A great business plan can help you clarify your strategy, identify potential roadblocks, decide what you’ll need in the way of resources, and evaluate the viability of your idea or your growth plans before you start a business. Show
Not every successful business launches with a formal business plan, but many founders find value in taking time to step back, research their idea and the market they’re looking to enter, and understand the scope and the strategy behind their tactics. That’s where writing a business plan comes in. Table of Contents
What is a business plan?A business plan is a document describing a business, its products or services, how it earns (or will earn) money, its leadership and staffing, its financing, its operations model, and many other details essential to its success.
Why write a business plan?Investors rely on business plans to evaluate the feasibility of a business before funding it, which is why business plans are commonly associated with getting a loan. But there are several compelling reasons to consider writing a business plan, even if you don’t need funding.
If you’re looking for a structured way to lay out your thoughts and ideas, and to share those ideas with people who can have a big impact on your success, a business plan is an excellent starting point. An example of an executive summary by lifestyle brand FIGS. FIGS An
executive summary shouldn’t exceed one page. Admittedly, that space constraint can make squeezing in all of the salient information a bit stressful—but it’s not impossible. Here’s what your business plan’s executive summary should include: This section of your business plan should answer two fundamental questions: who are you, and what do you plan to do? Answering these questions with a company description provides an introduction to why you’re in business, why you’re different, what you have going for you, and why you’re a good investment bet. For example, clean makeup brand
Saie shares a letter from its founder on the company’s mission and why it exists. Clarifying these details is still a useful exercise, even if you’re the only person who’s going to see them. It’s an opportunity to put to paper some of the more intangible facets of your business, like your principles, ideals, and cultural philosophies. Here are some of the components you should include in your company description: Some of these points are statements of fact, but others will
require a bit more thought to define, especially when it comes to your business’s vision, mission, and values. This is where you start getting to the core of why your business exists, what you hope to accomplish, and what you stand for. To define your values, think about all the people your company is accountable to, including
owners, employees, suppliers, customers, and investors. Now consider how you’d like to conduct business with each of them. As you make a list, your core values should start to emerge. Once you know your values, you can write a mission statement. Your statement should explain, in a convincing manner, why your business exists, and should be no longer than a single
sentence. As an example, Shopify’s mission statement is “Make commerce better for everyone.” It’s the “why” behind everything we do and clear enough that it needs no further explanation. Next, craft your vision statement: what impact do you envision your
business having on the world once you’ve achieved your vision? Phrase this impact as an assertion—begin the statement with “We will” and you’ll be off to a great start. Your vision statement, unlike your mission statement, can be longer than a single sentence, but try to keep it to three at most. The best vision statements are concise. Finally, your company description should include both short- and long-term goals. Short-term goals, generally, should be achievable within the
next year, while one to five years is a good window for long-term goals. Make sure all your goals are SMART: specific, measurable, attainable, realistic, and time-bound. No matter what type of business you start, it’s no exaggeration to say your market can make or break it. Choose the right market for your products—one with plenty of customers who understand and need your product—and you’ll have a head start on success. If you
choose the wrong market, or the right market at the wrong time, you may find yourself struggling for each sale. This is why market research and analysis is a key section of your business plan, whether or not you ever intend for anyone else to read it. It should include an overview of how big you estimate the market is for your products, an
analysis of your business’s position in the market, and an overview of the competitive landscape. Thorough research supporting your conclusions is important both to persuade investors and to validate your own assumptions as you work through your plan. The potential market is an estimate of how many people need your product. While it’s exciting to imagine sky-high sales figures, you’ll want to use as much relevant independent
data as possible to validate your estimated potential market. Since this can be a daunting process, here are some general tips to help you begin your research: Some sources to consult for market data include government statistics offices, industry associations, academic research, and respected news outlets covering your
industry. SWOT analysisA SWOT analysis looks at your strengths, weaknesses, opportunities, and threats. What are the best things about your company? What are you not so good at? What market or industry shifts can you take advantage of and turn into opportunities? Are there external factors threatening your ability to succeed? These breakdowns often are presented as a grid, with bullet points in each section breaking down the most relevant information—so you can probably skip writing full paragraphs here. Strengths and weaknesses—both internal company factors—are listed first, with opportunities and threats following in the next row. With this visual presentation, your reader can quickly see the factors that may impact your business and determine your competitive advantage in the market. Here’s an example: Example of SWOT analysis for a business planUnsplash The management and organization section of your business plan should tell readers about who’s running your company. Detail the legal structure of your business.
