When written effectively, a business plan can help raise capital, inform decisions and attract new talent.
Developing a business plan is often the first step in transforming the business from an idea to something tangible . As you write, your thoughts begin to solidify into a strategy, and a way forward begins to emerge. However, a business plan is not just the domain of startups. Established companies can also benefit from revisiting and rewriting their own business plan. In any case, formal documentation can produce the clarity needed to motivate the team , attract investors or inform future decisions.
Regardless of your industry or the size of your team, the task of writing a business plan—a document packed with details and records—can seem daunting. Don’t let that stop you; there are easy steps you can take to get started.
Why is business plan needed and is Business plan important?
A business plan is a formal document that outlines the goals, direction, finances, staff, and future planning of your business. It can be aimed at investors, to raise capital, or used as an internal document to align teams and provide guidance. It typically includes extensive market research, competitive analysis, financial documentation, and an overview of the business and marketing strategy. When written effectively, a business plan can help prescribe actions and keep business owners on track to achieve business goals.
Who needs a business plan?
A business plan can be particularly useful during a company’s early growth and serve as a guiding force amidst the uncertainty, distractions, and sometimes rapid developments involved in starting a business . For companies, a business plan should be an up-to-date document that guides decision making and facilitates purposeful growth.
Seven Necessary Components of Every Business Plan
While there is no defined format for writing a business plan, there are several elements that are typically included. We present what is important to consider when developing a business plan.
1. Executive Summary
The executive summary should be no more than half a page and should briefly present your business and describe the purpose of the business plan. Are you writing the plan to attract capital? If this is the case, specify the amount you expect to raise and how you will repay the loan. If you are writing the plan to align your team and provide guidance, explain in a preliminary way what you hope to achieve with this alignment and the size and state of your current team.
The executive summary should explain what your company does and present an introductory overview of your financial situation and your main accomplishments to date.
2. Company Description
In order to present your company properly, it is important to also describe the industry in general. What is the financial value of your market? Are there market trends that will affect your company’s success? What is the situation of the sector and its potential in the future? Use data to back up your statements, and remember to include the full range of information—both positive and negative—to present investors and your employees with a complete and accurate picture of your business environment.
Proceed with describing your business and what it offers customers. Are you an established company or a developing startup? What is your leadership team like and how many employees do you have? This section should present the historical and future context of your company, including the history of the foundation, the mission statement and the vision of the future of the company.
It is essential to show your differential in the company description, as well as any advantages you may have in terms of specialized talent or cutting-edge technology. This is usually one of the first parts of the plan to be written.
3. Market and opportunity analysis
Research is important to completing a business plan, and ideally more time should be spent on research and analysis than on writing the plan itself. Understanding the size, growth, history, future potential, and current risks inherent in the market at large is essential to the success of your business. These considerations should be described here.
In addition, it is important to include research on the target audience of your product or service. This can be in the form of an image of fictitious customers or with a broader overview of revenue, location, age, gender, and shopping habits of your current and potential customers.
Research should be objective, but the analysis in this section is a good place to reiterate your differentiator and the ways in which you plan to capture the market and outperform the competition.
4. Competitive Analysis
In addition to explaining the elements that differentiate you from the competition, it is important to present an in-depth analysis of the competitors themselves.
This research should delve into information on operations, finances, history, leadership and distribution channels of your direct and indirect competitors. It should explore these competitors’ value propositions and explain the ways in which you can compete or exploit their strengths and limitations.
5. Execution plan: operations, development, management
This segment details how you will do the work necessary to fulfill the plan. It should include information about your organizational structure and the day-to-day operations of your staff, service providers, and physical and digital assets.
Consider including your organization chart and more detailed information about the leadership team: Who are they? What are your experiences? What do they have to offer? It might be a good idea to include the resumes of key people on your team.
For startups, the execution plan should include the allotted time to start operations and then to generate profitability. For established businesses, it is also recommended to include the time allotted to execute the plan and the ways in which you will modify current operations.
If necessary, also include your strategy of hiring new team members and expanding into different markets.
6. Marketing plan
It’s essential to have a comprehensive marketing plan in place as you scale operations or start a new strategy—and this should be shared with stakeholders and your employees. This segment of the business plan should explain how you will promote your business, attract customers, and retain existing customers.
Include the brand message, marketing assets, timeline and budget to engage consumers across different channels. You can also include a marketing SWOT analysis of your strengths, limitations, opportunities and threats. Assess how competitors advertise their business and how your target audience responds—or doesn’t respond—to these messages.
7. Financial history and projections
It is important to disclose all the finances involved in running your company in the business plan. This way, your shareholders can correctly understand how you predict their performance in the future and the progress made so far.
You must include the income statement, which describes annual net profit or loss; a cash flow statement, which shows the financial resources needed for you to launch or scale operations; and a balance sheet showing financial liabilities and assets.
Also, if you are applying for funding, you will need to define exactly how much you need, where you will apply these funds and how you intend to pay.
12 top tips for writing a successful business plan :etop tips
Now that you know what components are traditionally included in a business plan, it’s time to consider how you will actually organize the document.
Here are 12 important factors you should consider when writing a business plan. These broad principles will help you write a business plan that fulfills your purpose (whatever that is) and becomes an easy reference for years to come.
1. Don’t be wordy
Use clear and concise language and avoid jargon. When a business plan is too wordy, it is less likely to be used as it should and more likely to be forgotten or misunderstood by stakeholders.
2. Show why you care
Let your passion for the business shine through ; show employees and investors why you care (and why they should too).
3. Submit supporting documents
Don’t be afraid to come up with a long list of attachments, including team member resumes, developed customer images, product demos, and examples of internal or external messaging.
4. Reference data
All information about the market, your competitors and your customers must be referenced to reliable and relevant data points.
5. Search, search, search
The research presented in the business plan should take longer than the writing itself. Consider accompanying the survey as supporting documentation.
6. Clearly demonstrate your differentials
At every opportunity, it’s important to emphasize how your product or service sets you apart from the competition and helps solve a problem for your target audience. Don’t be afraid to reiterate these differentiating factors throughout the plan.
7. Be objective in your research
As important as it is to present the company and the benefits you offer to customers, it is also important to be objective in the data and surveys you consult. Show the strengths and weaknesses of market research and have considered all possible eventualities.
8. Know the purpose of your plan
It’s critical that you understand the purpose of your plan before you start researching and writing. Be clear about the plan, i.e. whether the objective is to attract investment, align teams or provide guidance.
9. Identify your audience
Just as your business plan must have a clearly defined purpose, you must have a clearly defined audience. Who are you writing to? New investors? Current employees? Possible collaborators? Current shareholders?
10. Avoid jargon
Avoid using industry-specific jargon unless it’s completely unavoidable, and try to make the business plan as easy to understand as possible — for all possible stakeholders.
11. Don’t be afraid to make changes
The business plan must evolve as the company grows. The business plan document must also evolve. Revise and revamp the business plan as needed, and remember the most important factor: having a plan in place, even if it changes.
A business plan shouldn’t just be one line on your to-do list. It should be consulted and used as intended at this time and in the future. Keep the business plan close to you and use it to inform your decisions and guide your team for years to come.
Creating a business plan is an important step in the company’s growth.
If you are just starting up or running a current operation, writing an effective business plan can be an important indicator of future success. It can be a foundational document from which you will grow and develop . It can act as a constant reminder to employees and customers of what you stand for and the direction you are taking. In addition, it is a way of proving to investors that your business, your team and your vision are worth the investment.