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Top 10 Components of a Good Business Plan

Amanda Dixon | FEB 08, 2021

SHARE Whether you’re planning to open a MORE FROM SMARTASSET

shop that makes the best co ee or
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you want to sell eco-friendly o ce
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your business is necessary and how
it’ll di er from its competitors. That’s  How Much Do I Need to Save for
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where your business plan comes in. It
provides investors, lenders and  How Much Life Insurance Do I Need?
potential partners with an
understanding of your company’s  Compare mortgage rates

structure and goals. If you want to  Compare the Top 3 Financial Advisors
gain the nancial autonomy to run a For You
business or become an entrepreneur, a nancial advisor could help align your nances to meet your
business needs. Let’s break down the 10 key components of a business plan. SUBSCRIBE TO OUR NEWSLETTER
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1. Executive Summary
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Your executive summary should appear rst in your business plan. It should summarize what you
expect your business to accomplish. Since it’s meant to highlight what you intend to discuss in the  Auto
rest of the plan, the Small Business Administration suggests that you write this section last.
 Career

A good executive summary is compelling. It reveals the company’s mission statement, along with a  Checking Account
short description of its products and services. It might also be a good idea to brie y explain why
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you’re starting your company and include details about your experience in the industry that you’re
entering.  Credit Score

 Debt
2. Company Description
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A company description includes key information about your business, goals and the target
customers that you want to serve. This is where you explain why your company stands out from  Financial Advisor
other competitors in the industry and break down its strengths, including how it o ers solutions for
customers, and the competitive advantages that will give your business an edge to succeed.  Insights

 Insurance
3. Market Analysis
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This is where you show that you have a key understanding of the ins and outs of the industry and
the speci c market you plan to enter. Here you will substantiate the strengths that you highlighted in  Life Insurance

your company description with data and statistics that break down industry trends and themes.
 Mortgage
Show what other businesses are doing and how they are succeeding or failing. Your market analysis
should also help visualize your target customers — how much money they make, what their buying  Personal Finance
habits are, which services do they want and need, etc. Above all, the numbers should help answer
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why your business can do it better.
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4. Competitive Analysis  Retirement
A good business plan will present a
 Small Business
clear comparison of your business vs
your direct and indirect competitors.  Student Loans
This is where you prove your
 Taxes
knowledge of the industry by
breaking down their strengths and
weaknesses. Your end goal is show
how your business will stack up. And
if there are any issues that could
prevent you from jumping into the
market, like high upfront costs, this is
where you will need to be
forthcoming. Your competitive analysis will go in your market analysis section.

Related Article: 15 Ways Startups Can Raise Capital

5. Description of Management and Organization

Your business must also outline how your organization is set up. Introduce your company managers
here and summarize their skills and primary job responsibilities. An e ective way could be to create
a diagram that maps out your chain of command.

Don’t forget to indicate whether your business will operate as a partnership, a sole proprietorship or
a business with a di erent ownership structure. If you have a board of directors, you’ll need to
identify the members.

6. Breakdown of Your Products and Services

While your company description is an overview, a detailed breakdown of your products and services
is intended to give a complementary but fuller description about the products that you are creating
and selling, how long they could last and how they will meet existing demand.

This is where you should mention your suppliers, as well as other key information about how much it
will cost to make your products and how much money you are hoping to bring in. You should also
list here all relevant information pertaining to patents and copyright concerns as well.

7. Marketing Plan
This is where you describe how you intend to get your products and services in front of your target
customers. Break down here the steps that you will take to promote your products and the budget
that you will need to implement your strategies.

Related Article: How Turning a Hobby Into a Business A ects Your Taxes

8. Sales Strategy
This section should answer how you will sell the products that you are building or carry out the
services that you intend to o er. Your sales strategy must be speci c. Break down how many sales
reps you will need to hire and how you will recruit them and bring them on board. Make sure to
include your sales targets as well.

9. Request for Funding

If you need funding, this section focuses on the amount of money that you need to set up your
business and how you plan to use the capital that you are raising. You might want to include a
timeline here for additional funding that you may require to complete other important projects.

10. Financial Projections

This nal section breaks down the
nancial goals and expectations that
you’ve set based on market research.
You’ll report your anticipated revenue
for the rst 12 months and your
annual projected earnings for the
second, third, fourth and fth years of
business.

If you’re trying to apply for a personal

loan or a small business loan, you
can always add an appendix or
another section that provides additional nancial or background information.

Bottom Line
Every company is di erent so your business plan might look nothing like another entrepreneur’s.
But there are key components that every good plan needs to have, and it’s always a good idea to
provide a clear and accurate summary of your business goals in your business plan.

Tips for Business Owners

A nancial advisor can help you align your personal nances to give you an edge as a
business owner or an entrepreneur. SmartAsset’s free tool matches you with nancial
advisors in your area in ve minutes. If you’re ready to be matched with local advisors, get
started now.

If you are thinking of buying real estate, equipment, developing new products and other big-
ticket activities for your business, you should consider using a capital asset pricing model to
determine whether an investment is worth your risk.

Photo credit: ©iStock.com/nandyphotos, ©iStock.com/shironosov, ©iStock.com/cigdemhizal

AMANDA DIXON

Amanda Dixon is a personal nance writer and editor with an expertise in taxes and banking. She studied journalism and
sociology at the University of Georgia. Her work has been featured in Business Insider, AOL, Bankrate, The Hu ngton
Post, Fox Business News, Mashable and CBS News. Born and raised in metro Atlanta, Amanda currently lives in
Brooklyn.

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Derek Silva is determined to make personal nance accessible to everyone. He writes on a variety of personal nance topics for
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