Key elements and components of effective business plans

Business Strategies

The business plan represents the document which depicts the economic agent -- it reveals its problems, but also its advantages. In most of the cases, the business plan is constructed in a manner in which it presents the economic agent in a favorable light, so that the audience -- in this case the potential equity investors -- forms a positive image of the company.

The business plan is the creation of each and every entity in the meaning that it is up to the individual managing teams of each economic agent to decide what key elements to present to the potential equity investors. The specialized literature on the topic of business plans varies in the meaning that some sources indicate the need to include some elements, whereas other sources indicating the need to integrate other elements. In most cases however, the differences are not tremendous, but simply refer to a different formulation of the similar concepts. In such a context then, Chris E. Stout and Laurie C. Grand (2010) state that the business plan has to integrate the elements below:

1. The identification of the business, its features, its explanation and the need for it

2. The definition of the potential clients

3. The identification of organizational strengths and the reasons as to why customers would select the firm

4. The enumeration of the organizational goals

5. The identification of the financial targets

6. The assessment of the market

7. The assessment of the competition

8. The creation of a marketing plan to promote the products and services and to attract the customers

9. The integration of feedback so that the plan gains more trust. The parties offering this feedback could include professional accountants or potential referral sources.

10. However not an actual element, Stout and Grand also discuss the need to continually review the business plan in order to include changes in the micro and macro environments.

Answer number 2

The business plan is virtually a combination of elements which are essential to be communicated about the economic agents seeking the funds of potential investors. Dave Lavintsky argues that there are ten specific key components of any business plan, as follows:

The executive summary of the business plan, identifying the main points of the document

The analysis of the economic agent seeking investment

The analysis of the industry in which the economic agent operates

The assessment of the customers addressed by the economic agent

The analysis of the companies with which the economic agents competes

The marketing plan

The organizational plans regarding operations, design and development

The mentioning and short description of the members in the management team

The financial plan, which reveals the resources possessed and needed by the firm, the desired investment from the equity investors, as well as the assumptions on how the money would be used to generate revenues and profitability.

The appendixes.

Answer number 4

The business plan to be submitted to the potential investors is a complex document which has to simultaneously reflect the company's strengths, as well as its capabilities and the managerial commitment to the success of the entity. In other words, the business plan presented to the potential equity investors is much like the marketing campaign on the products introduced to potential customers -- it has to contain both valid information, as well as promises of benefits for the audience.

At the level of the actual information, this would contain financial projections, past and present results, resources available, market features (such as targeted customers and their response to the company's products and services), competitive position, resource needs and so on. This would however be presented in a manner in which the business plan is appealing to the potential investors. Through these lenses, the business plan would also include a short section on commitments and the letter of the business owner to the shareholders. It must however be recognized that the potential investors would be more interested in factual information, and this should as such be dominant in the business plan.

References:

Lavinssky, D., Key components of a business plan, Business Know-how, http://www.businessknowhow.com/StartUp/business-plan-parts.htm last accessed on September 19, 2011

Loughran, M., Business plan elements, About, http://artsandcrafts.about.com/od/businessplans/tp/elementsbusinessplan.htm last accessed on September 19, 2011

Stout, C.E., Grand, L.C., 2010, Getting started in private practice: the complete guide to building your mental health practice, John Wiley and Sons