What is a business plan?
A business plan is a formal document created by the founder or co-founders that outlines the business strategy and key details of a company, such as a startup or small business. No two business plans are the same, but a business plan should at least include information such as your business goals, the estimated time you expect to reach those goals, how those goals will be achieved, and financial projections.
A business plan is an important document for every company, not just start-ups or corporations. It helps you focus the team’s efforts and provide your company with clearly defined goals to achieve. A business plan should evolve over time and be reviewed annually by you and business leaders to ensure that goals are being met and that the business plan’s objectives remain applicable.
This important business document acts as a corporate roadmap to help your business stay on track as it scales and grows.
Key points of the business plan
- A business plan is a formal document that outlines the company’s operations, long-term goals and how the company will achieve them.
- There are two types of business plans: a lean startup plan and a traditional business plan.
- Conventional business plan formats are suitable for all companies and should be used when there is a need for investment.
- Lean startup business plans sometimes require additional information from some banks or investors.
Why do I need a business plan?
Although a comprehensive business plan initially serves as an orientation document for new businesses, this core business document can also be used for this purpose approach investors to raise business financing before the company has generated revenue or made sales.
Banks, some investors and venture capital firms have made it mandatory for startups to have a properly formatted, detailed business plan before considering applicants for any type of investment or seed funding.
While you can operate and potentially find investment without a business plan, it will be difficult to go the distance or scale your startup effectively without one, even if you don’t need external funding from third parties. The benefits of a good business plan far outweigh the disadvantages in the long run and serve as a stable anchor for your business activities and operations.
Different Types of Business Plan Formats
There are two types Business plan format that you can use for your new business venture; a traditional business plan or a lean startup business plan.
- Traditional business plan Traditional plan formats are generally more detailed and one might associate them with 20-page detailed documents that go into every detail. A traditional business plan leaves no stone unturned, but writing it can be time-consuming.
- Lean startup business plan Just as startup culture is all about speed and rapid iteration, a lean plan format focuses on the most important points and can be written quickly. The only downside is that some banks and investors may require more information. So be prepared and make sure you have the numbers memorized.
What elements does a business plan include?
A business plan is a strategic business planning tool and can contain anything you deem necessary to run your business or reflect your core values. Most business plans include, among other things: a mission statement, services or products, marketing strategy, market research, target market, financial projections, and at least a budget.
Elements of a business plan
- Mission statement: A mission statement is your traditional one-liner and summarizes why your company exists and does what it does. Your mission statement should, among other things, summarize culture, goals, and values in a single sentence or paragraph.
- Services or products: This is the opportunity to talk about the services or products you offer. This section should contain important information such as research and development (R&D), key facts about your service or product, pricing, production and manufacturing processes, trademarks and patents.
- Target market: Who is your target market? Can you back up your claims with verified data and statistics? You may have an idea of who wants your product, but you need a solid understanding of the industry and the problems faced by its consumers. This is a chance to show that you understand what your future customers need.
- Marketing strategy: Digital marketing includes everything from social media marketing (SMM), search engine optimization (SEO), paid advertising and commercials. In this section, you can demonstrate how to use these advertising channels to reach your ideal audience.
- Finance: If you’ve watched Dragon’s Den, you know that angel investors love coherent financial planning projections for your startup.
- Budget: Part of business planning is looking into the future and being able to accurately predict your long-term expenses. This includes office costs, marketing costs, R&D costs, manufacturing costs, staff costs and any other recurring expenses your business incurs.
Depending on which business plan format you choose, including these key business plan points can help lay the foundation.
Traditional business plan format
If you plan to receive investment and funding from sources such as banks, you should probably opt for using a traditional business plan format. While the business plan outline below may be helpful in creating a business plan, none of them are absolutely necessary.
Choose from these 8 key elements that best fit your business needs.
Summary
A summary should tell the reader about your company, what your company stands for, and why you think it will be a viable product for the market. This is an opportunity to powerfully present your mission statement, talk about your product or service, office and location plans, and even financial information about the company.
Company description
A good business description reveals important, detailed information about your new business, such as: B. Your ideal consumer market, the problems you want to solve, and the competitive advantages you want to build.
