A business plan is a critical component to getting any business off the ground. It is key to securing financing, documenting your business model, outlining your financial projections, and taking your idea from a business idea to a reality. Especially in a time when over 50% of small businesses fail in their first few years.
Business plans are a necessary tool for all entrepreneurs, business owners, business buyers, and even business school students. But… what exactly is a business plan?
What is a Business Plan?
A business plan is a strategic document for a business that outlines its goals and plans to achieve them. It outlines a company’s go-to-market plan , business and financial projections, market research, purpose of the business, and mission statement. Key human resources, who are responsible for achieving the goals, may also be included in the business plan along with a timeline.
What is the purpose of a business plan?
The purpose of a business plan is threefold : it summarizes the organization’s strategy for long-term execution, it secures funding from investors, and it helps forecast the future needs of the business.
Those who draft a business plan tend to do so for one or more of the following reasons :
1. Get funding from investors.
Because its contents revolve around how businesses succeed, break even, and make a profit, a business plan is used as a tool for raising capital . This document is the entrepreneur’s way of showing potential investors or financiers how their capital will be used and how it will help the business grow.
All banks, investors, and venture capital firms will want to see a business plan before they hand over their money, and investors typically expect an ROI of 10% or more on the capital they invest in a business.
Therefore, these investors need to know if, and when, they will get their money back. They will also want to read about the process and strategy that will lead the business to achieve these financial goals, that is, the context provided by the sales, marketing, and operational plans that come into play.
2. Document the company’s strategy and goals
Business plans can run for dozens or even hundreds of pages, giving their writers the opportunity to explain what a company’s goals are and how the company will achieve them.
To show potential investors that they’ve addressed every question and thought through every possible scenario, entrepreneurs should thoroughly explain their marketing, sales, and operations strategies —from acquiring a physical location for the business to explaining a tactical approach to marketing penetration.
These explanations should ultimately lead to the break-even point of the business , supported by a sales forecast and financial projections.
3. Legitimize a business idea.
Everyone has a great idea for a business – until they put pen to paper and realize it’s not exactly viable. A business plan is an aspiring entrepreneur’s way of proving that a business idea is actually worth pursuing.
As entrepreneurs document their go-to-market process, capital needs, and expected return on investment, they will likely encounter some challenges that will cause them to reconsider their strategies and metrics—and that’s what a business plan is for.
What should a business plan include?
1. Business plan subtitle
Every great business plan starts with a catchy title and subtitle. You want to make it clear that the document is, in fact, a business plan, but the subtitle can help tell your business story in one short sentence.
2. Executive Summary
Even though this is the last part of the business plan you write, it is the first (and perhaps only) section that stakeholders will read. The executive summary of a business plan sets the stage for the rest of the document. It includes the company’s mission and/or vision, value proposition , and long-term goals .
3. Company and business description
This short section of your business plan will detail your company name, years in business, key offerings, and positioning statement. You may also want to include your core values or a brief history of the company.
The role of the company description in a business plan is to introduce your company to the reader in a compelling and concise manner.
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4. Business opportunities
The business improving production efficiency in the automotive industry opportunity should convince investors that your organization meets the market’s needs in a way that no other company can. This section explains the specific problem asia phone number your company solves in the market and how it solves it . It will include your value proposition as well as some high-level information about your target market.
5. Competitor Analysis
Almost every industry has more than one player in the market. Even if your company has 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 will take an objective look at the industry landscape to determine where your company fits in.
A SWOT analysis or Porter’s 5 Forces analysis is an organized way to organize this section.
6. Target market (Market research)
Who are your business’s primary customers and why? The target market portion of your business plan outlines this in detail. The target market should explain the demographics, psychographics, behavioral, and geographic data of your ideal customer .
7. Marketing plan
Marketing is expansive, and it will be tempting to cover every type of marketing possible, but a brief overview of how you will market your Unique Selling Proposition (USP) to your target audience, followed by a tactical plan will suffice.
Think broadly and narrow from there: Will you focus on a slow and steady game where you make an initial investment in organic customer acquisition ? Or will you generate a lot of quick customers using a pay-to-play advertising strategy ?
8. Financial summary
Money doesn’t grow on trees, and even the most digital and sustainable businesses have expenses. Outlining a financial summary of where your business is now and where you want it to be in the future will flesh out this section. Consider including all the monetary information that will give potential investors a glimpse into the financial health of your business. Assets, liabilities, expenses, debt, investments, revenue, and more all count here.
9. Team
So, you’ve outlined some big goals, the business opportunity is sound, and the industry is ready for what you have to offer. Who’s responsible for turning all that high-level talk into results? The “team” section of your business plan answers this question by providing an overview of the roles responsible for each goal. Don’t worry if you don’t have all your team members on board yet; knowing which roles to hire is helpful when seeking funding from investors.
10. Funding requirements
Remember that one of the goals of a business plan is to secure funding from investors, so you will need to include the funding requirements you would like to have met. The amount your business needs, why, and for how long will satisfy the requirement in this section.
Types of Business Plans
There is no one-size-fits-all business plan because there are many different types of businesses on the market today. From single-founder startups to legacy names that need to stay competitive, every type of business needs a business plan that is tailored to its needs. Below are some of the most common types of business plans.
Business plan for startups
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 a startup business plan is that it is written completely from scratch. Startup business plans typically reference existing industry data and explain unique business strategies and go-to-market plans.
Business Acquisition Plan
A business plan for an existing business 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. It should also discuss the current state of the business and why it is for sale.
Business Repositioning Plan
When a company wants to avoid acquisition, reposition its brand, or try something new, CEOs or owners will develop a corporate repositioning plan .
This plan will serve to:
Recognize 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 comply.
Companies planning a business repositioning do so – proactively or retroactively – because of a change in market trends and customer needs.
Business Expansion Plan
Expanding a successful business to another location typically requires a business plan, as the project may focus on a new target market and require more capital. This type of plan refers to the sales, revenue, and success of existing locations .
Business Plan Template
At the end of the day, a business plan is simply an explanation of a business idea and why it will be successful. The more detail and thought you put into it, the more successful your plan and the business it outlines will be.
When writing your business plan , you’ll need extensive research , feedback from your team or board, and a solid template to organize your thoughts. If you need the latter, download our business plan template below to get started.
