A business plan is a document that provides the blueprint for starting, building and operating a new or existing business. It can be written in any format such as on paper, computer file, digital media. A good plan will identify your goals and objectives; provide comprehensive information about who you are doing business with (your competition); lay out financial projections to show potential success of the company’s activities; discuss marketing strategies and brand identity; outline legal considerations in registering the company name etc.,
Business plans are a way to help entrepreneurs plan their company. They can be very complex and difficult, but they are also an effective tool for starting a business. Read more in detail here: example of a business plan.
This article is part of our “Business Planning Guide,” which is a collection of our articles that will assist you in the planning process.
What is the definition of a business plan? In its most basic form, a business plan is a road map for your company, outlining objectives and the steps you’ll take to attain them.
I’ll go through the parts of a business plan in this post, as well as:
To begin, don’t believe the outdated notion that a business plan must be a large, formal document that you must create like a term paper. That is no longer the case. While going through the business planning process has several advantages, only a tiny percentage of businesses need the formal business plan document necessary for seeking investors or securing a commercial loan.
Most of us just need a Lean Business Plan for internal usage, consisting of bullet point lists and key estimates. Good companies maintain their Lean Plans up to date at all times.
The lean business plan is excellent news since it simplifies the planning process. You start small and work your way up. You don’t do anything that isn’t related to your company, thus you don’t discuss your management team (for example) until you require it for outsiders. There’s more on it under the Lean Plan section.
Furthermore, even for those of you who do need to generate a formal business plan document, the work of producing one now is much less onerous than it formerly was. Business plans are now simpler, shorter, and easier to write than they’ve ever been before. Modern business plans are shorter, simpler to create, and, hopefully, easier to understand (and you can always hire one of our MBA business plan consulting professionals to design one for you).
Let’s begin with the fundamentals.
What is the definition of a business plan?
You’ve created a business plan—or at least the very basic components of one—if you’ve ever scribbled a company concept on a napkin with a few tasks to complete. A business plan is, at its core, a blueprint for how your firm will operate and how you will ensure its success.
How long should your strategy last?
A business plan is often lengthier than a list on a napkin (although, as you’ll see below, writing your full business plan on one sheet is possible—and sometimes perfect). It may be as simple as the Lean Plan, which contains a few bullet points to concentrate strategy, tactics, milestones to monitor activities and responsibilities, and the essential financial predictions you need to plan: cash flow, budget, and spending, for me in practice and for most actual organizations.
What is the best way to communicate your company plan?
A word on format: business plans should only be printed on rare occasions, such as when information has to be shared with outsiders or team members. They should otherwise be dynamic documents that you keep on your PC.
Because you’re continually adjusting the plan because you’re often analyzing your business’s health, the printed version is essentially a snapshot of what the plan was on the day it was produced.
What is included in a formal plan?
If a formal business strategy is required, it should contain the following elements:
These are referred to as the “parts” or “chapters” of the business plan, and I’ll go through each one in further detail below.
How frequently should your company strategy be revised?
The review schedule—set precise times to examine your progress toward your goals—is the most critical piece of business planning in all circumstances. For example, “the third Thursday of every month” is a straightforward example.
It’s especially important now to examine your milestone progress and compare your actuals to your financial estimates. A true business plan is always flawed, which is why it has to be reviewed and revised on a frequent basis. It’s also never finished, since the process of reviewing and rewriting is so important.
What good is a business strategy if you don’t have one?
You may skip the business plan if you only want to do some freelancing work to augment your income. However, if you’re going on a larger project that will need a substantial amount of time, money, and resources, you’ll need a business plan.
If you’re serious about your company, meticulous preparation is essential to your success.
Many individuals mistakenly believe that business plans are only used to establish a new firm or to seek for business financing. However, whether or not a company need fresh loans or investments, business plans are essential for strategic planning. Existing firms should keep their business plans up to date as market circumstances change and new possibilities present themselves.
Every firm has long- and short-term objectives, sales targets, and spending budgets—a business plan incorporates all of these elements and is as important to a startup seeking funding as it is to a 10-year-old company seeking expansion.
1. Start-up companies
The most common situation for business planning is for a startup, in which the plan assists the founders in breaking down uncertainty into manageable chunks, such as sales projections, expenditure budgets, milestones, and activities.
