What is a business plan?
A business plan is a document that sets out in detail the goals of a business and how it plans to achieve its goals. A business plan lays out a written roadmap for the business from marketing, financial and operational. Startups and established businesses use business plans.
A business plan is an important document for a company’s external and internal audiences. For example, a business plan is used to attract investment before a business has established its track record. It can also help in obtaining loans from financial institutions.
Additionally, a business plan can serve to keep a company’s management team on the same page on strategic action items and on target to achieve established goals.
Although they are especially useful for new businesses, every business should have a business plan. Ideally, the plan is reviewed and updated periodically to reflect goals that have been achieved or have changed. Sometimes a new business plan is created for an established business that has decided to change direction.
Key points to remember
- A business plan is a document outlining a company’s main business activities and how it plans to achieve its goals.
- Startup companies use business plans to get started and attract outside investors.
- A business plan can also be used as an internal guide to keep a management team focused and working on short and long term goals.
- Businesses can create a longer traditional business plan or a shorter starter business plan.
- A good business plan should include an executive summary and sections on products and services, marketing strategy and analysis, financial planning, and a budget.
Want financing? You need a business plan
Understanding Business Plans
A business plan is a fundamental document that any new business should have in place before starting operations. Indeed, banks and capital risk business often require a viable business plan before determining whether they will provide capital to new ventures.
Operating without a business plan is generally not a good idea. In fact, very few businesses are able to last very long without one. There are benefits to creating (and sticking to) a good business plan. These include being able to think through ideas before investing too much money in them and overcoming potential barriers to success.
A good business plan should outline all expected costs and possible pitfalls of every decision a business makes. Business plans, even between competitors in the same industry, are rarely identical. However, they may have the same basic elements, such as a company summary and detailed descriptions of its operations, products and services, and financial projections. A plan also indicates how the company intends to achieve its objectives.
While it’s a good idea to give as much detail as possible, it’s also important that an outline be concise to keep the reader’s attention until the end.
How to Write a Business Plan
A well thought out and well written business plan can be of tremendous value to a business. Although there are templates you can use to write a business plan, try to avoid producing a generic result. The plan should include an overview and, if possible, details of the industry the business will be part of. It must explain how the company will distinguish itself from its competitors.
Start with the essential structure: an executive summary, business description, market analysis, product or service description, marketing strategy, financial projections, and an appendix (which includes documents and data that support main sections). These sections or elements of a business plan are described below.
When writing your business plan, you don’t have to strictly follow any particular plan or business plan template. Use only the sections that best suit your business and its needs.
Traditional business plans use a combination of the sections below. Your plan may also include any funding requests you make. Either way, try to limit the main body of your outline to around 15-25 pages.
Elements of a business plan
The length of a business plan varies greatly from company to company. Consider integrating the basic information into a document of 15 to 25 pages. Then, other crucial elements that take up a lot of space, such as patent applications, can be referenced in the main document and included as an appendix.
As mentioned above, no two business plans are the same. Nevertheless, they tend to have the same elements. Below are some of the common and essential parts of a business plan.
- Summary: This section describes the company and includes the mission statement as well as any information about the company’s management, employees, operations and location.
- Products and services: Here, the business can describe the products and services it will offer, and can also include pricing, product lifespan, and consumer benefits. Other factors that may fall into this section include production and manufacturing processes, any patents the company may have, as well as proprietary technology. Research and development (R&D) information may also be included here.
- Market analysis: A solidify needs a good understanding of its industry as well as its target market. This section of the plan will detail a company’s competition and how the company fits into the industry, as well as its relative strengths and weaknesses. It will also describe the expected consumer demand for a company’s products or services and how easy or difficult it is to grasp market share holders.
- Marketing Strategy: This section describes how the business will attract and retain its customers and how it intends to reach the consumer. A clear distribution channel must be defined. The section also specifies the advertising and marketing campaign plans and the types of media that these campaigns will use.
- Financial planning: This section must include a company financial planning and screenings. Financial statements, balance sheets and other financial information may be included for established businesses. New ventures will include goals and estimates for the first few years as well as a description of potential investors.
- Budget: Every business should have a budget in place. This section should include costs related to staffing, development, manufacturing, marketing, and any other business-related expenses.
Help with unique business plans
The best business plans are not generic plans created from readily available templates. A business must attract readers with a plan that demonstrates its uniqueness and potential for success.
Types of business plans
Business plans help companies identify their goals and stay on track to achieve them. They can help businesses get started, run, and grow once they’re up and running. They also act as a means of attracting lenders and investors.
Although there is no right or wrong business plan, they can fall into two different categories: traditional or lean startup. According to Small Business Administration (SBA)the traditional business plan is the most common. It contains a lot of details in each section. These tend to be longer than the Lean Start plan and require more work.
Lean startup business plans, on the other hand, use an abbreviated structure that highlights key elements. These business plans aren’t as common in the business world because they’re short – as short as one page – and lacking in detail. If a business uses this type of plan, it should be prepared to provide more details if an investor or lender requests it.
A complete business plan should include a set of financial projections for the business. These forward-looking financial statements are often referred to as pro forma financial statements or simply “professional formsThey include an overall budget, current and projected funding needs, market analysis, and the company’s marketing strategy.
Other Considerations for a Business Plan
One of the main reasons for a business plan is to give owners a clear picture of the objectives, goals, resources, potential costs and drawbacks of certain business decisions. A business plan should help them modify their structures before implementing their ideas. It also allows owners to project type of financing needed to start their business.
If there are particularly interesting aspects of the business, they should be highlighted and used to attract funding, if necessary. For instance, Tesla Motors’ The electric car business basically started as a business plan.
It is important to note that a business plan should not be a static document. As a business grows and changes, the business plan must also evolve. A annual review of the business and its plan allows an entrepreneur or a group of owners to update the plan, based on successes, setbacks and other new information. This is an opportunity to measure the ability of the plan to support the growth of the company.
Think of the business plan as a living document that grows with your business.
What is a business plan?
A business plan is a document created by a business that outlines the company’s goals, operations, industry position, marketing goals, and financial projections. The information it contains can be a useful guide in running the business. Moreover, it can be a valuable tool for attracting investors and obtaining funding from financial institutions.
Why do business plans fail?
Even if you have a good business plan, your business can still fail, especially if you don’t stick to the plan! Having strong leadership focused on the plan is always a good strategy. Even following the plan, if you had the wrong assumptions in your projections, you can be stuck with cash shortages and out-of-control budgets. Markets and the economy can also change. Without flexibility built into your business plan, you may not be able to turn to a new course when needed.
What does a Lean Startup business plan include?
The lean startup business plan is an option when a company prefers a quick explanation of its business. The business may feel like it doesn’t have a lot of information to provide since it’s just getting started.
Sections may include: a value proposition, a company’s main activities and benefits, resources such as personnel, intellectual property and capital, a list of partnerships, customer segments and revenue sources.
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