Explain what a business plan is and when one is necessary. Then list five components that should be included in a business plan, describing the type of information that would be included in each

Answer 1

A business plan is another form of proposal. A business plan is necessary when you want to start your own business. A business plan is critical for securing financial support of any kind. Such a plan also ensures that you have done your homework and know what you are doing in launching your business. It provides you with a detailed road map to chart a course to success.

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Letter of transmittal: Provides contact information for all principals and explains your reason for writing. If you are seeking venture capital or an angel investor, the transmittal letter may become a pitch letter. In that case you would want to include a simple description of your idea and a clear statement of what's in it for the investor. The letter should include a summary of the market, a brief note about the competition, and an explanation of why your business plan is worthy of investment.

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Mission Statement: Explains the purpose of your business and why it will succeed.

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Executive Summary: Highlights the main points of your business plan and should not exceed two pages. It should conclude by introducing the parts of the plan and asking for financial backing.

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Table of Contents: Lists the page numbers and topics included in your plan.

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Company Description: Identifies the form of your business (proprietorship, partnership, or corporation) and its type (merchandising, manufacturing, or service). For existing companies, describes the company's founding, growth, sales, and profit.

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Product or Service Description: Explains what you are providing, how what you are providing will benefit customers, and why what you are providing is better than existing products or services.

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Market Analysis: Discusses market characteristics, trends, projected growth, customer behavior, complementary products or services, and barriers to entry. Identifies your customers and how you will attract, hold, and increase your market share. Discusses the strengths and weaknesses of your direct and indirect competitors.

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Operations and Management: Explains specifically how you will run your business, including location, equipment, personnel, and management. Highlights experienced and well-trained members of the management team and your advisors.

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Financial Analysis: Outlines a realistic start-up budget and presents an operating budget. Explains how much money you have, how much you will need to start up, and how much you will need to stay in business.

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Appendices: Provide necessary extras such as managers' résumés, promotional materials, product photos, sales forecasts, personnel plans, anticipated cash flows, profits and losses, and balance sheets.