Communicate whether you’ll incorporate your business as an S corporation or create a limited partnership or sole proprietorship. If you have a management team, use an organizational chart to show your company’s internal structure, including the roles, responsibilities, and relationships between people in your chart. Communicate how each person will contribute to the success of your startup. Your
products or services will feature prominently in most areas of your business plan, but it’s important to provide a section that outlines key details about them for interested readers. If you sell many items, you can include more general information on each of your product lines; if you only sell a few, provide additional information on each. For example, bag shop
BAGGU sells a large selection of different types of bags, in addition to home goods and other accessories. Its business plan would list out those bags and key details about each. Describe new products
you’ll launch in the near future and any intellectual property you own. Express how they’ll improve profitability. It’s also important to note where products are coming from—handmade crafts are sourced differently than trending products for a dropshipping business,
for instance. Adeolu Eletu via Unsplash Your ideal customer, also known as your target market, is the foundation of your marketing plan, if not your business plan as a whole. You’ll want to keep this person in mind as you
make strategic decisions, which is why an overview of who they are is important to understand and include in your plan. To give a holistic overview of your ideal customer, describe a number of general and specific demographic characteristics. Customer segmentation often includes: This information will vary based on what you’re selling, but you should be specific enough that it’s unquestionably clear who you’re trying to reach—and more importantly, why you’ve made the choices you have based on
who your customers are and what they value. For example, a college student has different interests, shopping habits, and pricing sensitivity than a 50-year-old executive at a Fortune 500 company. Your business plan and decisions would look very different based on which one was your ideal customer. Your marketing efforts are directly informed by your ideal customer. Your marketing plan should outline your current decisions
and your future strategy, with a focus on how your ideas are a fit for that ideal customer. If you’re planning to invest heavily in Instagram marketing, for example, it might make sense to include whether Instagram is a leading platform for your audience—if it’s not, that might be a sign to rethink your marketing plan. Most marketing plans include
information on four key subjects. How much detail you present on each will depend on both your business and your plan’s audience. Promotion may be the bulk of your plan since you can more readily dive into tactical details, but the other three areas should be covered at least briefly—each is an important strategic lever in your marketing mix. Logistics and operations are the workflows you’ll implement to make your ideas a reality. If you’re writing a business plan for your own planning purposes, this is still an important section to consider, even though you might not need to include the same level of detail as if you were
seeking investment. Cover all parts of your planned operations, including: This section should
signal to your reader that you’ve got a solid understanding of your supply chain and strong contingency plans in place to cover potential uncertainty. If your reader is you, it should give you a basis to make other important decisions, like how to price your products to cover your estimated costs, and at what point you plan to break even on your initial spending. No matter how great your idea is, and regardless of the effort, time, and money you invest, a business lives or dies based on its financial health. At the end of the day, people want to work with a business they expect to be viable for the foreseeable future. The level of detail required in your financial plan will depend on your audience and goals, but typically you’ll want to include three major views of your financials: an income statement, a balance sheet, and a cash-flow statement. It also may be appropriate to include financial data and projections. Here’s a
spreadsheet template that includes everything you’ll need to create an income statement, balance sheet, and cash-flow statement, including some sample numbers. You can edit it to reflect projections if needed. Your income statement is designed to give readers a look at
your revenue sources and expenses over a given time period. With those two pieces of information, they can see the all-important bottom line or the profit or loss your business experienced during that time. If you haven’t launched your business yet, you can project future milestones of the same information. Your balance sheet offers a look at how much equity you have in your business. On one side, you list all your business assets (what you own),
and on the other side, all your liabilities (what you owe). This provides a snapshot of your business’s shareholder equity, which is calculated as: Assets - Liabilities = Equity Your cash flow statement is similar to your income statement, with one important difference: it takes into account when revenues are collected and when expenses are paid. When the cash you have coming in is greater than the cash you
