When you’re starting a business, one of the first jobs is to write a business plan. This document can be used to secure loans and funding to grow your business. Plus, it acts as a framework for the first couple of years of your business operations. Here’s a complete guide to writing a business plan.
What is a business plan?
At the most basic level, a business plan is a document that outlines your objectives and strategies for getting clients and making money. It also acts as an instruction manual for your employees. The final section of the plan summarizes how you’ll use the loan or investment capital to grow your business.
A business plan isn’t just for start-ups
People often think that a business plan is only for first-time entrepreneurs trying to get their ideas off the ground, but this isn’t true. Even established businesses need a clear idea of where they want to go and what they can do to get there. A strong business plan helps any sized firm set goals and measure progress toward those goals.
How long should my business plan be?
Most successful business plans are between 25 and 25 pages long (excluding appendices). That’s actually quite succinct, so don’t get scared off by the length. If you have more information that might help future readers understand your company better, include it as an appendix instead of expanding on it in the main document. For example, if you need more space to explain how your product works or how you got your start, put that information in an appendix.
Why do you need a business plan?
By writing a business plan, you can show potential lenders or investors how your business idea will work in practice. That way, they know the investment is worth the risk. You can also use it to guide yourself or your co-founders through the process of starting up and running a company. The plan can be flexible, but it still forces you to think about issues that might otherwise get overlooked.
For example, when your business was just an idea in your head, you probably had a vague sense of what its future looked like. By writing the plan and detailing how and why customers will buy your product or service and then giving them more of it, you can bring your vague dream into reality.
What should you include in your business plan?
Every business plan is different, but there are several standard sections that most plans include. For example, you should start with an executive summary that explains your company’s mission and how you will make money. Next, you should include a section on your product or service.
You can also break out separate sections for company operations, marketing and sales information, current financial information (if it’s already available), and future projections (if they aren’t available). Of course, each of these headings is just a guideline—feel free to rearrange the order to suit your needs.
The most important sections in a business plan
Now that you understand the importance of a business plan, it’s time to start creating your own. This part of the article will cover all of the sections you need to include in your business plan.
A brief description of your business. This is kind of like an elevator pitch, which means you should be able to explain your entire business in a few minutes. The executive summary should both explain and ‘sell’ your business.
This section of your business plan should describe your company’s history, including the founding members and their roles. This is basically a more in-depth version of your executive summary.
This is where you explain the problem your company will solve with its products or services. It should be clear and concise but thorough enough for investors to understand the scope of the market opportunity.
This is where you lay out your business values for everyone to see. Your mission statement should express the company’s purpose, guiding philosophy, and direction. For example, if honesty is important to your team, this could be the place you mention that. It should also help employees understand how their work fits into the big picture.
Describe your product or service in detail here. How does it work? What makes it unique? How is it different from competing products on the market right now? Think of this section as a more technical version of your mission statement, so try to stay jargon-free unless you’re sure everyone reading the plan will be familiar with a particular term.
This section is where you present the value proposition of your business. You should explain who your customers are and how they will benefit from what you’re selling. Again, this needs to be both concise and thorough.
This section should outline your market opportunity, including information on demand, customer demographics, and industry competition. This is one of the sections that need to be really in-depth because investors will be reading it very carefully. You need to analyze the market and prove that there is sufficient demand and a gap in the market for your product or service. You will need this information to help you calculate your market size.
This is where you describe your customer personas, which are detailed profiles of different types of customers for your business. Include information on the demographics and psychographics of each persona to help investors understand how many potential customers you have. It’s also important to include their specific needs or desires that your product will satisfy. You should list the characteristics of your average customer, along with the pain points that make up their current situation.
This section gives information on the competitive landscape and how your business will differentiate itself. For example, you could say that you’ll offer a distinctive product or service (such as a superior price or unique feature) or target an under-served market segment. You should also list your main competitors here, along with their strengths and weaknesses.
A SWOT analysis will help you understand your business’s strengths, weaknesses, opportunities, and threats. The advantage of a SWOT analysis is that it helps you identify factors outside of your control that may have an impact on the success or failure of your business.
The marketing section should explain how your company intends to acquire customers and the impact that acquisition has on revenue. In other words, you need to show investors that you can actually make money by selling your product or service.
Your operations plan is exactly how your business is going to run. For example, if you are building a start-up in the healthcare industry, you might need to hire someone with an online master of health administration. This plan should include information about your company’s production and distribution channels, including any partnerships that you may need to sign.
This section should show the financial projections for your company. The first step is to create a detailed business model that explains how revenue will be generated. This should include information on where you’ll source your customers from and how much it will cost to acquire them, along with what they’ll pay or contribute in margins. The next step is to explain how much it will cost for your company to deliver these products and services. The last step is to add up both sides of the equation, and you’ll end up with a total net profit.
The final section should include any pertinent supporting documentation for your business plan, such as surveys or reports that show market demand. You also need to include all of your relevant credentials and the contact details of the people involved with your business.
The advantages of a business plan
• It gives you a detailed map of your business and what it takes to be successful.
• It helps you identify the gaps in information and resources that could affect the success of your project.
• Helps you communicate efficiently with consultants, investors, or other people who may become part of your business circle.
• Prevents you from wasting your time and money developing a business idea that is doomed to fail.
• Allows you to secure seed funding from potential investors to help get the company off the ground.
• Gives you something to work towards so that you can stay focused on your goals.
The disadvantages of a business plan
• If not done properly, a business plan can take up a lot of time and be a large investment for your business.
• It may feel overwhelming to put together all the information that investors will need to see from you.
• It may be too early to think about a business plan if you are still in the idea stage.
• You’ll need to set aside time and money for research, writing, and editing your business plan.
Remember, a well-written business plan can be an invaluable tool when you’re putting together your pitching deck. You should frame it around the questions that investors will ask and use it to help you put together everything that you need for your presentation. Finally, you should always have a business plan in place to help you address the changing realities of your industry.