What are the 4 components of a business plan?

Having a thoughtful business plan can help a Mesquite business owner stay focused on company goals and objectives, yet according to a recent Wells Fargo survey, only about 33 percent of local small business owners said they have a formal, written business plan.

Even though many business owners have ideas for plans in their heads, those who put plans in writing are more optimistic about the coming year. In a recent survey, business owners with formal plans were more likely to say that in the next 12 months they planned to add jobs at their companies, expected revenues to increase, anticipated increasing their capital spending and intended to apply for new credit.

Why do business owners with written plans have more optimism? While there may be many reasons, from our experience working with small businesses in Mesquite, business owners in general benefit from creating a formal plan because it serves as the foundation for long-term success. It can help you prioritize how to spend your time and money, and set effective business goals.

The challenge for many business owners is getting started. To help, we’ve identified four critical components that should be in any business plan. Here are the key areas we recommend for every plan:

•Company overview – The overview should provide a description of the business, including what products or services you sell. It should outline your professional or industry experience, the history of your business, and your business structure, including staffing and management roles and responsibilities. In addition, the overview should house a detailed marketing plan.

•Analysis – Competitive intelligence and customer insights are a key part of developing your business plan. In this section, you should include data on competitors within your industry. It’s also a good place to explore prospective customers that might be a fit for your products and services, and define how you intend to reach them. Building this information into your business plan is intended to provide you with a competitive advantage, and helps you to fine-tune your marketing efforts and maximize sales.

•Financial Data – A business plan should include a financial data section. It’s the place to outline your starting balances, how you plan to make money and sales forecasts. Keeping financial information updated and organized can be a challenge for many business owners, yet an essential process to more easily plan for growth, manage cash flow and prepare for unexpected expenses.

•Executive Summary – This part of the plan is often considered the most important when seeking financing. This section provides a high-level summary of the business, and recaps the key features of your business plan in one page or less, including who you are, what you sell, and who you sell to, and a financial summary.

To help simplify the business planning process, Wells Fargo recently introduced a new, comprehensive resource on WellsFargoWorks.com: The Business Plan Center. This new, complimentary offering includes two new tools:

•The Business Plan Tool is step-by-step guide for creating your own written business plan;

•The Competitive Intelligence Tool provides business owners with up-to-date insight on competitors in the market.

The Business Plan Center delivers an integrated learning experience, and is available to all business owners – both customers and non-customers. It is a natural extension of the support we currently offer through Wells Fargo Works for Small BusinessSM.

Developing your business plan isn’t a one-time process. It requires regular maintenance as your business evolves and your needs change. Every business owner will experience successes and challenges on their entrepreneurship journey, and revising your business plan during these times will help you celebrate accomplishments, establish new goals, and plan for the future based on lessons learned.As a business owner, your focus is on running the business, and time away from day-to-day tasks is limited. Yet we’ve learned from business owners we serve that taking time to develop and maintain a streamlined business plan can save you time and better manage your money in the long run.

Lester Romero is the small business manager for Wells Fargo in Mesquite. For information about Wells Fargo, call 702-345-3900 or visit our branch at 611 W. Mesquite Blvd.

A well thought out business plan is critical to the success of any new venture. The business plan not only identifies the goals of your business, but it also will outline the plans to execute those goals. It tells you both where you want to go as well as how you are planning to get there.

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Many people, though, have a limited view of the business plan and what it can do for them, and even question the need for a written business plan at all. It is more than just a document you can use to discuss financing with investors and lenders. It also provides an ongoing management tool that you can use to judge your current progress without losing sight of your ultimate destination. The business plan is a way to confirm to both yourself and others that you have given serious thought to your business idea, and that you aren’t acting recklessly. With this kind of proper planning, your business is more likely to succeed and grow.

Each company will have a different business plan, based on the varying factors of company age, size, and industry, but there are a few common core elements that are central to any effective business plan.

1. Background Information

Background Information is an important element of any business plan. Its purpose is to define the management and products that will make the business successful. You will include a summary of the business ownership structure, resumes of owners and management, a history of the business, and product information. This section will be shorter for a new, sole proprietorship and more extensive for a newly acquired business that has been around for years with a number of employees, but will always have that same purpose.

2. Marketing Plan

The Marketing Plan occupies a central place in your business plan. It includes research, strategies, and tactics, covering every aspect of marketing—it is more than just media advertisements. You’ll want to include product positioning, packaging, and pricing, as well as distribution and target customers. The marketing plan will also discuss how you will handle competitors, including how you will distinguish yourself from similar companies. Another part of the marketing plan must anticipate evolving marketing techniques. Over time, you will need to adapt to changes in the business environment, and the marketing plan will describe marketing alternatives. Changes can stem from product or service modifications, technology innovations, or changes in competition.

3. Operating Plan

The Operating Plan will outline the requirements for implementing and developing your business, including management philosophy, guidelines, and resources. Specific elements to address are people, capital, and facilities. You must determine your plans for funding the business, and to do this you must outline all your costs and expenses. To accurately judge and plan your business’s operations, include office space, equipment, computers, salaries, and all other necessary matters. Don’t forget: you not only need to outline the resources you need to start the business, but also what you plan to do as the business grows.

4. Financial Statements

The Financial Statements are the final element of a business plan, and a natural extension of the Operating Plan. They can include both historical and projected information, using the operating expenses details you developed in the previous section. With a business plan for an existing company, you’ll include between two and five years of historical financial results, while future projections ought to cover five years of data. A balance sheet, income statement, and statement of cash flows will be among the basic financial information, along with debt financing and repayment schedules. Your projections should be as accurate as possible, although they will obviously require estimates.

Related: 15 Reasons You Need a Business Plan

It takes a lot of time and hard work to develop a comprehensive business plan, but it will pay for itself down the road, helping you anticipate problems and set realistic expectations. Even if the plan ultimately proves to show that your business idea cannot succeed, it’s better to invest in the business plan at the outset and find that out than to start without any planning and lose everything. A successful business plan proves that the concept is sound and that you have the foundation to organize and start your business.