A business plan is a written document that describes in detail how a company, usually a startup, defines its objectives and how it is going to achieve its objectives. A business plan establishes a written roadmap for the business from a marketing, financial, and operational standpoint.
Business plans are important documents used to attract investment before a business has established a proven track record. They are also a good way for companies to stay on target in the future.
Although they are especially useful for new businesses, all companies should have a business plan. Ideally, the plan is periodically reviewed and updated to see if the goals have been met or if they have changed and evolved. Sometimes a new business plan is created for an established company that has decided to move in a new direction.
- A business plan is a written document that describes a company’s core business activities and objectives and how it plans to achieve its goals.
- Start-ups use business plans to get off the ground and attract outside investors.
- Companies can submit a longer traditional business plan or a shorter lean-start business plan.
- Good business plans should include an executive summary, products and services, marketing strategy and analysis, financial planning, and a budget.
1. Understand Business Plans
A business plan is a critical document that any new business should have before starting operations. In fact, banks and venture capital firms often make writing a viable business plan a prerequisite before considering providing capital to startups.
Trading without a business plan is usually not a good idea. In fact, very few businesses can last long without one. There are definitely more benefits to creating and sticking to a good business plan, including being able to think through ideas without investing too much money in them and ultimately losing out in the end.
A good business plan should describe all the projected costs and potential roadblocks in every decision a business makes. Business plans, even between competitors in the same industry, are rarely identical. But they all tend to have the same basic elements, including an executive summary of the business and a detailed description of the business, its services, and its products. It also establishes how the company intends to achieve its objectives.
The plan should include at least an overview of the industry the company will be a part of and how it will distinguish itself from potential competitors.
Note: While it’s a good idea to go into as much detail as possible, it’s also important to make sure your plan is concise so that the reader wants to get to the end.
2. Elements of Business Plan
The duration of the business plan varies greatly from company to company. All information should fit on a 15-20 page document. If there are crucial elements of the business plan that take up a lot of space, such as patent applications, they should be mentioned in the main plan and included as appendices.
As mentioned above, no two business plans are the same. But they all have the same elements. Here are some of the common and key parts of a business plan.
- Executive Summary: This section describes the company and includes the mission statement along with any information about the company’s leadership, 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 life, and consumer benefits. Other factors that can be included in this section include production and manufacturing processes, patents the company may hold, and patented technology. Any information on research and development (R&D) can also be included here.
- Market analysis:a company needs a good management of the industry, as well as its target market. It will describe who the competition is and how they influence the industry, along with their strengths and weaknesses. It will also describe expected consumer demand for what companies sell and how easy or difficult it can be to get market share from incumbents.
- Marketing Strategy:This area describes how the company will attract and maintain its customer base and how it intends to reach the consumer. This means that a clear distribution channel must be delineated. It will also detail the plans of advertising and marketing campaigns and through what types of media those campaigns will exist.
- Financial planning:To attract the party reading the business plan, the company must include its financial planning and future projections. Financial statements, balance sheets, and other financial information for established businesses can be included. Instead, new businesses will include targets and estimates for the first few years of the business and any potential investors.
- Budget:Any good company must have a set budget. This includes costs related to staffing, development, manufacturing, marketing, and any other business-related expenses.
3. Types of Business Planning
Business plans help companies identify their goals and stay on track. They can help businesses start and run themselves, and grow after they are up and running. They also act as a means for people to work and invest in the business.
Although there are no right or wrong business plans, they can be classified into two different categories: traditional or lean startups. According to the Small Business Administration, the traditional business plan is the most common. They are standard, with much more detail in each section. These tend to be much longer and require a lot more work.
Lean Start business plans, on the other hand, use a standard structure even though they are not as common in the business world. These business plans are short, as short as a page, and have very little detail. If a business uses this type of plan, you should expect to provide more details if requested by an investor or lender.
4. Special Considerations
A complete business plan should include a set of financial projections for the business. These forward-looking financial statements are often called pro forma financial statements or simply “pro-forma.” These statements include the overall budget, current and projected financial needs, a market analysis, and the company’s marketing strategy.
Other considerations for a business plan
The idea behind making a business plan is to allow owners to have a clearer picture of the potential costs and drawbacks of certain business decisions and to help them modify their structures accordingly before implementing these ideas. It also allows owners to project what type of financing is required to start their businesses.
If there are particularly interesting aspects of the business, they should be highlighted and used to attract funding. Take Tesla Motors’ electric car business, for example. It started essentially just as a business plan.
A business plan should not be a static document. As the business grows and evolves, so should the business plan. An annual review of the plan allows an entrepreneur to update it by taking the markets into consideration. It also provides an opportunity to look back and see what has been achieved and what has not. Consider it a living document that grows and evolves with your business.