This is an opportunity to talk about your business idea, talk about the highly qualified team around you and arouse the interest of readers. A company description can be helpful when procuring investments.
Market analysis
Market research and analysis should confirm why you are starting your business by providing a comprehensive overview of the industry and competitors and also why there is room for your startup. Use this space to highlight strategies that competing companies are currently using, why they are successful, and how you plan to improve.
Organization and administration
No two companies are the same. In this section, you should tell the reader how you plan to structure your company, who you want on the board, and who will ultimately run the company.
Don’t show a brief overview of your business structure, show everything, including the legal structure of your startup.
Service or product line
Tell the reader about your service or product, tell them what makes it unique and how it solves problems for consumers.
You can also talk about R&D and manufacturing if you have a physical product. This section should also cover intellectual property rights, e.g. B. whether you own trademarks and copyrights for your idea or, if not, whether you plan to acquire them.
Marketing and Sales
Talk about your marketing strategies and how you will attract buyers to your product. Will you use paid advertising? Will you use SEO to generate organic traffic? Will you use commercial advertising channels such as television or radio?
Talk about your sales funnel and tell the reader how you will make the sale once you attract a potential buyer. Disclose everything in this section as you will refer to it later in your financial forecast section.
Funding application
The funding isn’t just for tech start-ups. If your business requires any type of financing or investment from third parties, you can outline in plain English how much investment you need for your business over the next five years.
Banks, venture capitalists, and angel investors all want to know how you plan to use the funds. You’ll need to list employee salary projections, office costs, equipment costs, and the costs of any temporary workers you expect to hire.
Financial forecasts
Convince your readers why your company is financially viable and why it will be successful — build your company’s mission statement with real data.
You should aim to provide financial projections for the next five years. Include forecasted income statements, balance sheets, cash flow statements and capital expenditure budgets.
For existing businesses, you can include all financial reports such as sales, balance sheets and cash flow statements going back up to five years if you can provide them. If your startup already has collateral, you can disclose it here.
Everyone loves a chart. So if you want to visualize your financial forecast, here is the perfect time.
Lean startup business plan format
If you need to start trading as soon as possible and do not need investments in the near future, a lean startup business plan format is probably best for you. Lean startup plans typically include visual elements and very specific diagrams that can easily visualize your business.
There are 9 key elements to a lean startup format, and while you could use them all, I advise you to take what you need again.
Important partnerships
Provide information about other services or companies you expect to use or work with in running your business. These partnerships should include, at a minimum, contractors, suppliers and product manufacturers, where applicable.
Key activities
Key activities should include the various methods that will keep your business ahead of the competition. In this section, you can talk about selling to customers, how you plan to reach your audience, or the technology used to achieve your business goals.
Key Resources
You should list key resources such as intellectual property, capital, and human resources.
Value proposition
Why should your company exist? Deliver a compelling statement that demonstrates the value your company offers in a saturated market.
Customer relationships
Tell the reader how you want to interact with your customer base. Are you an online business that serves customers over the Internet? Are you a retail store that serves customers face-to-face?
Target market
Every product has an ideal target market. Which is yours? There’s no point in marketing bright pink skinny jeans to 85-year-old Doris, right?
Define your customer and demographic data. What are they interested in? What is the typical age range? Where do they hang out the most? All the important questions to consider about your company’s target market.
channels
How will you interact and build relationships with your audience or customers? Explain the different methods your company will use to generate leads. This is essentially a high-level overview of your marketing strategy.
Sources of income
You need to explain how you plan to generate income. Your company may offer multiple products and services. For example, you can make direct sales by selling goods, generating recurring membership fees, or selling advertising space. These are all examples of items to include in your plan.
For those in the back
An effective business plan is just one of the many tools available to new companies and startups to develop strategies and plan the fundamentals of the business. It doesn’t matter whether you’re planning to start a small local business, start a new blog, or go international with a new fashion brand — don’t get stuck with your pants around your ankles, write a business plan.
However, remember that choosing the right business plan format for your company’s needs is critical. If you don’t need investment from banks or venture capitalists, you can probably get by with a streamlined business plan format that takes less time to create. However, if you need to raise funds for your business, you will likely need to invest more time in a traditional business plan.
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