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Small Business Secret #4 – The 10 Chapter Elements Every Business Plan Must Have to Be Successful
One of the ten most important documents you must have in creating a successful small business, and in fact any business is the Business Plan. The Business Plan is the overall summary document that describes how your business will work, how people will invest into your business and how the business will operate.
A successful Business Plan will contain 10 key Chapter elements and they are –
1. Company Description
2. Business Concept
3. Management Team
4. Market Analysis
5. Marketing Strategy
6. Operations
7. Investment Analysis
8. Growth Plan/Exit Strategy
9. Financial Projections
10. Business Mastermind Group Advisers
One element that should also be in your business plan that is not in the list of 10 key Elements is the Executive Summary. All documents that have some substance should have an executive summary that outlines a summary of the contents of the document. As this should be in every document you create, I felt that it was not a Key Chapter element and as such that is why it is not in my list of 10 Key Chapter Elements.
Chapter 1 – Company Description
The company description is the first chapter of 10 for your business plan. The role of the Company Description is to define the organization, who it will be owned by, the capitalization of the business, the location of the business and generally what the business will do.
Chapter 1 to a certain degree is a summary of other chapters within the business plan like the capitalization information but it also carries unique information like, where the business will operate from.
Chapter 2 – Business Concept
The Business Concept chapter is the vision side of your business plan. This is where you get to put your dream down on paper. You will define in this chapter information like the concept design of your business, an explanation of what your business will look like, what sort of image it is going to have, what your customers will see when they walk up the street and or into your front door. It will also define exactly what your business is going to do and how you are going to do it.
In the business concept chapter you may like to put some samples in this chapter as to what you will be selling or offering. For example if you were opening a restaurant then you might put a sample menu into this chapter as a sub chapter or if you were cleaning dogs then you might put in your sales brochure.
Chapter 3 – Management Team
The Management Team sets out who is going to manage your business, who the key players are and what their experience is. This chapter alone can make the difference in securing considerable money, if you are using the business plan to get others to invest in your venture. If you can demonstrate in this chapter that the people you are going to enlist to help manage the business have solid experience in your target industry then investors or banks or private equity groups are more likely to back you financially.
You should also include in this section any lawyer approved management agreements and confidentiality agreements.
Chapter 4 – Market Analysis
The Market Analysis is specifically focused on talking about the industry in which you will be operating. This chapter should included lots of facts and figures from reliable and verifiable sources. The sources of this information could include information from Government agencies that provide statistics, information from the local chamber of commerce or better business bureau or your industry association.
All the fact and figures you provide in your business plan must be verifiable. If you are hoping to garner money from private equity groups or financial institutions, they have teams of people whose job it is to go over Business Plans and to confirm that the facts and figures are in fact true and not made up. If they find that you have used dodgy figures or that you have made them up, then organizations will very quickly identify that and reject your application for financing.
One other way you may gather market information is by doing your own surveys of your intended market. Make sure though that if you are going to use these results that you keep the raw data and make it available to your investors. If you do not do this, they will question the validity of your findings. If they can take your raw results and verify what you have said then your survey results will be given a higher weighting during an investment review.
Chapter 5 – Marketing Strategy
The Marketing Strategy sets out what marketing and advertising you are going to do, to get the required business to meet your financial projections. This section will include how you are going to build that all important customer database, what mediums you will use to market your business. What marketing mix you will use to keep your customers coming back time and time again. In this chapter you will also address issues such as your Community and Charity Involvement plus who will be responsible for your public relations management.
Chapter 6 – Operations Chapter
The Operations Chapter looks at how your business will operate on a day-to-day basis. Issues to be included are how many staff you will employ, what positions they will hold, what training will they get, who your suppliers will be, an alternative list of suppliers if something should happen, the daily operations that will need to occur, what administrative systems you will put in place and finally the management controls you will put in place to ensure everything runs smoothly.
Chapter 7 – Investment Analysis
This is an important area for those people or institutions who will be investing into your business, cause essentially they want to know what they are going to get for their money. The Investment Analysis chapter will outline the full investment strategy, the investment types, the amount of the investment, the percentage ownership value for the investor, the investment roles and the Return on Investment.
The other area that I recommend that be included is the Equity analysis showing how Cash Distributions will be undertaken. From experience this area alone causes a lot of concern for investors and is often a sticking point when profits are being divvied out.
Chapter 8 – Growth Plan/Exit Strategy
This section is as important a chapter as the Investment Analysis Chapter. Knowing how you are going to expand your business and exit the business is your number one strategy and issue you need to address before starting the business. More so, you also must have it clearly articulated how your investors can exit the investment in your organization and also how you will expand investment options for other investors. For example, if you want to expand and to bring on more investment capital how will that affect the equity of the existing investors?
Each of these issues are ones that can often cause clear concerns and divisions with the investors in your organization and it is always best to have these issues addressed prior to the establishment of your business rather than once it has been started.
Chapter 9 – Financial Projections
Everybody likes this chapter as it defines what sort of money everyone is going to make. This section should include all project sources and how the cash will be used, it should define where all capital acquisitions will becoming from, sales projections, expenditure projections, labour projections, cash flow projections (the most important issue of all) and detailed summary statement of income for 1 year, 2 years and 5 years.
One of the other areas I also like to see at this point is a sample Chart of Accounts for the business. Often what is given in the Business Plan at this point is simply the same simple Chart of Accounts that every business uses rather than the one that is most appropriate for your industry. Getting a clearly defined Chart of Account at the start will tell investors whether you really understand how to invest and if you understand the industry you are going to be operating in.
Chapter 10 - Business Mastermind Group Advisers
Your Business Mastermind Group of Advisers is your 10 people who you will use, that are independent of your business to help your build your enterprise. These 10 people are usually made up of accountants, lawyers, industry specialists, marketing specialist and so forth. It is important to list this group in this chapter as equity investors or banks and financial institutions will look on these advisers and if they see people on your Mastermind Group that are expert specialists in the area of business you are entering then they will know that you have done your homework and if you are in trouble you will have people you can rely on to help you.
I like many people when I built my first small business, I did it without writing a business plan and that made life incredibly difficult for the first few years because I didn't have focus. As I have built more and more companies, and created their associated business plans, I have found that it is easier to build a successful enterprise once you have that information.
Without a business plan you will never truly achieve your goals, because you will not have clearly articulated what they are for that business. Making money is not an acceptable goal in business, you need to know where you want your business to go and what you want to achieve from that business.
To finish off, I would like to take a moment to summarize the ten elements every business plan must have –
1. Company Description
2. Business Concept
3. Management Team
4. Market Analysis
5. Marketing Strategy
6. Operations
7. Investment Analysis
8. Growth Plan/Exit Strategy
9. Financial Projections
10. Business Mastermind Group Advisers
About the Author: Would you like to learn more on developing your own Small Business or how to implement the Thirteen Secret Steps all millionaires know in the path to becoming an obscenely wealth and successful person. Then find out how with a copy of our Think and Grow Rich book by Napoleon Hill and our audio package. Check out our Meditation Music to help you master this important program.
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