If you’re planning to start a small business or are already a small business owner, you surely understand the importance of having a business plan. A good business plan can help you build a solid strategy, decide which resources you need, set a budget, and stay ahead of any potential complications that may happen along the way.
Sounds like a dream, but not everyone knows how to write a business plan. That is why we’ve decided to write a comprehensive guide with all the important information summed up. By the end of this article, you should have a clear idea of where to start and how to develop a business plan that will make your business bloom.
What Is a Business Plan?
In short, a business plan is a document that includes your company’s goals and the steps you intend to use to achieve them.
Many entrepreneurs don’t even start developing a business unless they have a business plan set and ready. That’s because it’s important to put all your ideas on paper and see if they make financial sense. If your business idea doesn’t look promising on paper, it’s unlikely it will work in real life. Here are some elements you should think about while writing a business plan:
- Product goals
- Monthly goals and deadlines
- Financials for the first two years
- Profit and loss statements for the first three to five years
Of course, as each business is different, you should adjust your approach accordingly. You don’t have to strictly follow any specific rules as long as you have all the fundamentals covered.
Why Is a Business Plan Important?
Business plans are important for both business owners and potential investors, and here’s why. If you’re just starting out, a business plan will keep you focused and help you position your brand. A solid business plan will help you:
- Prove that you’re serious about your business. If you have a successful business plan that shows your commitment, your partners and those looking to invest in your company will be confident about doing business with you.
- Determine your financial needs. One of the main purposes of any business plan is to help determine how much capital you need and for what. By allocating funds properly, you can plan ahead, which is especially important if you intend to raise additional funding later on.
- Understand your competition. While creating a business plan, you can’t only focus on your company. You need to do a competitive analysis and review the market conditions as a whole. Knowing more about your main competitors will help you step up your game and boost your company’s competitive advantage.
- Understand your audience. A business plan can help you better understand your customers and what they expect of you. It can help you make better products and services and tailor them to your customers’ needs.
- Reduce risk. By following the guidelines set in your business plan, you’re reducing the risk of investing in the wrong opportunities or missing the right ones.
- Attract partners and investors. If you’re running a startup, finding prospective investors is the first order of business. Potential investors will be interested to know your goals and how you will go about pursuing them. They will want to see how you plan to manage stressful situations and whether you have an exit strategy. At the same time, prospective partners will want to check your business plan to see how it benefits them.
As you can see, there are multiple benefits to making a business plan. It shows you are committed to your business and helps get funding, bring new business partners, reduce risk, and engage with your customers.
How To Write a Business Plan, Step by Step
Now that you know all the basics and the advantages of a good business plan, let’s see how you can go about writing one. Here is a traditional business plan template:
1. Executive Summary
First things first. Your business plan should start with an executive summary. The summary should include an overview of your company with a brief description of your product or service. It should summarize all your plans, ideas, and logistical details.
If written properly, your executive summary will attract potential partners and investors and convince them to read the rest of your business plan. The executive summary should include a short review of:
- Your business concept
- Your product description
- Your target audience
- The marketing strategy
- The current and projected financial status
- The information about your team
2. Company Description
This is the part of a business plan where you should provide a detailed description of your company, including your company’s registered name and address and information about your products and services. You should explain your goal, what sets you apart from the competition, and what makes your business a good investment.
Here are some of the particulars you should include in this segment of your business plan:
- Your business model
- Your business structure
- Your mission
- Your business history
- Business objectives
- Thorough information about your team and their salaries
3. Market Analysis
Market analysis is one of the crucial parts of business plan writing. By conducting in-depth market research, you will get a better understanding of the current trends and the nature of your industry. It will also help you learn how to outshine the competition, which is extremely important, especially if you’re new in the business.
One of the main questions you should answer in this part of your business plan is how big your target market is and how many people are interested in what you have to offer. That might sound overwhelming, but there are various sources you can consult.
You can do some academic research, check government statistics on particular demographics, or simply observe relevant news outlets. The more information you have, the easier it will be to make an informed decision.
4. Organization and Management
This is the section in the business plan where you should describe the legal structure of your company. You should explain whether you’re running an S or C corporation, or if you’re operating as an LLC.
Furthermore, you should explain how your management team works and their roles and responsibilities. You should describe the hierarchy between all your team members and how each contributes to your vision.