The necessity becomes apparent as soon as you realize you don’t know how much money you’ll need or when you’ll need it without first writing out your predicted sales, costs, expenditures, and payment schedule. And this is true for all entrepreneurs, regardless of whether they need to persuade investors, banks, or friends and family to contribute funds to the new enterprise.
In this situation, the business plan explains what the new firm will do, how it will achieve its objectives, and, most crucially, why the founders are the best individuals for the job. A starting business plan also outlines the amount of money required to get the company up and running, as well as the early growth stages that will lead to profitability (hopefully!).
2. Existing companies
Not every business plan is for a company that is about to launch the next great thing. Existing organizations utilize business plans to manage and direct their operations strategically, not merely to respond to market changes and seize new possibilities. A plan is used to reinforce strategy, set metrics, manage duties and objectives, measure outcomes, and manage and plan resources, such as crucial financial flow. They also employ a plan to establish a timetable for frequent evaluation and modification.
For established firms, business plans may be a crucial driver of growth. Did you know that firms that make plans and utilize them to manage their operations grow 30% faster than those that go by the seat of their pants? This was identified in a research conducted by Professor Andrew Burke, the founding Director of the Bettany Centre for Entrepreneurial Performance and Economics at Cranfield School of Management.
A strong business planning process may be a competitive advantage for established organizations, allowing them to develop quicker and innovate more. Business plans in current firms, rather than being a static document, have evolved into dynamic tools for tracking growth and spotting possible issues before they wreck the company.
Selecting the Right Business Plan for Your Company
Given that business plans are used for a variety of objectives, it’s no wonder that they exist in a variety of formats.
Before you begin developing your business plan, consider who your target audience is and what your plan’s objectives are. While certain elements of practically every business plan are universal, such as sales estimates and marketing strategy, business plan forms vary greatly depending on the audience and kind of firm.
If you’re creating a business plan for a biotech company, for example, you’ll include information regarding government approval procedures. Details concerning location and improvements may be crucial aspects if you’re developing a restaurant plan. Furthermore, the language used in the biotech firm’s business plan would be much more technical than the language used in the restaurant’s strategy.
The length, intricacy, and presentation of plans may also vary substantially. Plans that are only used for internal strategic planning and management and never leave the office may contain more informal language and lack visual quality.
A strategy headed for the desk of a top venture investor, on the other hand, will have a high level of polish and will concentrate on the high-growth areas of the company as well as the experienced team that will provide outstanding outcomes.
Here’s a short rundown of the three most prevalent sorts of plans:
Business strategy on a single page
A one-page business plan is exactly what it sounds like: a one-page description of your company’s operations. No, this does not imply using a tiny font size and cramming a lot of content into a single page—it just means that the company is presented in extremely succinct, straight, and to-the-point language.
A one-page business plan may be used for two things. To begin with, it may be an excellent tool for introducing your company to outsiders, such as possible investors. Because most investors don’t have time to read lengthy business plans, a basic one-page strategy is sometimes a better way to obtain that initial meeting. A more extensive strategy will be required later in the process, but the one-page plan is ideal for getting your foot in the door.
This straightforward plan style is also ideal for startups that wish to sketch out their concept in broad strokes. Consider a one-page business plan as a more formalized version of scribbling your concept on a napkin. Keeping the business concept on one page allows you to rapidly examine the complete concept at a glance and tweak notions as new ones emerge. Learn how to write a one-page business plan in this article.
The Business Plan for Lean
A Lean Plan is more extensive than a one-page plan and contains more financial data, but it is shorter than a standard business plan. Internally, lean plans are more likely to be employed as strategic planning and growth tools.
The Lean Company Plan skips the formalities that come with presenting a plan to a bank or investor for a loan or investment, instead focusing almost entirely on the business strategy, tactics, milestones, KPIs, budgets, and projections.
Because everyone in the organization almost surely knows this information, these lean business plans omit components like company history and management team. If you’re not writing for investors and hence aren’t concerned with an exit, you don’t include an exit strategy section in your business plan.
Bullet points outline strategy, tactics, clear exact dates and activities, and crucial data such as predicted sales, expenditures, and cash flow in the simplest lean business plan. When printed, it’s just five to ten pages long. And just a few Lean Plans need printing. Allow them to remain on the computer. At least once a month, review and modify them. The first Lean Plan may be completed in a few hours (or less), and a monthly review and modification can be completed in an hour or two.
