What is a Business Plan?
To put it simply, a business plan is a written document that thoroughly describes how a business, usually a startup, defines its objectives. The document showcases how the business goals will be accomplished by laying out a roadmap from operations, financial, marketing and other essential standpoints.
The mere definition of a business plan illustrates the importance of preparing such document and knowing how to write a business plan efficiently. With it, a company is more likely to attract investors before establishing a proven track record. Moreover, they are also a great way for a company to keep their team on track and motivated to go forward.
As mentioned, business plans are particularly useful and important to new businesses and startups, however every company should have one. The plan is reviewed, edited and updated on a regular basis to make sure that goals have been met or if they have evolved or changed. In many cases, an established business can create a new business plan if the company has decided to move to a new direction.
Key points to remember:
✔️ A business plan is a written document that describes a company’s core business objectives and how they plan to achieve them.
✔️ Startups use business plans to attract investors.
✔️ Business plans can be lengthy and traditional or shorter and lean.
✔️ A good business plan features executive summary, products/services, analysis of marketing strategy, financial planning and a budget.
Why Do You need a Business Plan?
Now that you know what a business plan is, let’s talk about the purpose of crafting a business plan. A good business plan can do the following for you and your product/business:
✔️ Provides a guideline of each stage of your business – from the starting point to how to manage each stage.
✔️ Acts as a roadmap for how to structure, manage or grow a new business.
✔️ Can help you land an investor, funding or new business partners.
✔️ Serves as a tool to convince your team members and potential investors that you’re on the right path.
Knowing How to Write a Business Plan can also:
✔️ Help you spot problems or weaknesses in your business idea so that you can work on them before you start running the business.
✔️ Identify opportunities that you’ve missed before and take advantage in them.
✔️ Analyze the market and tell you more about your competitors.
✔️ Provide a chance to determine potential future challenges and issues and think of ways to overcome them beforehand.
✔️ Determine your target market and ways to reach them.
✔️ Give you a clear picture of when you can make a profit, how much money do you need to reach that point and end up with an adequate startup investment.
How to Write a Business Plan
Before we get down to the business plan outline, let’s first talk about a few things that you should most definitely keep in mind when writing an effective business plan.
✔️ Be familiar with your audience. When you know who will be reading your business plan, you can better tailor it. This can also help you pick the language, level of detail and what to omit.
✔️ Set a clear goal. If your goal is to secure funding, you have to put in some more work and structure a well-written plan that will answer all the questions or concerns investors might have. If the goal of the business plan is to present it to your team or use it for yourself, it probably doesn’t have to be that thorough.
✔️ Research is your best friend. Invest time in understanding your product and who you are selling it to. Dive deep into the competition and extract valuable conclusions. Although the business plan will present your own vision and ideas of the product, it’s important to gather some crucial market information.
✔️ Keep it short and straightforward. Regardless of who you’re preparing your business plan for, you should do your best to keep it short and readable. It shouldn’t be longer than 15-20 pages. Any additional documents that might be important to your audience can be added as appendices.
✔️ Be consistent with the tone, style and voice of the business plan. You can achieve this by having just one single person in charge of it or allocating time for a proper review before the official distribution.
How to Write a Business Plan Outline
Starting with a well-structured business plan outline is absolutely essential in order to deliver all the key details and present your business idea in the best way possible. For your convenience, we have prepared a high-level business plan outline, featuring essential business plan components that you should absolutely consider including. Here’s what a sample business plan should include:
🔵 Executive Summary
This is a crucial section of your plan. It’s where you have to highlight key points and answer important questions. If you’re preparing the plan for your own planning purposes, you can go ahead and skip this part. Although, writing it for future practice is recommended.
Your executive summary should answer the following questions:
- What is the concept of your business?
- What is the goal and vision of your business?
- How does your product differentiate from other similar products in the market?
- Who’s the target market?
- How do you plan on reaching your customers?
- What is your current revenue?
- What is your projected financial state?
- How much money are you asking for?
- Who is involved in the business?
🔵 Company Overview
The following section of your business plan should answer two important questions: Who are you and what are your goals? Answering these questions will serve as an introduction to why you’re in business, why is your team different and why are you a good investment bet.