5. Products and Services
Your business plan should also have a dedicated section about your products and services. What exactly is your product? Who is it for? How much does it cost? Why is it better than what your competitors are offering? These are just some of the questions you should answer in this section.
If you’re planning on adding some new products in the future, you should describe them as well and explain how they will contribute to your business.
6. Marketing and Sales
To build a business plan, you need to define your marketing and sales strategy and how you plan to accomplish it. You should write about your sales process in detail and describe how you plan to attract and retain your customers.
Of course, as the market conditions change, your marketing strategy will also change and evolve, and you can always adjust this part of your business plan accordingly.
If your business needs funding, you should include that in your business plan. You should specify the type of funding and how much you need. You need to explain how you plan to use that capital, as that is the information your potential investors will be most interested in. Also, if you have any plans to sell the company at some point in the future, you should include that information as you write a business plan.
8. Financial Plan
Having solid financial projections is probably the most important aspect of any business plan. Even if you have an excellent business idea and you’re invested in it, it won’t mean much unless you’ve figured out how to finance it. Each financial plan should feature a balance sheet, an income statement, and a cash-flow statement.
A balance sheet gives an insight into how much equity you have in your business. Equity is the value the company’s shareholders would get if all of the company’s assets were liquidated and all its debts paid off. In plain terms, the balance sheet will show what you own vs. what you owe.
The next segment your business plan should include is an income statement. An income statement is used to show a company’s financial performance over a given period of time. This statement includes all the necessary information about your company’s revenue, expenses, gains, and losses. So, whoever reads your business plan will be able to see how your business has performed in the past and whether or not it’s worth investing in.
A cash-flow statement is similar to an income statement, but there are some differences. A cash-flow statement shows the source of cash but also helps track all ingoing and outgoing transactions. If the incoming cash is greater than the outgoing cash, your company has a positive cash flow.
And if it’s the other way around, your cash flow is negative, which can be a serious issue. According to some statistics, 82% of businesses fail because of cash flow problems, which is why you should regularly analyze your cash flow statements.
Types of Business Plans
Although there are some general guidelines, each business plan needs to be tailored according to your company’s needs and stage of development. With that being said, there are different kinds of business plans you can go for.
The Operational Plan
An operational plan is a plan that defines how each part of the team contributes to the company and its goals. It outlines the daily operations and tasks for over a year. A good operational plan ensures each manager and employee knows what’s required of them and understands their deadlines.
Operational business plans are very important as they provide a roadmap for managing a business, but they can also be extremely helpful if you’re trying to get funding. They help assign human, physical, and financial resources, making it easier to reach your goals.
The Strategic Plan
The strategic plan is similar to the operation plan, with one major distinction. While an operational plan focuses on day-to-day operations, a strategic plan focuses on the company’s long-term goals and whatever is required to fulfill them. And while these are both action plans, a strategic plan heavily depends on an operating plan and its efficiency.
As a business owner, you need to ensure you have both operational and strategic plans in place, as that will make it much easier to achieve your business mission.
The Marketing Plan
A marketing plan is another business plan example we cannot forget. It is a document that shows how you intend to promote and sell your products and services. It is an outline of your advertising strategy and all your promotional activities for a specific period of time.
Some of the key elements each marketing plan should cover include market research, marketing objectives and activities, the current business marketing positioning, marketing budget, and KPIs that should be tracked over time. Having good marketing can help you raise brand awareness, increase market share, and enter new niche markets.
The Financial Plan
Financial plans are another vital part of any business plan. As the name suggests, this document focuses on a company’s financial goals and the strategies it needs to employ to achieve them. A financial plan is especially important if you’re just starting a business, as it will show whether or not your business idea is profitable.
Each financial plan should include an investment budget, a financial budget, an operating budget, a cash-flow budget, and a personal expense budget. Once you have all this information in place, you should not have any trouble with your business planning and achieving your business goals. Just make sure to review your business plan periodically to see if it requires any adjustments.
As you can see, the process of writing a business plan isn’t as perplexing as it may seem at first, and the final product can be very beneficial to your business. By following the guidelines set in our article, you should be able to make a business plan outline and start developing your business strategy. All you have to do is define where your business currently is and where you want it to be in the future.