Lean business plans are management tools that help startups and established enterprises flourish. They assist company leaders in making strategic choices and tracking their progress toward their objectives.
Business strategy for the outside world (a.k.a the standard business plan document)
External business plans, also known as formal business plans, are intended for outsiders to examine and convey information about a company. A detailed business plan is most often used to persuade investors to finance a firm, and it is also used to support a loan application. This form of business strategy is sometimes used to attract, train, or absorb important workers, but it is uncommon.
The internal business plan, often known as the Lean Plan, is expanded into a formal business plan document. It’s mostly a snapshot of the internal plan at a certain point in time. However, while an internal plan lacks polish and formality, a formal business plan document should be well-presented, with more attention to detail in the language and structure. See our sample plan collection for examples of business plans to get a sense of what the final result will look like.
Furthermore, an external strategy outlines how prospective funding will be utilized. Investors don’t simply throw over money with no conditions attached; they want to know how their money will be spent and what their anticipated return will be.
Finally, external plans place a significant focus on the company’s founding staff. Because investors prefer people over ideas, it’s vital to include biographies of key team members and how their history and expertise will aid in the company’s growth.
What should your formal business plan contain?
While we’ve just gone over a few different kinds of business plans, there are several crucial aspects that present in almost all of them. The review schedule, strategy overview, milestones, responsibilities, metrics (numerical objectives that may be monitored), and basic predictions are among these components. Sales, costs, expenditures, and cash flow are all projected.
These essential parts develop naturally when the company need them for their specific purpose.
The sequence isn’t important, so don’t worry about having the “perfect” outline as long as you have one that works. Here’s what they usually consist of:
a brief overview
The executive summary is your company’s calling card, much like the old cliché that you never get a second opportunity to create a first impression. It should be brief and focus on the plan’s main points. Because many prospective investors would never read beyond the executive summary, it must be captivating and engaging.
The executive summary should include a concise overview of the issue your company addresses, your solution, the company’s target market, major financial highlights, and a description of who on the management team performs what.
While it may be tough to include all you want in an executive summary, keeping it brief is essential. If you’ve piqued your reader’s interest, they’ll want to read on for additional information in the plan’s body. You may make your executive summary out of your one-page company plan. And LivePlan has an outstanding alternative in the form of the Pitch page, a standard overview (as of August 2018).
One element of a formal plan that is often valuable is the market section, which includes market analysis, statistics, predictions, descriptions, and competition.
Market to be targeted
It’s just as crucial to specify who you’re selling to as it is that your firm solves a real-world issue that individuals or other companies face. Understanding your target market is essential for creating successful marketing campaigns and sales procedures. In addition to marketing, your target market will determine how your business develops.
Describe the most significant developments now occurring in your target market. Are there any noticeable changes in the demands, demographics, or preferences of prospective customers? Ideally, you should explain how these trends will benefit your goods or services over your rivals’.
If, for example, individuals in your industry are increasingly utilizing their smartphones to do activities that they previously completed on a computer, your mobile app may be well-positioned to acquire a larger share of the market.
Explain how your target market has grown or shrunk over the last several years. Obviously, research is essential in this case. To evaluate market growth, you may utilize Internet searches, trade groups, market research companies, journalists that cover your industry, or other reliable sources. A expanding market is positive because it indicates that there will be more demand for your service in the future. In a poor or decreasing market, though, you may still succeed. It’s just necessary to recognize that you’re swimming against the current.
What are your clients’ alternative choices for addressing their requirements, and how is your solution superior for them?
Services and products
The goods and services portion of your company plan gets into the heart of your objectives. You’ll describe the issue you’re addressing, how you’re solving it, the competitive environment, and your company’s competitive advantage in this part.
Depending on the sort of business you’re beginning, this part may also include information on the technology you’re utilizing, intellectual property you possess, and other important aspects of the items you’re developing now and in the future.
Sales and marketing
The marketing and sales strategy lays out the tactics you’ll use to reach out to your target market. This section of your business plan explains how you’ll position your firm in the market, how you’ll price your goods and services, how you’ll advertise your offers, and any sales methods you’ll require.
Include plans for sites and facilities, technology, and regulatory challenges, depending on the details of your firm.
Metrics and milestones
Plans are worthless if they aren’t put into action. The milestones and metrics chapter of your business plan spells out specific activities that you want to execute, along with due dates and names of persons who will be held accountable.
