The key sections of an effective business plan explained

A business plan sets out your vision for your company in clear terms. It provides a structure that helps you stay on track and build your business.

A well-thought-out and presented business plan should also impress potential clients and investors. Here, we explain what to include in your plan.

What is a business plan?

A business plan is a comprehensive guide to the future of your company. Typically, it is around 10-25 pages and outlines what your business hopes to achieve in the short term and how you envision it growing. It explains where you’d like the firm to be in five or ten years and how you intend to reach your goals.

A well-constructed business plan covers all the main elements of a business that must work for the plan to have any credibility. Nail this, and you will be well placed to achieve your aims.

Read more: How to write a business plan

Why make a business plan?

Research shows that companies with a business plan grow 30% faster than those without one. However, you need to ensure your plan is effective. 

To increase your chances of success, your plan should state what you hope to achieve with your new business. It must be easy to read, comprehensive, concise, and dynamic. It should serve as a reference book for you and your staff, ensuring everyone understands the type of business you’re striving to create and grow. It is also invaluable when seeking business partners, investors, or a business loan. 

Who should make a business plan?

Business plans are essential for sole traders, partnerships, or limited companies if:

• You’re starting up your own business

• You’re taking over an existing business

• You’re planning to expand the scope of your business

What are the key sections of a business plan?

Numerous free business plan templates are available online. While each differs in structure and terminology, the good ones cover the same key sections, starting with the executive summary.

1. Executive summary

This section presents an overview of your business and your long-term aspirations. Consider it a sneak preview, a compelling film trailer that leaves you wanting more.

The executive summary should include a mission statement. This declaration outlines why you started the business, what it hopes to achieve, and how, referencing key points from the other sections to support your strategy.

Your summary should also state who owns and runs the company, its leadership structure, the number of employees, its operations, and its location.

2. Business description

Given around 60% of UK start-ups fail within the first year, it’s important that anyone reading your business plan is confident that your firm won’t be among those that don’t reach their second anniversary. 

The business description section is the first of many that explain why your company is a solid prospect. It outlines why you formed the business, the market need you’re fulfilling, your target audience, and how your offering differs from the competition.

You could also include a SWOT segment (strengths, weaknesses, opportunities, and threats). This demonstrates your awareness of potential obstacles and confidence in tackling them. 

3. Management and organisation strategy 

A clear business structure is essential for success, meaning you need to know who is responsible for each element of your company.

Using an organisation chart to show your firm’s structure, with names and titles, is useful. You can follow this diagram with a short biography of the personnel key to propelling the company forward.

This section allows you to promote the expertise and experience of your team, which can help gain client and investor confidence.

4. Market research

While your business description focuses on the firm itself and how it can make money by meeting the demands of its customer base, the market research section presents an overview of the market itself. 

It highlights trends, with special attention paid to areas of growth that your company intends to exploit through its products or services. When discussing market growth, you should illustrate how quickly the sector has expanded and where it’s expected to be in five years or more.

This section may also nod to other firms that have enjoyed success in the market and explain why there is room for your firm. For example, you might feature a mini-case study of a similar company that is doing well but operates in a different region and is, therefore, not in direct competition with your business.

Read more: How to do market research

5. Product and services

Having covered the overall market, you need to drill down into your company’s offering. This means showcasing your product or service’s key features and what makes it stand out. Use this section to explain where and how customers can purchase your solution and how it works.

Don’t underestimate the importance of clarifying how the item works or how the service runs. You may have been thinking about it for months or years, but your customers won’t have the same familiarity. If you don’t need to explain the product's details, chances are you’re not offering anything new, which is a red flag.

Be clear about products, components, and labour costs. Also, specify how many products or services you plan to shift and how many orders or sales you can accommodate within an established timeframe.

6. Competitive analysis

You may have identified a gap in the market, but that doesn’t mean you’re a shoo-in to fill the hole and see customers, clients, and investors clamouring for your products and services.

First, you need to look closely at the competition, even if their offerings differ from yours. You may see your unique selling point (USP) but what’s important is whether customers also do. They may be content to buy a different product if it fulfils the same need.

Focus on what your competitors are doing well and where you think they’re getting it wrong. Use this part of your business plan to explain how your business can overcome the problems others have faced and what you’re already doing better.

Note your competitors’ trajectory – where they were a year or so back? If they’ve ditched similar products to yours, this is worth investigating. It could indicate the market is drying up or has evolved.

7. Operating plan

Your financial plans and projections focus on how you can move out of the red and into the black, and rely to a great extent on your operating costs.

This section covers what you incur to set up and run the business. It includes everything from premises rent, utility bills, machinery, and other stock purchases to hiring costs, wages, transport and delivery costs.

Your operating plan details what you expect your running costs to be and how you intend to cover these outgoings. For example, are you planning to rely on your savings and assets, startup business loans, investors or government grants?

Read more: How to write a business plan for a loan

8. Financial plans and projections

It may be exciting to plan a new business venture, but most new firms don’t make a profit in the first year or two, and for some, it can take even longer.

For this reason, include details about how the company will remain afloat until you make money, when you expect this turnaround to happen, and what you expect to reap in your first, second and third years of profit. 

Read more: How to work out a cash flow forecast

9. Marketing plans

The marketing section of your business plan is vital, as it indicates how you will set out your window to the outside world. Your marketing and sales messages must be consistent and positive, focusing on the benefits your ‘unique’ product or service offers. If you have run focus groups or trials and received positive feedback include the results.

Also, explain how you intend to market your product. For example, are you using an in-house team or contracting this work out? Are you advertising in the press, on the radio or through direct mail? Would using social media work best, and if so, are you planning to use an agency or an influencer? Finally, what do you expect to spend, and how are you to measure the success of your campaigns?

What else could you include in a business plan?

In addition to the key sections listed above, you may include further elements, such as extra segments, footnotes or appendices. For example, you may want to add:

• Details and proof of any patents

• Market research

• Proof of association or trade body memberships

• Proof of permits held and any required business insurance policies

• Proof of adherence to regulations or registration with a regulatory authority

• CVs of key stakeholders and management personnel

• Diagrams or photos of the product or to illustrate the service offered

• A timeframe for reviewing progress