financial know-how you can do them yourself.

In either case, your involvement in every step as an entrepreneur is a must.

Once you have built a solid financial forecast for your startup, you need to present it in the most understandable way for your audience.

For a typical startup business plan, you need monthly sales and revenue forecasts for the first 12 months.

The rest can be annual projections for 3-5 years.

While detailed sheets can be attached in the Appendix section, brief descriptions of the following should be provided.

When understanding how to structure your business plan, make sure to include them.

Essential Components:

Sales Forecast

Mention the assumptions you made and why they are valid. Note any authoritative resources you have used.

Come up with charts and graphs to illustrate your projections in a much easier-to-comprehend manner.

Salary and Expenses Forecasts

Highlight your compensation and salary forecasts for the upcoming years. Estimated changes in expenses should also be projected.

Income Statement

Things this forecasted statement should highlight are revenue, COGS, gross margin, and operating expenses.

Also add operating income, debt payments (if any), taxes payable, total expenses, and net profit.

Cash flow Statement

Many naïve entrepreneurs confuse this statement with an income statement. The two are, however, very different.

Serving a totally different purpose, the cash flow statement helps understand the movement of cash or money in and out of the business.

It highlights the forecast of your monthly cash usage and needs.

Balance Sheet

This report is important to understand the financial health of the company. It showcases the assets versus the liabilities and equity of the business.

Usage of Funds

If you are raising funds through this business plan, then you need to draft a plan of action for the usage of these funds as well.

8. Appendix

The last section of the business plan is an additional informational chapter that contains detailed reports, supporting documents, and resources.

Summary

Business planning is a critical process that helps you in validating your idea, setting future goals, managing functions and successfully gaining investor attention.

Many first-time entrepreneurs underestimate the importance of this strategic document for the business’s future success.

Considering it as a trivial piece of paper that is not worth your time or effort can be a big mistake on your part.

Starting any company without proper planning is heralding a disaster for yourself.

You simply cannot jump into the industry and start running a company without direction and focus.

You need to do your research, analyze the market, create a plan of action and execute professionally.

And, learning how to structure your business plan is a great first step in the right direction.

You may find interesting as well our free library of business templates. There you will find every single template you will need when building and scaling your business completely for free. See it here.