What should business plans include

It's based on not only an analysis of the market but on highly targeted and competitive distribution, pricing and promotional strategies. For instance, even though there may be a sizable number of premium pilsner drinkers to form the total feasible market, you need to be able to reach them through your distribution network at a price point that's competitive, and then you have to let them know it's available and where they can buy it.

How effectively you can achieve your distribution, pricing and promotional goals determines the extent to which you will be able to garner market share. For a business plan, you must be able to estimate market share for the time period the plan will cover.

In order to project market share over the time frame of the business plan, you'll need to consider two factors:.

Defining the market is but one step in your analysis. With the information you've gained through market research, you need to develop strategies that will allow you to fulfill your objectives. When discussing market strategy, it's inevitable that positioning will be brought up. A company's positioning strategy is affected by a number of variables that are closely tied to the motivations and requirements of target customers within as well as the actions of primary competitors.

Once you've answered your strategic questions based on research of the market, you can then begin to develop your positioning strategy and illustrate that in your business plan. A positioning statement for a business plan doesn't have to be long or elaborate.

It should merely point out exactly how you want your product perceived by both customers and the competition. How you price your product is important because it will have a direct effect on the success of your business. Though pricing strategy and computations can be complex, the basic rules of pricing are straightforward:. Distribution includes the entire process of moving the product from the factory to the end user.

The type of distribution network you choose will depend upon the industry and the size of the market. A good way to make your decision is to analyze your competitors to determine the channels they are using, then decide whether to use the same type of channel or an alternative that may provide you with a strategic advantage.

As we've mentioned already, the distribution strategy you choose for your product will be based on several factors that include the channels being used by your competition, your pricing strategy and your own internal resources. With a distribution strategy formed, you must develop a promotion plan. The promotion strategy in its most basic form is the controlled distribution of communication designed to sell your product or service.

In order to accomplish this, the promotion strategy encompasses every marketing tool utilized in the communication effort. This includes:. Once the market has been researched and analyzed, conclusions need to be developed that will supply a quantitative outlook concerning the potential of the business.

The first financial projection within the business plan must be formed utilizing the information drawn from defining the market, positioning the product, pricing, distribution, and strategies for sales. The sales or revenue model charts the potential for the product, as well as the business, over a set period of time. Most business plans will project revenue for up to three years, although five-year projections are becoming increasingly popular among lenders.

When developing the revenue model for the business plan, the equation used to project sales is fairly simple. It consists of the total number of customers and the average revenue from each customer. In the equation, "T" represents the total number of people, "A" represents the average revenue per customer, and "S" represents the sales projection.

Using this equation, the annual sales for each year projected within the business plan can be developed. Of course, there are other factors that you'll need to evaluate from the revenue model. Since the revenue model is a table illustrating the source for all income, every segment of the target market that is treated differently must be accounted for.

In order to determine any differences, the various strategies utilized in order to sell the product have to be considered. As we've already mentioned, those strategies include distribution, pricing and promotion. The competitive analysis is a statement of the business strategy and how it relates to the competition.

The purpose of the competitive analysis is to determine the strengths and weaknesses of the competitors within your market, strategies that will provide you with a distinct advantage, the barriers that can be developed in order to prevent competition from entering your market, and any weaknesses that can be exploited within the product development cycle.

The first step in a competitor analysis is to identify the current and potential competition. There are essentially two ways you can identify competitors. The first is to look at the market from the customer's viewpoint and group all your competitors by the degree to which they contend for the buyer's dollar. The second method is to group competitors according to their various competitive strategies so you understand what motivates them.

Once you've grouped your competitors, you can start to analyze their strategies and identify the areas where they're most vulnerable. This can be done through an examination of your competitors' weaknesses and strengths.

A competitor's strengths and weaknesses are usually based on the presence and absence of key assets and skills needed to compete in the market. To determine just what constitutes a key asset or skill within an industry, David A. Aaker in his book, Developing Business Strategies , suggests concentrating your efforts in four areas:.

According to theory, the performance of a company within a market is directly related to the possession of key assets and skills. Therefore, an analysis of strong performers should reveal the causes behind such a successful track record. This analysis, in conjunction with an examination of unsuccessful companies and the reasons behind their failure, should provide a good idea of just what key assets and skills are needed to be successful within a given industry and market segment.

