Essential Components of a Solid Business Plan
No one builds a building without creating a blueprint first. The same thing should apply to your business too. If you want to give your business the best chance of success, you need a roadmap to know where you're heading, so that you can prioritise accordingly and spot challenges before they crop up.
In short, a solid business plan should help you:
- Make better decisions by having the right objectives as benchmarks.
- Engage higher-quality talent by sharing your business plan with them.
- Obtain external investment or funding.
But how do you create a business plan? In this article, we break down the five essential areas that every solid business plan should have as well as discuss why they're important and what you should consider for each one of them.
Component #1 - Business and management profile
This section outlines a high-level view of your business. You will need to list out key details of your business, such as:
- Products and/or services you offer.
- Your business' legal structure.
- Your key management.
This section not only explains the nature of your business but also where it is heading. It helps set the tone for the rest of your plan and create a general path for your business goals.
This means you should also include and explain:
- Your general strategic direction.
- Your short, medium, and long-term goals for the business.
Component #2 - Market opportunity and analysis
As the previous section focuses on your business, this section will focus on something just as important - the market. You will need to understand the market your business is operating in (or would be operating in). This includes current trends, projected growths, and the competitive landscape you are in.
Key questions to answer here are:
- What problems do my products or services solve?
- Who is my target market?
- What is the outlook for my target market - is it a growing or mature market?
- How are my products or services positioned relative to my competitors? A SWOT analysis will prove useful here.
- How is my business positioned in today's current marketing situation? E.g., do I have the right digital tools that will help execute my marketing plan?
Component #3 - Marketing plan
Building from the previous section, this section helps you consider how you'll reach your target market. This includes your customer acquisition strategy, relevant sales channels, how you plan to leverage your key competitive advantages to win over customers, and most importantly, the metrics you track.
For instance, a key metric that all marketing plans must track is your cost per acquisition (CPA). This refers to the dollar amount spent to acquire a single new customer. This is especially important if you are a start-up that has yet to gain a foothold in your market, as customer acquisition costs often exceed business revenue in the earlier stages. That said, established businesses should not neglect this metric as well.
For more information on making sure your marketing plan is "future proof", check out 5 useful tips in this article.
Component #4 - Cash flow planning
This section will help you get a better handle on the "lifeblood" of your business - your cash flow. The key objectives in this section are to get an estimate of how your future cash flow will look like as well as determine your need for a business loan and how much you'll need.
The first objective is Business Financial Management tools. Like this new one by OCBC, these tools can help you manage business financials easily with features like smart cash flow forecasting. Don't forget to include the assumptions used in the projections, such as revenue growth rate and gross profit margin.
The analysis in the first objective will help you determine whether your business can benefit from a business loan. It will also give you some clarity as to what type of loans will suit your business and its size best.
If you're unsure of getting funding for expansions, day-to-day working capital needs or more, you can always use information from the previous sections to help ensure that your loan will directly contribute to your business objectives.
And if you determine that your business will indeed benefit from a business loan, make sure to include the future monthly instalment calculations into your cash flow analysis.
Component #5 - Human Resources/Talent
At its core, an organisation can only be as good as its people. This makes human resource management and talent retention a crucial component of a successful business.
At the same time, staffing costs are one of the largest expenses for businesses. No business plan can be complete without laying out some broad frameworks in this area.
That is what this section serves. You will need to consider key items such as the number of staff â€” categorised into full-time, part-time, and contract - and how they impact your cash flow. You may also want to include details on pertinent employment contract terms, especially if they have an effect on cash flow.
This section should not only focus on the present but also the future. Spend some time and think about the requirements for future human resources.
Ask yourself this - If you are to achieve your business objectives (as stated in the first section), what level of staffing will you need and how can you effectively manage this level of staffing? One potential answer to easy staff management could be digital HR solutions like Talenox.
Get the financing help you need with OCBC Business Banking now
At OCBC we don't just believe in helping our SME clients in financing. We believe we should also provide the knowledge to help them run their business more effectively.
No matter what your business needs are, we have a wide range of business loans for you. Apply online or chat with one of our friendly staff today.
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