What is a business plan?
A business plan is a written strategy for a company that outlines its objectives and strategies for accomplishing them. It includes a company’s go-to-market strategy, financial predictions, market research, goal statement, and business purpose. The business plan may include key personnel who are responsible for completing the objectives, as well as a schedule.
A business plan serves three purposes: it describes the organization’s strategy in order to carry it out over time, it secures funding from investors, and it aids in forecasting future company demands.
A Business Plan’s Goals
Someone who is writing a business plan is most likely doing so for one or more of the following reasons:
1. Securing financing from investors.
A business plan is utilized to source financing because its contents center around how businesses prosper, break-even, and generate a profit. This document is a technique for a business owner to show potential investors or lenders how their money will be put to good use and help the company grow.
Before handing over money, all banks, investors, and venture capital firms will want to see a business plan, and investors normally demand a 10% or higher return on their investment.
2. Documenting a company’s strategy and goals.
No stone should be left unturned in a business plan. Business plans can be dozens or even hundreds of pages long, allowing their authors to clarify what a company’s goals are and how it aims to attain them.
Entrepreneurs should thoroughly explain their marketing, sales, and operations strategies from acquiring a physical location for the business to explaining a tactical approach for marketing penetration to show potential investors that they’ve addressed every question and thought through every possible scenario.
These explanations should eventually lead to a business’ break-even point, which should be supported by a sales forecast and financial predictions, and the business plan writer should be able to explain why anything in the plan is included.
3. Legitimizing a business idea.
Everyone has a fantastic business concept — until they put pen to paper and realize it isn’t viable.
A business plan is a tool used by prospective entrepreneurs to demonstrate that a business idea is viable.
Entrepreneurs are sure to run into a few snags when they describe their go-to-market process, capital requirements, and estimated return on investment, which will cause them to second-guess their tactics and KPIs — which is exactly what the business plan is for.
It ensures that an entrepreneur has all of their ducks in a row before presenting their business idea to the world, as well as reassuring readers that whoever wrote the plan is serious about the idea, having spent hours thinking about it, fleshing outgrowth tactics, and calculating financial projections.
What does a business plan need to include?
1. Business Plan Subtitle
Every great business plan starts with a captivating title and subtitle. You’ll want to make it clear that the document is, in fact, a business plan, but the subtitle can help tell the story of your business in just a short sentence.
2. Executive Summary
Although this is the last part of the business plan that you’ll write, it’s the first section (and maybe the only section) that stakeholders will read. The executive summary of a business plan sets the stage for the rest of the document. It includes your company’s mission or vision statement, value proposition, and long-term goals.
3. Company Description
This brief part of your business plan will detail your business name, years in operation, key offerings, and positioning statement. You might even add core values or a short history of the company. The company description’s role in a business plan is to introduce your business to the reader in a compelling and concise way.
4. The Business Opportunity
The business opportunity should convince investors that your organization meets the needs of the market in a way that no other company can. This section explains the specific problem your business solves within the marketplace and how it solves them. It will include your value proposition as well as some high-level information about your target market.
5. Competitive Analysis
Just about every industry has more than one player in the market. Even if your business owns the majority of the market share in your industry or your business concept is the first of its kind, you still have competition. In the competitive analysis section, you’ll take an objective look at the industry landscape to determine where your business fits. A SWOT analysis is an organized way to format this section.
6. Target Market
Who are the core customers of your business and why? The target market portion of your business plan outlines this in detail. The target market should explain the demographics, psychographics, behavioristics, and geographics of the ideal customer.
7. Marketing Plan
Marketing is expansive, and it’ll be tempting to cover every type of marketing possible, but a brief overview of how you’ll market your unique value proposition to your target audience, followed by a tactical plan will suffice. Think broadly and narrow down from there: Will you focus on a slow-and-steady play where you make an upfront investment in organic customer acquisition? Or will you generate lots of quick customers using a pay-to-play advertising strategy? This kind of information should guide the marketing plan section of your business plan.
8. Financial Summary
Money doesn’t grow on trees and even the most digital, sustainable businesses have expenses. Outlining a financial summary of where your business is currently and where you’d like it to be in the future will substantiate this section. Consider including any monetary information that will give potential investors a glimpse into the financial health of your business. Assets, liabilities, expenses, debt, investments, revenue, and more are all fair game here.
So, you’ve outlined some great goals, the business opportunity is valid, and the industry is ready for what you have to offer. Who’s responsible for turning all this high-level talk into results? The “team” section of your business plan answers that question by providing an overview of the roles responsible for each goal. Don’t worry if you don’t have every team member on board yet, knowing what roles to hire for is helpful as you seek funding from investors.
10. Funding Requirements
Remember that one of the goals of a business plan is to secure funding from investors, so you’ll need to include funding requirements you’d like them to fulfill. The amount your business needs, for what reasons, and for how long will meet the requirement for this section.
Types of Business Plans
There’s no one size fits all business plan as there are several types of businesses in the market today. From startups with just one founder to historic household names that need to stay competitive, every type of business needs a business plan that’s tailored to its needs. Below are a few of the most common types of business plans.
1. Startup Business Plan
As one of the most common types of business plans, a startup business plan is used for brand new business ideas. This plan is used to lay the foundation for the eventual success of a business.
The biggest challenge with the startup business plan is that it’s written completely from scratch. Startup business plans typically reference existing industry data and explain unique business strategies and go-to-market plans.
2. Business Acquisition Plan
Believe it or not, investors use business plans to acquire existing businesses, too — not just new businesses.
A business plan for an existing company will explain how an acquisition will change its operating model, what will stay the same under new ownership, and why things will change or stay the same. Additionally, the business plan should speak to what the current state of the business is and why it’s up for sale.
For example, if someone is purchasing a failing business, the business plan should explain why the business is being purchased and what the new owner will do to turn the business around, referencing previous business metrics, sales projections after the acquisition, and a justification for those projections.
3. Business Repositioning Plan
When a business wants to avoid acquisition, reposition its brand, or try something new, CEOs or owners will develop a business repositioning plan.
This plan will:
- Acknowledge the current state of the company.
- State a vision for the future of the company.
- Explain why the business should (or must) be repositioned.
- Outline a process for how the company will adjust.
4. Expansion Business Plan
Expanding a successful business venture into another location typically requires a business plan, as the project may focus on a new target market and demand more capital.
Fortunately, an expansion business plan isn’t like a startup business plan in that it starts from scratch. Instead, this type of plan references sales, revenue, and successes from existing locations. However, as great as a reference as these points can be, it’s important to not be too reliant on them since it’s still a new business that could succeed or fail for a myriad of reasons.
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