A business plan is an outline of the steps you will take to start and run your own company.
It includes information about what kind of product or service you are going to offer, how much it costs to produce that product/service, who your target market is, where you intend to sell those products/services, etc.
A business plan should be written in such a way as to make it easy for potential investors and lenders to understand what they are investing or lending money into, how much profit there is likely to be from this investment/lending etc. Creating a business plan helps you lay out the steps you will take to start and manage your own business.
A business plan is like a shopping list: You need to know exactly what you want before you can buy anything. A good business plan gives you all the details you need to get started on your journey towards success.
- A business plan is not just something you write down on paper; it is also a living document that evolves with changes in your business.
- If you don’t have one yet, get started now!
- Do not worry if you are not sure what all goes into making up a good business plan – we have got plenty more resources here and in this Business plan toolkit.
The importance of developing a Business Plan
Developing a business plan is an important step in starting your own business. A well developed and written business plan will help you to get the funding that you need for your new venture, it can also be used as evidence when applying for loans or grants from government agencies such as banks, local councils etc.
A business plan may even be useful if you are looking to sell your existing business. The following sections explain what a good business plan should contain and how to develop one yourself.
How do I write my business plan?
The best place to begin writing your business plan is by thinking through the following questions: What problem does your idea solve? Who needs your solution? How big is the market opportunity? Where else could you find similar solutions? Is there any competition already offering these services? If so, why would customers choose yours over theirs?
There are many different ways to create a business plan. Some people prefer writing their plans on paper while others may prefer using software programs. There are also online resources and tools available if you would rather not spend time creating one yourself. The tools are listed later in this toolkit.
A good business plan will include:
- A description of your company.
- An overview of your target audience.
- Your financial projections.
- Marketing plans.
- Strategies for dealing with competition.
Types of Business Plans -Traditional vs Lean
There are many different kinds of business plans available. Some companies choose to create their own while others use templates provided by consultants or software programs. The type of business plan you need depends upon your specific situation. For example, if you’re starting a new venture, then an executive summary might suffice. However, if you’ve been operating successfully for several years and now wish to expand, then a more detailed report would probably be required.
To keep things simple, most business owners choose between two types of business planning tools: Traditional and lean. Both approaches work fine but each has its advantages and disadvantages.
Traditional business plan
Here are some examples of traditional versus lean business planning approaches:
Traditional Planning Approach
- Executive Summary
- Overview of Target Audience
- Financial Projections
- Marketing Strategy
- Competition Analysis
- Lean Planning Approach
- Strategic Overview
- Market Research & Competitive Intelligence
- Product Development Process Flow Diagrams
- Key Performance Indicators
- Sales Forecast
- Customer Relationship Management System
- Operations Manual
- Legal Structure Chart
- Risk Assessment
- Budgetary Breakdown
These traditional methods involve gathering data through interviews, surveys, focus groups, research studies, statistical analysis, etc., then summarizing these findings in a report. This type of approach requires significant amounts of upfront effort and usually takes months to complete. However, once completed, the results provide valuable information about your market, competitors, customers, products, services, finances, marketing strategy, management structure, etc.
Lean Methods
These less formal techniques rely heavily on brainstorming ideas, collecting customer feedback, analysing trends, identifying problems, and coming up with solutions. They tend to require little initial preparation and often produce quick results. But they lack depth and detail compared to traditional planning tools.
Though they aren’t as common in the business world, lean startup business plans use a standard structure. As short as one page, these business plans have very little detail. Investors or lenders might ask for more details if a company has this type of plan, and you should be prepared to provide them.
If you already have a successful business but wish to grow further, then a lean business plan template could work best. In either case, however, having a clear idea about who your customers are and why they purchase products and services similar to yours is essential. This information will allow you to determine whether your product or service meets their needs. Once you understand these factors, you’ll be able to decide whether your current market position makes sense.
To create a one-page business plan, you can use the lean canvas business plan template – click here to visit lean canvas
Business Plans Software Programs
The most common software packages used for creating a business plan include Microsoft Word, Excel, Google Docs, CorelDRAW, Adobe Acrobat Pro, OpenOffice Writer, etc. Each offers slightly different features so make sure you check them out carefully.
