What are the Essential Components of an Effective Business Plan?

Khushboo Priya
| Updated: Aug 02, 2019 | Category: Business Plan

An effective business plan acts as a ladder to success. No company or organization can ever operate without having one. Even if somebody has begun functioning without a plan, the entity won’t be able to work for long and will collapse in some time.

Therefore, if you want your new venture to be a success, then the foremost thing you require is an effective business plan. It not only drives the investors to invest in your business but also provides your business with a perfect structure.

Hence, whether you’re running your business for a long time or are preparing to launch a new venture, you can get a business plan any point of your business as there’s never a wrong time for getting one.

In this blog, we will take you through what a business plan is and what makes it so worth for the business. So, stay until the end-

What is a Business Plan?

A Business plan is a framework for any company which provides a benchmark to visualize if they are achieving their goals or not.

It serves as a roadmap for every business to provide the owner with insights on attracting investors, potential partners, and lenders to contribute to the company’s growth.

Moreover, it helps you keep your business on the right track. It defines the scope of your business, provides you with a vision, and lets you figure out strategies that could work for you.

Likewise, there are several reasons why you need a business plan when you are about to start a new venture.

Crucial Components of an Effective Business Plan

It doesn’t matter how great your product or service is until you have an impressive plan. A business plan lets you identify a lot about the competition in the market. You get to know what’s in the trend.

It helps you figure out whether your offerings are going to work or not. Similarly, there are several things an effective business plan can do for you and your business.

But the question arises, what makes it so worth and working? The answer is the components that create them. Here you can find the list of such significant components that creates a business plan:

Executive Summary

The executive summary in the plan describes the goal of your business. It lets your readers find out what you want to accomplish. Besides, it’s one of the most valuable sections that summarize the highlights of the entire business plan.

The key elements that you must include in the executive summary are:

  • Business concept: It clarifies the business, the market it will be serving, and the product to be offered. It must clearly display what you are going to sell, to whom, and how the business holds a competitive advantage.
  • Current business position: Provides crucial information associated with the company such as its legal form of operation, key personnel, when it’s formed, and the key owners.
  • Financial features: It showcases the company’s significant financial points such as cash flows, ROI (return on investment)[1] , profits, and sales.
  • Financial requirements: Describes the capital for starting a business and its expansion. It must enumerate the way capital will be used and how the equity will be given for funding.
  • Major achievements: It clearly describes the elements essential for the growth of the company such as patents, any crucial contracts, prototypes, etc.

Company/Business Description

Typically, the business description of the plan details about the industry. It describes everything from the company’s present outlook to its future possibilities.

Furthermore, one must also furnish information on several markets within the industry and include new products or services that could have an adverse impact on your business.

Besides, the most important factor to consider while creating a business description is to concentrate on the type of business operation such as manufacturing, wholesale, retail, etc.

Market Analysis for creating marketing strategies

Market Analysis helps the entrepreneur to gain insights on the target market so that the company could garner profit from its share of sales. With market analysis, one can decide on the price of the products, their distribution, and the promotional strategies for selling them within a competitive environment.

Besides, it indicates the growth potential of the industry and allows the entrepreneur to build their own estimates for the future of their business. On the basis of market analysis, one can surely create a great market strategy. Hence, we can say that market strategy is the outcome of a diligent market analysis.

Revenue Plan of the Company

Whatever business you are going to start, your ultimate aim would be to generate fat revenue. And here’s where the revenue plan of the company comes into play.

It serves as a revenue generator structure and aids marketers to discover what value to offer, who pay the value, how to price the value, etc. Therefore, a well-structured revenue plan may help the business to generate more revenues and let the business to attain a level.

Management and Operational Plan

Such plans express how your business functions on a regular basis. The operational plan of any organization emphasizes on the logistics of the company such as responsibilities allocated to the management team, tasked assigned to each division, expenses, and capital associated with the business operations.

In a nutshell, the operation and management plan of the business lets entrepreneurs create the next set of financial tables.

Competitive Analysis

It functions as one of the pivotal parts of the company’s marketing plan. With the competitive analysis, you can identify what makes your product or service stand different from others. Hence, it lets you verify how you can attract your target market.

Apart from this, you can encounter the following things:

  • Your competitors;
  • Products or services your competitors are selling;
  • Their past and current strategies;
  • How much market share they have got;
  • Strengths and weakness of every competitor;
  • Possible potential threats they pose;
  • Opportunities they could create for you;
  • Number of hours they advertise, etc.

Technology and Product Plan

Technology is the basic need for today’s world. Everything depends on technology. It lets businesses develop better strategies, helps in making sales and purchases better, lets companies send regular follow-ups to the customers, etc.

However, product planning helps companies to come up with innovative ideas and aid in following through on until the product gets launched in the market.

Financial Projections

The financial projection of the company provides an estimation of future expenses and revenues. A financial projection accounts for historical and internal data. Furthermore, it incorporates a prediction of external market factors.

Read, Also:How to Prepare a Successful Business Plan in India?


Related Articles

Business Plan
Khushboo Priya
| Date: Jan 24, 2019 | Category: Business Plan

Why Do You Need a Business Plan?

A Business Plan refers to a written guide or description of goals of the businesses. Generally, it is used by investment-seeking entrepreneurs to communicate their vision to potential investors. It...

Read More
Prepare a Successful Business Plan in India
Dashmeet Kaur
| Date: Dec 05, 2019 | Category: Business Plan

How to Prepare a Successful Business Plan in India?

As a pre-planned strategy can lead you from point A to point B; likewise, a well-framed business plan can be a roadmap to attain fruitful outcomes. While writing a business...

Read More
Component of Business Plan
Divyanshu Gupta
| Date: Mar 22, 2020 | Category: Business Plan

Component of Business Plan Relevant for Business

When a business is about to start, it requires tremendous effort and vigour of an owner so that he can initiate the business and sustain it in future. One such...

Read More


Hi! My name is Akanksha! Let's talk.