have going out, your cash flow is positive. When the opposite scenario is true, your cash flow is negative. Ideally, your cash flow statement will help you see when cash is low, when you might have a surplus, and where you might need to have a contingency plan to access funding to keep your business solvent. It can be especially helpful to forecast your cash-flow statement to identify gaps
or negative cash flow and adjust operations as required. Here’s a full guide to working through cash-flow projections for your business. Download your copy of all three templates to build out these financial
statements for your business plan. When you know who will be reading your plan—even if you’re just writing it for yourself to clarify your ideas—you can tailor the language and level of detail to them. This can also help you make sure you’re including the most relevant information and figure out when to omit sections that aren’t as impactful. You’ll need to put in more work and deliver a more thorough plan if your goal is to secure funding for your business versus working through a plan for yourself or even your team. Sections of your business plan will primarily be informed by your ideas and vision, but some of the most crucial information you’ll need requires research from independent sources. This is where you can invest time in understanding who you’re
selling to, whether there’s demand for your products, and who else is selling similar products or services. No matter who you’re writing for, your business plan should be short and readable—generally no longer than 15 to 20 pages. If you do have additional documents you think may be valuable to your audience and your goals, consider adding them as appendices. This is best managed by having a single person write the plan or by allowing time for the plan to be properly edited before distributing it. Writing a business plan isn’t the easiest task for business owners. But it’s important for anyone starting or expanding a business. Fortunately, there are tools to help with everything from planning, drafting, creating graphics, syncing financial data, and more. Business plan
software also have templates and tutorials to help you finish a comprehensive plan in hours, rather than days. A few curated picks include: For a more in-depth look at the available options, read Get Guidance: 6 Business Plan Software to Help Write Your
Future. Other articles on business plans would never tell you what we’re about to tell you: your business plan can fail. The last thing you want is for time and effort to go down the drain. Avoid these common mistakes: Read through the following business plan example. You can download a copy in Microsoft Word or Google Docs and use it to inspire your own business planning. Download sample business plan example (.doc) A business plan can help you identify clear, deliberate next steps for your business, even if you never plan to pitch investors—and it can help you see gaps in your plan before they become issues. Whether you’ve written a business plan for a new
online business idea, a retail storefront, growing your established business, or purchasing an existing business, you now have a comprehensive guide and the information you need to help you start working on the next phase of your own business. Illustrations
by Rachel Tunstall A traditional business plan should have the
following components: What is a good business plan?A good business plan starts with a strong executive summary. It also adequately outlines idea feasibility, target market insights, and the competitive landscape, which we go over in this blog post. What are the 3 main purposes of a business plan?The three main purposes of a business plan are: (1) to clarify your plans for growth; (2) to understand your financial needs; and (3) to attract funding from investors, banks, and lenders. What are the different types of business plans?The types of business plans include startup, refocusing, internal, annual, strategic, feasibility, operations, growth, and scenario-based. Each type of business plan has a different purpose. What shows the estimated profit and expenses of the venture in a business plan?Financial Projections
These forward-looking financial statements are often called pro-forma financial statements or simply the "pro-formas." They include an overall budget, current and projected financing needs, a market analysis, and the company's marketing strategy.
What are the 4 main parts of a business plan?The 4 Key Components of a Business Plan (and Why They're Important). Executive summary.. Marketing plan.. Key management bios.. Financial plan.. What are the components of a venture plan?But most plans will include the following main sections:. Executive summary. This is your five-minute elevator pitch. ... . Business description and structure. This is where you explain why you're in business and what you're selling. ... . Market research and strategies. ... . Management and personnel. ... . Financial documents.. What is executive summary in business plan?An executive summary is a business plan overview that succinctly highlights its most essential elements. It's not just a general outline; the executive summary might be the only part of your business plan that busy executives and potential investors read.
|