Alternatively, there are also dedicated software tools for creating business plans, including:
1. Bizplan
Bizplan by Starups.com offers a guided business plan creator that includes a financial option.
2. Business plan by Visme
Using Visme’s easy-to-use customizable templates, you can create a comprehensive business plan and present your data through more than 40 charts, similar to Biz Plan.
3. Plan builder
Plan builder offers a simple and easy to use online version to create your business plan. At the time of writing this guide, this business plan builder offers a free option for creating business plans.
What Should My Business Plan Include?
Your business plan needs to answer three questions:
- Who am I?
- What problem does your product/ service solve?
- And How much money will it make?
You will answer these questions throughout your business plan.
Here are some other key points to consider when putting together your business plan:
1) About you, who are you?
Describe who you are, why you want to start your own business, where you live, what kind of location you have chosen, any special circumstances which might affect your ability to run your business successfully, etc. Your name, address, phone number, email address, website URL, social media profiles, and any relevant certifications must all appear at least twice within your business plan. If you’re self-employed, you might want to add details about your professional qualifications and experience.
2) What does your product / service offer?
This section describes exactly what your product / service offers and why someone would buy it. For example, “Our new line of kitchen appliances is designed to help busy families cook healthy meals quickly.” Or “We have developed an innovative way to reduce food waste by offering our clients free compostable bags that can be used instead of plastic ones”.
List all the benefits your product offers over similar items currently being sold by competing businesses. This includes features such as lower cost, better performance, greater convenience, improved safety, increased comfort, longer life span, higher durability, easier maintenance, reduced environmental impact, etc.
3) How much money will the business make?
This section shows investors or lenders how well your idea could perform financially. In this case, we’d say that the appliance manufacturer’s profit margin was around 30%. That means if their sales were $100 million per year, they’d earn $30 million after paying expenses. The rest would go into profits.
4) Why should someone buy from you instead of another competitor?
The purpose of this section is to describe who your ideal client is and why he or she should use your service. We’ve found that people like to know more than just the price before buying from us. So here, for instance, we tell them that our company provides quality products at affordable prices because we believe that everyone deserves good home cooking! Include a list of competitors with whom you compete. Also, provide contact information so potential customers can learn more about your business.
5) How much would a customer pay?
Include information about pricing in this section. Be sure to include both fixed costs and variable costs. Fixed costs are things like rent, utilities, insurance, advertising, marketing materials, inventory, employee salaries, etc., while variable costs are things like labour, raw material, packaging, shipping, customer support, repairs, replacement parts, etc.
6) Where do you see yourself five years down the road?
Include a vision statement describing your goals and objectives over the next few years. Be specific; don’t leave things open-ended. Describe what you hope to accomplish during each quarter of the coming year.
7) Who are your key contacts?
List names, titles, and telephone numbers of those individuals responsible for making decisions regarding your project. You may also include other important stakeholders such as bankers, lawyers, accountants, consultants, suppliers, distributors, retailers, franchisees, franchisors, government officials, community leaders, and anyone else involved in your venture.
8) Do you need financing?
If yes, explain briefly what type of funding you seek. Provide financial projections showing how much revenue you expect to generate annually based on current market conditions. Explain whether you intend to pay back creditors using cash flow generated through operations or require additional capital to fund growth.
Your business plan may not need a lot of words to get started. However, as time goes on, you may wish to expand upon certain aspects of your business plan.
This includes adding sections such as:
- A description of your target audience.
- An explanation of your competitive advantage over others in your industry.
- Details about your financial projections.
- Detailed descriptions of each step involved in running your business.
Funding / Investment
After you have written down all of your ideas, It may also be helpful to ask friends and family members for advice. Ask them if they believe your idea has merit. Also, see if anyone knows someone who owns a similar business. Find out what he/she did differently to succeed. This information could prove invaluable when trying to decide whether or not to pursue your dream.
Once you have decided, It is time to fund your business, this is where you present your proposal to banks, lenders or investors. Investors are individuals or groups willing to invest their capital in exchange for equity ownership in your company. They usually give loans based on the value of the assets owned by the company. Startups.com is a fantastic resource to learn about funding opportunities.
