What’s the first thing that comes to mind when you think of a business plan? You might imagine a lengthy document that takes weeks to pull together or prevents you from focusing on your day-to-day responsibilities. The reality, however, is that creating a business plan isn’t nearly as daunting as it first seems. Plus, almost every business can benefit from going through the process of writing a business plan.
A recent study found that businesses that write plans and use them to manage their business grow 30 percent faster than businesses that take a “seat of the pants” approach. The truth is a business plan is a powerful tool that can help you spot potential issues and propel your business forward.
What is a business plan?
A business plan is simply a roadmap that outlines your goals for the business and how you plan to make them a reality. Most business plans contain similar types of information and there are templates that you can use to get started, but they are not a ‘one size fits all’ approach. Your business plan should be tailored to your business, audience and needs.
Here are the most important things you need to know about writing a business plan.
What is a business plan?
Lots of people have great business ideas. What matters most, however, is the capability of those running the business and the execution of the ideas. Creating a business plan helps you fine-tune your ideas and demonstrate why they’ll be successful. This help validate your business and encourages other stakeholders, such as investors, lenders or potential partners, to take it seriously.
There are a variety of situations in which a business plan can be handy, or even essential. Entrepreneurs may create a business plan to define and develop their ideas, or to get in front of investors. For startups or new businesses, a solid plan can demonstrate the strength of your business when you do not yet have a strong track record of revenue or customer acquisition. These businesses might not yet have a product or service in market and lenders or investors need to see what the business wants to do, how they’re going to do it and why the founders are best placed to run it.
Established businesses can use a business plan to support a business loan application. It can help you gain clarity about new products and services, target audiences or markets and evaluate growth opportunities - such as partnerships or an international expansion. You plan can also serve as a benchmark, helping you set and progress toward new goals. You should try to think of your business plan as a ‘living’ document - one that you update consistency as you progress through your goals.
What is a business plan?
Business plans are as unique as the businesses they describe. Your business plan should be tailored to your needs and there are a few different types of formats, depending on your goals.
- One page business plan
A one-page business plan provides a quick overview of your business. This type of plan should be concise and contain only the most important information. It is not an invitation to fit every detail you can onto the page. It serves as an introduction to other stakeholders, such as potential investors or partners.
- ‘Internal only’ business plan
This type of business plan is best used to help you focus on your internal business goals and strategy. It can be used to track key milestones and achievements, budgets, and forecasts. As it is only to be used internally, it usually does not include information geared toward external stakeholders, such as your company history or details about your management team.
- Traditional business plan
A traditional business plan is designed to inform external parties and potentially, get them excited about working with (or lending to) your business. This format is what business owners would most commonly use to support a business loan application.
The essentials of a good business plan:
While there are different business plan formats, there are details that are generally common to most plans. This is the information that external stakeholders will be interested to know before entering into a loan, investment or partnership.
- Executive summary
While it might come first in your plan, it is usually best to save this section for last when writing. That’s because your executive summary should capture all of the key highlights of the plan and you’ll need a good grasp of the highlights to write it well. The idea is to spark the reader’s interest, so keep it concise and compelling. Parts of the summary include:
- 1-2 sentence overview about your business
- The problem
- Your solution
- Your target market
- Your competition
- Your team
- Financial highlights
- Funding requirements
- Key milestones / achievements
- Company overview
You may choose to include some more specific company details, such as the ownership history, legal structure and physical location(s). This section might also include your company’s mission statement. The company overview, however, can generally be omitted from internal only business plans.
- The opportunity
This is where you will want to talk more specifically about the problem that you’re solving, the products and services that will solve it, and how those products fit into the current competitive landscape. The idea is to showcase what gives your business a competitive advantage. You should be sure to include information about the unique technologies you are using, new innovations or product developments, intellectual property owned by the business and how your products benefit your customers.
- The execution
If the previous section is the ‘what’ of your company, the next section of your business plan should be the ‘how’. This is where you will include details on your marketing plan and strategies and tactics you are using (or will use) to reach your intended target audience. Provide more detail on the types of customers you want to reach and how you plan to sell to them. Include information on how you plan to position your business in the market and how your products and services are priced. It also might make sense to offer a brief description of the customer journey or sales and user experience processes.
- Major company milestones
Demonstrate why you think your business will be a success by including specific goals you plan to accomplish (or have already accomplished) as well as expected deadlines and information about what is needed to achieve them. Provide more detail on how you will measure success and the metrics by which you will track your progress. For instance, businesses might track customer acquisition, sign-ups or registrations of interest, or website traffic.
- Your team
This section is important for startups and entrepreneurs seeking investment and business owners who are making use of highly-specialised skills or experience. The idea is to demonstrate why you are best placed to run your business by providing details about your previous business experience, industry expertise and skills. This section can be omitted from internal only business plans and may not be required for all businesses.
- Your financial plan
Lenders will play close attention to this section - so should you! Essentially, this section will demonstrate how much money your business is generating compared to its expenses. While this is useful for external parties, it is also helpful in evaluating whether you business can safely take on new opportunities, such as additional employees, a new office space or a piece of equipment.
A typical financial plan includes:
- Sales Forecast
- Personnel Plan
- Profit & Loss Statement
- Cash Flow Statement
- Balance Sheet
While it may not be required for all business plans, feel free to add an appendix to store supporting information such as charts and graphs, product images or technical explanations of your products or processes.
5 Tips for writing your business plan
Your business plan will not be effective if it is not written for the right audience. Decide what type of plan you need and who is likely to read it. Then, use that information to tailor your business plan as best as possible. If you’re applying for a business loan, feel free to ask questions about what they look for. If you’re a startup looking for investment, a one-page business plan might be preferred as a first step by time-poor investors. Treat it like your CV and personalise your business plan to get the right details in front of the right people.
Drafting an entire plan may seem like a big task, especially for a busy business owner. Start small by writing down a few details for each of the sections you need to include. Then begin to build out each section as you gather more details. Think about the questions you are asked most frequently about your business and try to answer them on paper. If you are passionate about your business, it will be easier than you think to talk about your plans.
Many of the people who will read your business plan will not have the same level of expertise in your industry as you do. Avoid using complicated jargon and aim for clear, active language. Keep explanations simple and use your appendix to provide greater detail, if necessary.
The whole point of a business plan is for others to read it. Dragging it out for page after page will make it more difficult to keep external stakeholders interested - no matter how incredible your business! Don’t turn your business plan into a homework assignment. Keep it concise so that you and others actually want to read it.
There’s a saying that you only get one chance to make a first impression. Your business plan may be the first impression your business makes - so make it a good one! Review the document carefully to ensure there are no miscalculations or grammatical errors. Mistakes will hurt your professional image and could impact how it is received. Asking others to help you proofread is a great way to ensure everything is in tip-top shape and that you’ve addressed all of the key questions.
Now you have all of the information you need to make your business plan. So, what do I do once you have one? Review it! Creating a business plan is not a ‘one and done’ process. Review your plan regularly, track your progress and continue to set your sights even higher.