Here are some components you should consider including in your company overview section:
- Business structure (Are you an incorporated company or a sole proprietorship?)
- The nature of your business
- Vision, mission and values of your business/company
- A brief history of your business
- Short-term and long-term business objectives
- A short-introduction of your team and key personnel
Some of these points are quite straightforward and can easily be defined. Others, like business vision and values may take you some time to refine. To define your business values, think about all the employees your company is accountable to and consider how you would like to conduct business with each one of them.
🔵 Market Analysis
Market analysis is a key section of your business plan outline. It should present an overview of:
- How big is the market you’ll be competing in? A potential market is an estimate of how many people might need your product.
- What’s your business position in the market? What’s so good about your company or product that customers might purchase it? Conduct a SWOT analysis, showcasing your strengths, weaknesses, opportunities and threats. Examine any external factors that might threaten your position in the market as well.
- Who are your competitors? You will always have competitors, regardless of how innovative your product or service is. Include a competitive overview in your business plan and include a list of companies you consider direct competitors. Try to explain why and how you plan on differentiating yourself and your products from theirs.
Here, you have to spend a significant amount of time doing research and prepare valid conclusions. If done properly, your market analysis can persuade investors and you might end up with the investment you need to move forward with your business idea.
🔵 Products and Services
Provide a designated section in your business plan that will outline in detail the characteristics of your product or service. Depending on what you’re trying to sell, you can determine the level of detail needed to describe the product.
🔵 Marketing Plan
A core aspect of your marketing plan is defining your ideal customer. Give a holistic overview of your ideal customer. Describe a number of general, as well as specific demographic characteristics, such as their age, level of education, where they live and more.
Once you’ve established who your ideal customer is, provide a marketing outline that will showcase your plan on how to reach them. Describe media outlets, online or offline, that you would use and explain why it makes sense to go this way.
Marketing plans include information on four key areas:
- Price – How much will your product cost and why?
- Product – What are you selling and why is it different from anything else in the market?
- Promotion – How will you deliver your products to your ideal customer?
- Place – Where can customers purchase your products?
🔵 Logistics and Operations Plan
In this part of your business plan, you have to explain the logistics, operations and workflows you’ll implement to reach your goal. Make sure you’ll cover all parts of the operations, including:
- Shipping and fulfillment
This section will demonstrate to your reader that you possess a solid knowledge of your supply chain and have strong contingency planning. It will also provide estimated costs and at what point will you break even on your initial spending.
🔵 Financial Plan
Your business plan can’t be complete without a financial forecast. Start with a sales forecast and move on to cash flow statements, income statements and balance sheet.
Keep in mind that although this section of the business plan can be a little intimidating, a business degree is definitely not a requirement to build a solid financial forecast.
A typical financial plan includes sales and revenue forecasts for the first year and annual projections for the following three to five years. A three-year projection is absolutely fine but keep in mind that some investors require a five-year forecast.
Although appendix is not a required chapter to your business plan, it might come in handy. If you have any useful charts, tables, notes or any other critical documents that were simply too long to include elsewhere in your business plan, you can pin them right here. Use the appendix to include a patent or a patent-pending, for instance.
Use a Business Plan to Succeed
Businesses that are willing to spend resources on preparing the perfect business plan are more likely to succeed than those that don’t plan. Writing a great business plan, however, can’t guarantee your success. You have to make sure you have a high-performing team behind your back and you’re ready for every inconvenience or problem that might come along the way.
Use your business plan as an ongoing management tool. Once you’ve learned how to write a business plan, revisit and review it to make sure it reflects the current market conditions or any other external or internal factors that might affect your initial goals. Not just that but as you start running your business, you will come across tons of new information that will inevitably change a couple of details on your initial business plan.
You may find out new things about your customers and discover a new target audience. Not just that but promotional tactics will absolutely change along the way as some might prove useless. Your business plan should reflect your learnings and you should be able to quickly focus on a new strategy.
It does sound like a lot of work but if you’re passionate about introducing a great new product or service to the market, you will have no problem learning how to write a business plan and composing a great document. We hope this article gave you the boost needed to turn your idea into a profitable business just by planning carefully.
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