You must shortlist your investors and decide which investor you’d like to approach, make sure you prepare thoroughly. Write down everything you think might interest these potential partners. Include details about your product, services, marketing strategy, finances, management team, competitors, market research, customer base, growth opportunities, and any other relevant data. Make copies of your presentation so you’ll always have access to it.
When presenting your idea to investors, remember to keep things simple. Don’t try to explain every detail of your business plan right off the bat. Instead, just tell them why you feel your business is worth investing in. Explain how you intend to reach customers, how many jobs you expect to create, and how profitable your venture will be.
Keep track of your progress throughout the process. Write down notes about each step along the way. Make sure to document anything that seems important. For example, note dates of meetings, names of contacts, and details regarding conversations.
Business Plan Checklist
- Business name: What do you want people to call your business?
- Company logo: How would you describe your brand image?
- Mission statement: Describe your vision for the future
- Target Audience: Who is your ideal clientele?
- Competitive Advantage: Why should consumers buy from you instead of another competitor
- Products & Services: List products and services offered
- Marketing Strategy: Where does your business fit into its marketplace
- Financial Projections: How much money do you need to startup?
- Management Team: Who’s going to run your business
- Key Employees: Who else needs to know about your plans
- Legal Structure: Do you prefer an LLC or corporation
- Start-up Costs: How much cash do you need to get started
- Financing Options: Which sources can provide financing
- Risk Factors: Are there risks associated with starting your own business
- References: Contact previous clients
An example business plan structure
Executive Summary
The executive summary summarizes what your entire business plan does. In other words, if someone were reading just your executive summary, they would know everything about your business.
Your executive summary doesn’t have to be lengthy; however, it must include enough information to answer these questions: What problem exists? Why did you start your business? How will your product/service solve that problem? And why should anyone buy your product/services now instead of later?
Overview and Objectives
This section describes your company’s mission, goals, objectives, and strategies. It also includes a description of your target audience and competitive advantages. This part of your business plan may take anywhere from one page to three pages depending on the size of your organization.
Market Research
In this section, you identify who your potential customers are, where those customers live, and their buying habits. You also explain how your service differs from competitors in terms of quality, price, convenience, etc.
Products / Service Description
In this section, you list all the goods and services you offer. If possible, try to make them unique by describing something no one has ever done before. Also, think carefully about whether you need to sell every single item listed here. For instance, maybe you only need to sell some items online while others can still be sold at retail stores. Or perhaps you don’t even need to sell any physical products because you already have a successful website.
Marketing Plan
Here, you outline your marketing strategy including when you intend to launch your new venture, which media outlets you’ll use, and how often you’ll advertise. The more specific you are, the better off you’ll be.
Financial Projections
You estimate how much revenue you expect to earn overtime. Then, you calculate how many units you’ll produce each month, week, day, hour, minute, second, millisecond, nanosecond, microsecond, and so forth. Finally, you multiply the number of units produced per unit cost to determine total revenues for each period.
Operations Overview
If you are planning to hire employees or subcontractors, then you might want to describe how you’d manage payroll, benefits, taxes, insurance, employee training, safety procedures, customer relations, inventory management, accounting records, and anything else involved with running an actual business.
Business Organization Chart
Finally, you draw out a diagram showing how your various departments relate to each other. In addition to helping readers understand what is going on inside your company, it will help you organize your thoughts as you write your proposal.
Financial Model
The financial model is probably the most important part of your entire proposal. It shows exactly how much money you will spend during the next year. This includes everything from salaries to advertising costs to rent.
Sales Forecast
This forecast estimates sales volumes based on past performance and current market conditions. To do this, you must know both your history and the industry average.
Operations Summary
Your operations summary describes in detail how you would run your business if you were operating it. You should include information such as where you’d buy supplies, who you’d pay, how long it takes to get paid, and how frequently you’d invoice customers.
Market Analysis
A good market analysis helps you identify potential competitors and explains why they aren’t likely to pose a threat to your success. A well-written report also provides details about the size of the target audience, their buying habits.
SWOT Analysis
It is a good idea to do a SWOT analysis for your business plan before submitting it to investors. The purpose of this exercise is to identify strengths, weaknesses, opportunities, threats, and any other factors that could affect your ability to succeed.
SWOT analysis for your business plan
The next toolkit walks you through SWOT Analysis.