This chapter should also include a list of the important metrics you intend to utilize to measure your company’s progress. This might be the amount of sales leads produced, the number of page visits on your website, or any other important measure that aids in determining the health of your company.
Overview of the Business
The business overview is a quick account of the firm’s legal structure, ownership, history, and location for external planning. Although it’s typical to include a mission statement in the company overview, it’s not required in all business plans.
Internal planning often leave out the corporate overview.
For entrepreneurs seeking funding, the management team chapter of a business plan is essential, but it may be skipped for nearly any other form of plan.
The management team section should contain pertinent team profiles that demonstrate why your management team is comprised of the best candidates for the job. After all, fantastic ideas abound; it takes a gifted entrepreneur to convert them into flourishing enterprises.
Business plans should highlight not just a company’s strengths, but also areas where it may develop and holes that need to be addressed. Identifying management team shortages demonstrates expertise and forethought, not a lack of capacity to grow the company.
a financial strategy
A finance strategy is an important part of practically every company plan. Running a successful company requires keeping track of how much money you get in and how much money you spend. A sound financial strategy may assist in determining whether to recruit additional personnel or purchase new equipment.
A comprehensive financial plan may help you figure out how much cash your firm needs to get started or develop, so you know how much money to ask for from the bank or from investors if you’re a startup and/or seeking investment.
A typical financial plan comprises the following items:
Check out our extensive business plan outline, download a business plan template in Word format, or browse our collection of example business plans to see how other companies have organized their plans and described their company strategy.
Getting forward with your company strategy
Firms that develop business plans grow 30 percent faster than businesses that don’t plan, as I said previously in this post. Taking the basic step of doing any preparation at all will undoubtedly give your company a substantial edge over competitors that proceed with no defined plans.
However, just developing a business strategy will not ensure your success.
The easiest method to get the most out of your company plan is to utilize it as a management tool on a regular basis. To accomplish so, your business plan must be evaluated and altered on a regular basis to reflect current circumstances and new knowledge gathered as you manage your company.
When you’re operating a company, you’re always discovering new things about your consumers, such as what they like and don’t like, and which marketing strategies work and which don’t. Your company plan should reflect the lessons learned and serve as a roadmap for your future approach.
All of this may seem to be a lot of labor, but it isn’t.
How to get the most out of your strategy in the shortest period of time
- To rapidly explain your approach, use your one-page company plan. Use this document to examine your high-level plan on a regular basis. Are you still helping your clients with the same issue? Has your target demographic shifted?
- To record procedures that work, use a Lean Plan. To offer new workers a clear understanding of your overarching plan, share this paper with them.
- Make a list of what you want to do in the following 30 days and set goals for yourself. Assign these tasks to team members, assign deadlines, and, if required, budget for them.
- Maintain a current sales estimate and spending budget. Revise your prediction as you learn more about client purchasing habits.
- At least once a month, compare your anticipated budgets and projections to your actual outcomes. Based on the findings, make changes to your strategy.
- The most crucial component of using your company plan as a development engine is to examine it on a regular basis. The review doesn’t have to last more than an hour, but it should be scheduled on your calendar on a regular basis. Evaluate your key figures in comparison to your plan, evaluation the goals you wanted to achieve, create new milestones, and perform a short review of your overall strategy in your monthly review.
It’s a lot easy than it seems, and it may get you into the “30% growth club” sooner than you think.
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A business plan is a document that outlines how you will run your business. It includes information on your products, services, and the market you are going to be in. You can also include financial projections and other important data. Reference: how to write a business plan.
Frequently Asked Questions
What exactly is a business plan?
A: A business plan is an overview of your companys goals and strategies to achieve those goals. It will include details on what you want to do, how much money it will take, when it can be achieved, who the audience should be for your product/service etc.
What are the 3 main purposes of a business plan?
A: A business plan is a tool used by companies to determine the feasibility of their project. There are three main purposes for this document, these being planning and organizing what needs to be done in order for the companys idea or venture to succeed. In addition, it helps set goals that can help assess if an endeavor will achieve profitability.
What is a business plan and why is it important?
A: A business plan is a document that provides an overview of what you hope to achieve, the resources you need and how they will be used. Its important because it shows potential investors or lenders just what your company may expect in terms of earnings and growth over time.
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