The Three Key Components of a Business Plan

When you have what you feel to be a winning business idea, it’s only natural to feel impatient — you may find yourself thinking, “Let’s get this show on the road!” However, launching and sustaining your business will require capital. And, unless you have all the money necessarily to cover start-up and operational costs ready to go, you’ll need to tap other sources for funding.

Part of getting people to cosign your business idea — whether it’s a bank officer deciding whether to approve your loan application or an angel investor deciding whether to front the funding — is getting them to understand your vision. Not only do people need to understand your motivation and plans for the future, but they also need access to all the details about how the company will function.

A business plan is a document meant to convey the inner workings of your business, past and present, to external sources. Here’s more on what the three main sections of a business plan should contain.

Part 1: Executive Summary

The executive summary is essentially a snappy, information-laden overview of your business. It’s meant to summarize the most crucial points as well as compel the reader to pay attention. Experts generally advise creating an executive summary that’s at least one page long but no more than a few pages long.

Typical components of the executive summary include:

• Your company’s mission statement
• A rundown of employee and product information
• Snapshots of key financial metrics, like revenue
• Your company’s short- and long-term goals

The idea here is that a reader could scan your executive summary alone to glean a working understanding of what your small business is all about. The executive summary provides a synopsis strong enough to stand alone, though ideally readers will have time to continue onto the following sections.

Part 2: Body

The body of your business plan will cover the topics from the executive summary in richer detail. Keep in mind the objectives for business plans as you prepare this document: to give readers a picture of where your company currently stands and where it’s headed. Beyond the bullet points and charts and paragraphs, though, you want readers of your business plan to get a sense of what makes your brand special — its personality, voice, mission statement and values.

Take advantage of available templates and tips for writing business plans, especially if it’s your first time doing so. The U.S. Small Business Administration has plenty of advice for preparing a business plan — either a modified lean version or a longer traditional version. Here are some of the sections this organization recommends including:

• Your target customer market
• The outlook for your industry
• Employees and management structure
• Products or services offered
• Marketing and advertising plans
• Financial forecasts
• Specific request for funding

Another way to get a feel for how a business plan can look is to ask entrepreneurs you know if you can see a copy of their document.

Part 3: Appendix

Finally, the appendix contains all the documentation that’s simply too bulky to include in the executive summary and body sections — like graphs, legal papers, permits, resumes, marketing reports, product diagrams and more. This allows readers to choose between smoothly skipping these interruptions while perusing your document or flipping to the back to gain more insight.

Focusing on these three components while compiling your business plan will help you offer a quick version and a long version to readers, like potential investors and partners. The executive summary supplies readers with key points, while the body and appendix offer supporting information to answer any question that readers may possibly have along the way.