What Exactly Is a Business Plan?
A business plan is a written document that outlines a company’s aims and ambitions, as well as the schedule, funds, and strategies for achieving them. It may also include a mission statement and information about the specific products or services offered.
Depending on the stage of your firm and its aims, a business plan can highlight several time periods. Having stated that, a typical company strategy will incorporate the following metrics:
Monthly product goals and deadlines
- Financial statements during the first two years
- Statements of profit and loss for the first three to five years
- Projection of balance sheets for the first three to five years
Startups, entrepreneurs, and small enterprises all write business plans to steer their new venture. Larger firms may also develop (and update) a business plan to maintain high-level goals, financials, and timetables.
While a written explanation of your organization’s aims and finances is required, developing a business plan can also assist you in determining a company’s viability, profitability (including when it will first turn a profit), and how much money you will require from investors. A business strategy, in turn, has functional value: Outlining goals not only keeps you accountable on a timeframe, but it can also attract investors in and of itself, acting as a successful growth plan.
Visit our full guide on drafting a strategic plan for more information, or download free strategic plan templates. This page concentrates on for-profit business plans, however you may get nonprofit business plan templates in our post.
Steps in the Business Plan
The particular content in your business plan will vary depending on your venture’s needs and goals, but a typical plan typically have the following ordered elements:
A brief summary
- Business description Market analysis
- Analyze the competition
- Organizational management description
- Product or service description
- Marketing strategy
- Marketing strategy
- Details on funding (or request for funding)
- Financial forecasts
Consider include a table of contents or an appendix for reference if your plan is exceptionally extensive or involved. Read “How to Write a Business Plan Stage by Step” below for a detailed explanation of each step described above.
In general, your audience consists of everybody who has a vested interest in your organization. Customers, internal team members, suppliers, and vendors are examples of potential and existing investors.
Is it better to have a simple or detailed plan?
The level of information required for your plan is determined by the stage of your business and the intended audience. Corporations require a detailed business plan that can be up to 100 pages long. Small firms and startups should have a clear plan that focuses on finances and strategy.
How to Select the Best Plan for Your Company
To determine which form of business plan is required, ask yourself, “What do we want the plan to do?” Determine the function first, and the form will follow.
Is the sequence of your business plan critical?
With the exception of the executive summary, which should usually come first, there is no prescribed order for a business plan. Simply ensure that the plan is organized in a way that makes sense and flows organically.
What Is the Distinction Between Traditional and Lean Business Plans?
A traditional business plan adheres to the normal framework; however, because these plans promote detail, they typically necessitate more work upfront and can span dozens of pages. A Lean business plan, which focuses on summarizing key elements for each part, is less prevalent. These plans require substantially less effort and are often one page in length.
In general, a traditional model should be used for a legacy company, a large corporation, or any business that does not adhere to Lean principles (or another Agile method). Use Lean if you anticipate a swift pivot or if you already use a Lean strategy in other business processes. A Lean business plan can also suffice if the document is only for internal use. For investors, stick to the traditional version because they may be more sensitive to rapid changes or a high degree of built-in flexibility in the plan.
Step-by-Step Instructions for Writing a Business Plan
Writing a successful business plan necessitates extensive research and attention to detail in each aspect. Below is a 10-step strategy to studying and developing each plan aspect.
Executive Summary (Step 1)
The executive summary should always come first in your business strategy. The purpose is to provide answers to the following questions:
- What is the company’s vision and mission?
- What are the company’s short-term and long-term objectives?
For examples, see our selection of executive summary examples and templates. To learn more about creating an executive summary, check out our guide.
Step 2: Business Description
This section’s objective is to establish the domain, scope, and intent of your endeavor. To do so, respond as clearly and simply as possible to the following questions:
- What are we doing here?
- What exactly does our company do?
Step 3: Market Research
Provide evidence in this part that you have investigated and understand the current marketplace, and that your product or service fills a market niche. To accomplish so, answer the following questions:
- Who is our client?
- What is that customer’s worth?
Step 4: Conduct a Competitive Analysis
In many circumstances, a business plan suggests a more competitive version — whether through features, pricing, integrations, or other means — than what is currently offered, rather than a completely new (or even market-disrupting) enterprise. Answer the following questions in this section to demonstrate that your product or service will outperform competitors:
- Who are the rivals?
- What do they excel at?
- What is our one-of-a-kind value proposition?
Step 5: Organizational Management Description
Write a summary of the team members and other key persons who are critical to success in this area. List the duties and responsibilities, as well as the hierarchy or team organization, if possible.
Step 6: Product or Service Description
Define your product or service, as well as all of the time and resources that go into generating it, in this area. Because the strength of your product determines the success of your firm, it is critical that you test and develop the product before diving into marketing, sales, or funding aspects.
The following are the questions to be answered in this section:
- What exactly is the product or service?
- What resources are required for production, and how do we produce it?
Step 7: Marketing Strategy
Define your product or service’s marketing plan in this area. This doesn’t have to be as detailed as a whole marketing strategy, but it should address basic questions like the following:
- Who is the intended market (if different from the current client base)?
- How will you get out to your target market?
- What resources does your marketing plan necessitate, and do you have them?
- Do you have a general estimate of the timeline and budget?
- How will you determine success?
Step 8: Create a Sales Plan
Create an overview of the sales plan, including the aims for each cycle, steps to attain these objectives, and success measures. This section does not need to be a thorough, in-depth sales plan for the sake of a business plan, but can simply state the high-level objectives and methods of your sales operations.
Begin by responding to the following questions:
- What is the company’s sales strategy?
- What tools and methods will you employ to attain your objectives?
- What are the possible roadblocks, and how will you overcome them?
- What is the timetable for sales and profit?
- What are the success indicators?
Step 9: Funding Specifics (or Request for Funding)
This is one of the most important sections of any business plan, especially if you intend to share it with investors. You are not need to give a comprehensive financial plan, but you must be able to answer the following questions:
- How much money do you have right now? How much money do you require?
- How do you want to expand the team (onboarding, team structure, training and development)?
- What are your physical requirements and limitations (room, equipment, etc.)?
Step ten: Make financial projections.
Aside from fundraising research, investors want to see well-thought-out financial projections for the future. As previously noted, depending on the extent and stage of your firm, this could range from one to five years.
While these forecasts will not be perfect and must be somewhat fluid, you should be able to approximate the following:
- When and how will the company make its first profit?
- How will the company continue to make money after that?