Through your competitor analysis, you will also have to create a marketing strategy that will generate an asset or skill competitors don't have, which will provide you with a distinct and enduring competitive advantage. Since competitive advantages are developed from key assets and skills, you should sit down and put together a competitive strength grid. This is a scale that lists all your major competitors or strategic groups based upon their applicable assets and skills and how your own company fits on this scale.

To put together a competitive strength grid, list all the key assets and skills down the left margin of a piece of paper. Along the top, write down two column headers: "weakness" and "strength. After you've finished, you'll be able to determine just where you stand in relation to the other firms competing in your industry.

Once you've established the key assets and skills necessary to succeed in this business and have defined your distinct competitive advantage, you need to communicate them in a strategic form that will attract market share as well as defend it.

Competitive strategies usually fall into these five areas:. Many of the factors leading to the formation of a strategy should already have been highlighted in previous sections, specifically in marketing strategies. Strategies primarily revolve around establishing the point of entry in the product life cycle and an endurable competitive advantage. As we've already discussed, this involves defining the elements that will set your product or service apart from your competitors or strategic groups.

You need to establish this competitive advantage clearly so the reader understands not only how you will accomplish your goals, but also why your strategy will work. The purpose of the design and development plan section is to provide investors with a description of the product's design, chart its development within the context of production, marketing and the company itself, and create a development budget that will enable the company to reach its goals.

Each of these elements needs to be examined from the funding of the plan to the point where the business begins to experience a continuous income.

Although these elements will differ in nature concerning their content, each will be based on structure and goals. The first step in the development process is setting goals for the overall development plan. From your analysis of the market and competition, most of the product, market and organizational development goals will be readily apparent.

Each goal you define should have certain characteristics. Your goals should be quantifiable in order to set up time lines, directed so they relate to the success of the business, consequential so they have impact upon the company, and feasible so that they aren't beyond the bounds of actual completion.

Goals for product development should center on the technical as well as the marketing aspects of the product so that you have a focused outline from which the development team can work. For example, a goal for product development of a microbrewed beer might be "Produce recipe for premium lager beer" or "Create packaging for premium lager beer.

This expertise usually needs to be present in areas of key assets that provide a competitive advantage. Without the necessary expertise, the chances of bringing a product successfully to market diminish. With your goals set and expertise in place, you need to form a set of procedural tasks or work assignments for each area of the development plan.

Procedures will have to be developed for product development, market development, and organization development. In some cases, product and organization can be combined if the list of procedures is short enough. Procedures should include how resources will be allocated, who is in charge of accomplishing each goal, and how everything will interact.

For example, to produce a recipe for a premium lager beer, you would need to do the following:. The development of procedures provides a list of work assignments that need to be accomplished, but one thing it doesn't provide are the stages of development that coordinate the work assignments within the overall development plan.

To do this, you first need to amend the work assignments created in the procedures section so that all the individual work elements are accounted for in the development plan.

The next stage involves setting deliverable dates for components as well as the finished product for testing purposes. There are primarily three steps you need to go through before the product is ready for final delivery:. This is one of the most important elements in the development plan.

Scheduling includes all of the key work elements as well as the stages the product must pass through before customer delivery. It should also be tied to the development budget so that expenses can be tracked. But its main purpose is to establish time frames for completion of all work assignments and juxtapose them within the stages through which the product must pass.

When producing the schedule, provide a column for each procedural task, how long it takes, start date and stop date. If you want to provide a number for each task, include a column in the schedule for the task number. That leads us into a discussion of the development budget. When forming your development budget, you need to take into account all the expenses required to design the product and to take it from prototype to production.

As we mentioned already, the company has to have the proper expertise in key areas to succeed; however, not every company will start a business with the expertise required in every key area. Therefore, the proper personnel have to be recruited, integrated into the development process, and managed so that everyone forms a team focused on the achievement of the development goals.

Before you begin recruiting, however, you should determine which areas within the development process will require the addition of personnel. This can be done by reviewing the goals of your development plan to establish key areas that need attention. After you have an idea of the positions that need to be filled, you should produce a job description and job specification.

