Key Components of a Business Plan: Part I

A good business plan has ten key components. Providing a comprehensive assessment of each of these components is critical in attracting investors. This article discusses the first five components. A subsequent article will detail the remaining elements.

1. Executive Summary. The Executive Summary provides a succinct synopsis of the business plan, and highlights the key points raised within. The Executive Summary must communicate to the prospective investor the size and scope of the market opportunity, the venture's business and profitability model, and how the resources/skills/strategic positioning of the Company's management team make it uniquely qualified to execute the plan. The Executive Summary must be compelling, easy-to-read, and no longer than 2-4 pages.

2. Company Analysis. This section provides a strategic overview of the company and describes how the company is organized, what products and services it offers/will offer, and goes into further detail on the company's unique qualifications in serving its target markets.

3. Industry Analysis. This section evaluates the playing field in which the company will be competing, and includes well-structured answers to key market research questions such as the following:

- What are the sizes of the target market segments?

- What are the trends for the industry as a whole?

- With what other industries do your services compete?

4. Analysis of Customers. The Customer Analysis section assesses the customer segment(s) that the company serves. In this section, the company must convey the needs of its target customers. It must then show how its products and services satisfy these needs to an extent that the customer will pay for them

5. Analysis of Competition. This section defines the competitive landscape of your business. It identifies who the direct and indirect competitors are, assesses their strengths and weaknesses and delineates your company's competitive advantages.

The first five sections of a business plan are critical because in most cases, investors will not read the full plan. As such, winning the investor's interest early is critical. In addition to providing background on the full business opportunity, these sections provide the market research to back up the business' potential, another critical factor in gaining an investment.