How to create a business plan
Creating a roadmap for the overview of your business and your long-term business strategy
Business plans are essential for any type of business, particularly a new startup or a business looking for new partners, funding opportunities, and other business development initiatives. A business plan can also help your company attract and retain top talent and redefine goals if you are restructuring your organization. A great business plan can help investors build confidence in their investment and understand the broader plan and picture of your business idea, concept, and operations. Moreover, the plan will help you oversee milestones that your company encounters as it grows and expands.
Business plans are essential; it has been reported that businesses with a business plan in place grow 30% faster than those without a plan. Even if you are an existing business and don’t have a business plan, this article can support you in understanding the framework of a business plan, outline a step-by-step guide to what should be included, and other important considerations for business owners to keep in mind.
What is a business plan?
A business plan is a formal document that often follows a business plan template. This template includes key elements of what comprises the business (including a cash flow statement, executive summary, market analysis, competitive advantages, legal structure, liabilities, etc.). There can be traditional business plans that are very detailed, or lean startup plans that are high-level and only include the most basic of information. Ultimately, a business plan outlines your financial goals and how you will achieve them over time.
Why do I need a business plan?
A good business plan will support you in taking the next steps for your business, whether in funding, partnerships, growth, expansion, or development. All business types — including small businesses — benefit from having a business plan in place. A plan can help potential investors make the decision to invest in your company, especially if they feel there is a product-market fit for your product or service, if you have a strong team in place, and if your business has the potential for scalability.
What are the parts of a business plan?
Whether working with investors or venture capitalists, your plan should have a format that includes key elements of your business. These details will help them learn about the company as well as how your entrepreneurial skills will benefit the establishment and growth of your business. The primary parts of a business plan are as follows:
- Executive summary. The very first part of your plan is the executive summary. This should be a high level overview of your business, including the mission statement and a brief description of your product or service that will add value for potential customers. You can even include the founding story of your business (as space allows). This is the first glimpse at your business that your target audience will see so it is important that it draws them in and leaves them wanting more. Many business leaders recommend writing this part of your business plan last since you will know everything that your plan covers and describes.
- Company description. The company description should provide the demographics of your business, for example, the name of your entity, your location, the leaders or key members of your company, as well as the type of structure that your business is registered as. This could be as a sole proprietorship, a partnership, or a corporation. If you have established owners of the business, it is also necessary to include their percentage of ownership. If you are running a startup business and still building your team, you can include positions that you aim to hire for in the future. This part of the business plan is also an appropriate place to discuss the history of the company as well.
- Business goals. This section is one of the most important as it outlines the actual goals your company is working towards. You can include high level goals and then specific objectives to serve as milestones along the way, especially in helping you understand what will make your company a successful business. In seeking funding, it is critical that you tie the goals to the needs for funds. This will help potential investors see how their contributions can help the business get off the ground. With financing, you can even make some financial projections that will help your company meet the outlined goals included in the business plan.
- Business structure. The business structure section of your business plan helps you go into more detail about your management team and the specific areas of expertise and qualifications that your team members have. You can consult your team members’ resumes for additional details. Outside of existing team members, you should identify roles that you still need to hire in the growth process as well as projected costs of new hires that will contribute to the overall bottom line of the business. You may also indicate any third party support you are receiving, either with a contracted bookkeeper, lawyer, or CPA. This will help investors see that you have the support in place to manage all aspects of business operations.
- Products and services. This section goes into more details about the value proposition of your specific product or service. You can discuss the benefits of your product or service, the production process, the life cycle of your product or service, and how your product or service stacks up against other competitors. Benefits of your product or service can include how customers benefit, any intellectual property rights that exist, and the unique features of your idea that you are bringing to the marketplace. You may include the pricing of your product as well as a competitive analysis to show comparables to other similar items that exist as well. You can include ideas for new products down the road currently in research and development. Lastly, this section may include a SWOT Analysis (strengths, weaknesses, opportunities, threats) that help explore various aspects of product development and launch.
- Marketing and sales plan. If you are seeking a business loan or funding, it is important to include a marketing and sales plan that details how you will grow and eventually be able to meet profitability and pay back borrowed funds. This part of the plan can include your actual marketing strategy that will help your brand grow and gain visibility. Your marketing plan should describe your ideal target markets, existing customer segments, your plan to launch the business, ways to expand in your area, ideas for loyalty programs, and advertising strategies (such as social media advertisements, TV ads, and print designs).
- Business financial analysis. If your company has already begun operations, this section can include income statements, profit and loss statements, cash flow statements, and balance sheets. Other crucial financial data includes overall revenues that are a part of net income, liquid assets, and the process for collection of invoices. If you are a startup and have yet to launch, this section will function more like a financial plan, specifically including a budget and areas of expenses and income that investors would need to be aware of.
- Financial projections. Financial projections help funders, lenders, or investors see where your business idea can go long-term. Based on existing financial data, you can project future revenues and income that your company will gain in addition to overall profit margins. This data should be based on the financial statements reported in the previous section. Financial forecasts can include best-case and worst-case scenarios.
- Appendix. The last section of your business plan should be an appendix that includes any additional or supplemental pieces of information that would be helpful for the readers of your business plan. Business registration documents, patents, certifications, industry associations, or other legal documents could be helpful to include. It is important to label each part of the appendix so that your readers understand what type of document they are reading.
How do you write a business plan?
So, you have an idea of the elements that go into a great business plan. The next step is to begin the writing process. As mentioned above, you should write your executive summary last. So, beginning with your company description you will want to focus on one key area at a time. Research, discussion, and review will need to take place before writing to ensure that you know what details you want to include. Once you have a sense of what you want to write, make sure you have someone to review the content, edit, and provide recommendations along the way.
Here are the steps in which you should pull everything together for your company’s business plan:
- Create an executive summary.
- Compose your company description.
- Describe your organization and management.
- Summarize market research and potential.
- Describe your product or service.
- Develop a marketing and sales strategy.
- Compile your business finances.
- Explain your funding request.
- Compile an appendix for official documents.
Within every section, make sure you are returning to the goals of your business, your product offerings, and the opportunities for your business to be successful. This will remind readers, investors, and funders of why your company is a desirable investment and how you can grow and expand long-term.
Elevating your business
A solid business plan will bring the necessary foundation required to have a profitable and scalable organization. You are essentially building the roadmap for your company to follow once funding and support has been secured. As you explore options for your business plan, remember that you can incorporate the support of team members, board members, and advisors to ensure that you have everything that you need to pitch for financial and growth opportunities.
When you are ready to start writing, there are many free business plan templates online that can help you with formatting right away. You can decide how detailed you want your plan to be (based on where you are in the business development process and what you are looking for). From there, you can begin writing, creating, and launching the next part of your great business idea.
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