Once you've hired the proper personnel, you need to integrate them into the development process by assigning tasks from the work assignments you've developed. Finally, the whole team needs to know what their role is within the company and how each interrelates with every position within the development team. In order to do this, you should develop an organizational chart for your development team.

Finally, the risks involved in developing the product should be assessed and a plan developed to address each one. The risks during the development stage will usually center on technical development of the product, marketing, personnel requirements, and financial problems.

By identifying and addressing each of the perceived risks during the development period, you will allay some of your major fears concerning the project and those of investors as well. The operations and management plan is designed to describe just how the business functions on a continuing basis.

The operations plan will highlight the logistics of the organization such as the various responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operations of the business. In fact, within the operations plan you'll develop the next set of financial tables that will supply the foundation for the "Financial Components" section.

There are two areas that need to be accounted for when planning the operations of your company. The first area is the organizational structure of the company, and the second is the expense and capital requirements associated with its operation.

The organizational structure of the company is an essential element within a business plan because it provides a basis from which to project operating expenses. Download our business plan template DOC, K. My New Business Northern Ireland business support finder Sample templates, forms, letters, policies and checklists Licence finder Find a case study Do it online. Write a business plan: step-by-step What a business plan should include.

Your plan should include: An executive summary - this is an overview of the business you want to start. It's vital. Many lenders and investors make judgments about your business based on this section of the plan alone - read business plan executive summary. Your vision and business idea - a short description of who you are, what you plan to sell or offer, why and to whom, your business goals and key selling points - see your business, its products and services.

Learn more about target marketing in this article. A good business plan will identify the target market segments and then provide some data to indicate how fast each segment is growing. When identifying target markets, a classic method is to use the TAM, SAM, and SOM breakdown to look at market sizes from a top-down approach as well as a bottom-up approach.

Once you have identified your key market segments, you should discuss the trends for these markets. Are they growing or shrinking? This section is really only required for enterprise large companies that have very few customers.

Most small businesses and typical startups can skip this and move on. But if you are selling to other businesses B2B , you may have a few key customers that are critical to the success of your business, or a handful of important customers that are trend leaders in your space. Immediately following your target market section, you should describe your competition.

What are your competitive advantages over the competition? Most business plans include market research and compare their features against their competition using a SWOT analysis. The most important thing to illustrate in this section of your business plan is how your solution is different or better than other offerings that a potential customer might consider. Investors will want to know what advantages you have over the competition and how you plan on differentiating yourself. The simple fact is that all businesses have competition.

Instead, Ford was competing against other modes of transportation—horses, bikes, trains, and walking. On the surface, none of these things look like real direct competition, but they were how people were solving their transportation problems at that time.

All entrepreneurs have a vision of where they want to take the business in the future if they are successful. The focus should be on bringing your first products and services to market. The opportunity section of your business plan should provide enough information and data to prove that there is a need for your business and that you understand how to position yourself in a given market.

The marketing and sales plan section of your business plan details how you plan to reach your target market segments also called target marketing , how you plan on selling to those target markets, what your pricing plan is, and what types of activities and partnerships you need to make your business a success.

Before you even think about writing your marketing plan, you must have your target market well-defined and have your buyer persona s fleshed out. Without truly understanding who you are marketing to, a marketing plan will have little value. The first part of your marketing and sales plan is your positioning statement.

Positioning is how you will try and present your company to your customers. Are you the low-price solution, or are you the premium, luxury brand in your market? Before you start working on your positioning statement, you should take a little time to evaluate the current market and answer the following questions:.

You just need to explain where your company sits within the competitive landscape and what your core value proposition is that differentiates your company from the alternatives that a customer might consider. For [target market description] who [target market need], [this product] [how it meets the need]. Unlike [key competition], it [most important distinguishing feature].

For example, the positioning statement for LivePlan, our business planning product, is:. Unlike [name omitted], LivePlan creates a real business plan, with real insights—not just cookie-cutter, fill-in-the-blank templates.

Once you know what your overall positioning strategy is, you can move on to pricing. Your positioning strategy will often be a major driver of how you price your offerings. Price sends a very strong message to consumers and can be an important tool to communicate your positioning to consumers.

