According to Entrepreneur.com, an effective business plan is comprised of five major elements: executive summary, business overview, market analysis, financial assessment and management overview. Itself a guide useful in determining the direction of a business, a business plan also serves as a critical component in the decision-making process for individuals and companies interested in providing financial assistance to the business. Therefore, it is of the utmost importance that each element explicitly outline the ideas and goals of the business.
At the beginning of an effective business plan is a well-written executive summary. As an overview of the business venture, this section should make known all differences between the business in question and similar companies. Also, given that a business's uniqueness often weighs heavily on a potential investor or financial institution's decision to work with it, all existing competitive advantages should be expressed as well. Conversely, failure to engage a reader's interest in this section often results in a loss of interest in the rest of the business plan.
In addition to the legal name and address of the business, this section should include a detailed description of the nature of the business. Moreover, the description should be void of industry jargon, as readers may not be abreast on such terminology. Also, this section should describe how the business's competitive advantages will be implemented to better serve the current market.
Essentially an overview of a business's marketing plan, this section is only as reliable as the information gathered while researching the market a business is in. Likewise, in addition to describing the demand for the products or services being offered, this section should include a description of the current market in regard to its size, its viability and the trends therein.
Often viewed as an indicator of how committed business owners are to their business, this section should detail how financially involved they are in the company. A lack of personal financial involvement can be construed as doubt regarding the proposed success of the business.
Notwithstanding, if appropriate, the amount of financial assistance needed should be stated, in addition to a plan to repay it using projected income statements. Moreover, this section should include all related financial documentation such as annual income projections, a break-even worksheet, projected cash flow statements and a balance sheet.
This section is a general outline of the business's organizational structure including its type of legal entity. Also, this section should list the members of the business's management team complete with their credentials and an overview of all related experience carrying out the responsibilities associated with the positions they hold. This can be accomplished with the inclusion of resumes, biographies or a combination of the two.
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