If you are offering a premium product, a premium price will quickly communicate that message to consumers. Deciding on your price can feel more like an art than a science, but there are some basic rules that you should follow:. You can approach your pricing strategy in different ways. Here are a few ways that you can think about your pricing and come up with the right strategy for your business:. A promotion plan details how you plan on communicating with your prospects and customers.

If you are selling a product, the packaging of that product is critical. If you have images of your packaging, including those in your business plan is always a good idea.

Your business plan should include an overview of the kinds of advertising you plan to spend money on. Will you be advertising online? Or perhaps in traditional, offline media? A key component to your advertising plan is your plan for measuring the success of your advertising. Getting the media to cover you—PR —can be a great way to reach your customers. Getting a prominent review of your product or service can give you the exposure you need to grow your business. If public relations is part of your promotional strategy, detail your plans here.

Content marketing is what Bplans is all about. Content marketing is about teaching and educating your prospects on topics that they are interested in, not just on the features and benefits that you offer. More and more, prospects are using social media to learn about companies and to find out how responsive they are.

As part of your marketing plan, you may rely on working closely with another company in the form of a partnership. This partnership may help provide access to a target market segment for your company while allowing your partner to offer a new product or service to their customers. The operations section is how your business works. Depending on the type of business you are starting, you may or may not need the following sections. Only include what you need and remove everything else.

If you are sourcing products from manufacturers overseas, investors are going to want to know about your progress working with these suppliers. If your business is going to be delivering products to your customers, you should describe your plans for shipping your products.

At a high level, you will want to describe how your technology works. Remember, your goal is to keep your business plan as short as possible, so too much detail here could easily make your plan much too long.

For product companies, a distribution plan is an important part of the complete business plan. For the most part, service companies can skip this piece and move on. Distribution is how you will get your product into the hands of your customers.

Every industry has different distribution channels and the best way to create your distribution plan is to interview others in your industry to figure out what their distribution model is.

You could consider passing the savings of selling directly on to your customers or you could simply increase your profit margins. You will still need to cover the logistics of how you will get your products to your customers from your warehouse, but a direct distribution model is usually fairly simple. Instead, they prefer to buy through large distribution companies that aggregate products from lots of suppliers and then make that inventory available to retailers to purchase.

Of course, these distributors take a percentage of the sales that pass through their warehouses. They often have relationships with retailers and distributors and work to sell your products into the appropriate channel.

A good example of this is car parts suppliers. While large auto manufacturers do build large components of their cars, they also purchase common parts from third-party vendors and incorporate those parts into the finished vehicle. For example, it is very common to both sell direct and via distributors—you can purchase an iPhone directly from Apple, or go into a Target store and get one there. A business plan is only a document on paper without a real path to get the work done, complete with a schedule, defined roles, and key responsibilities.

Investors will want to see that you understand what needs to happen to make your plans a reality and that you are working on a realistic schedule. Start with a quick review of your milestones. Milestones are planned major goals. For example, if you are producing a medical device, you will have milestones associated with clinical testing and government approval processes. If you are producing a consumer product, you may have milestones associated with prototypes, finding manufacturers, and first-order receipt.

While milestones look forward, you will also want to take a look back at major accomplishments that you have already had. Traction could be some initial sales, a successful pilot program, or a significant partnership. Sharing this proof that your company is more than just an idea—that it has actual evidence that it is going to be a success—can be critically important to landing the money you need to grow your business. In addition to milestones and traction, your business plan should detail the key metrics that you will be watching as your business gets off the ground.

Metrics are the numbers that you watch on a regular basis to judge the health of your business. They are the drivers of growth for your business model and your financial plan. For example, a restaurant may pay special attention to the number of table turns they have on an average night and the ratio of drink sales to food sales.

An online software company might look at churn rates the percentage of customers that cancel and new signups. Every business will have key metrics that it watches to monitor growth and spot trouble early, and your business plan should detail the key metrics that you will be tracking in your business. Another way to think about key assumptions is to think about risk. What risks are you taking with your business?

If you are relying on online advertising as a major promotional channel, you are making assumptions about the costs of that advertising and the percentage of ad viewers that will actually make a purchase.

Knowing what your assumptions are as you start a business can make the difference between business success and business failure. When you recognize your assumptions, you can set out to prove that your assumptions are correct. The more that you can minimize your assumptions, the more likely it is that your business will succeed.

This section covers the functionality of your business.