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Business plans are the blueprints that companies create to roadmap their way to success. These documents are also vital for raising capital, attracting investors, and monitoring overall progress. Ensure that your organization puts its best face forward by having a solid business plan in place.
This article covers what every owner should know about writing a business plan:
What is a Business Plan?
A business plan is a document that entrepreneurs create to outline their company’s funding and operational strategy. Business planning is essential for any company that wants to attract and retain investors. You write a business plan for angel investors, banks, and venture capitalists so that they can make sound investment decisions.
This article also defines what a business plan is.
How to Write a Business Plan – Step-by-Step
Writing a business plan can seem daunting without a step-by-step approach. The scope of the plan can snowball and leave founders tabling their efforts altogether. Avoid falling into this trap.
We handled the heavy-lifting for you and outlined a five-step process below:
Step 1. Start Small
Business plans should be brief and to the point. An overly long business plan is a pain to revise and read. It’s a document that you’ll keep using and refining over time, which means you should make it as concise as possible.
Step 2. Know Your Audience
Use communications and language that your target audience will understand when writing your plan. If your company is developing a complex technical process and investors aren’t tech-savvy, avoid using jargon or acronyms they won’t recognize, for example. Accommodate your investors by keeping your communications straightforward while using terms that everyone can understand.
Step 3. Test Your Idea
Start by writing a single-page pitch. This exercise will allow you to test the viability of your business concept long before launch. It is an exercise that can be as simple as a peer review or as complex as a feasibility study.
Step 4. Set Objectives
Have a strong concept of where you want your company to go from the start. Before you begin, you may not have every milestone or even specific steps in mind to achieve your objectives. However, the main elements of a business plan will help you address them methodically.
Step 5. Ask for Help at the Right Time
Small business law can apply to your business plan and affect your investing objectives. Know when to ask for help rather than leave your company exposed to liability. Business lawyers can help you address these issues and review your final document.
Here is another article that discusses how to write a business plan.
Main Elements of a Business Plan
Developing a solid business plan is necessary for various reasons. However, even more, critical is the process of ensuring that it is updated to reflect the small and large changes that your business will experience as it grows and evolves. A well-structured agreement will help you handle this challenge over time.
Here are five main elements of a business plan to include in your document:
Element 1. Executive Summary
The Executive Summary is the opener of your business plan, but it should also be the final one you write. This section is the most read and creates a critical first impression for investors. Based on your executive summary, your target audience may continue to read through it.
Element 2. Company Description
Following the Executive Summary, a business plan should begin with a detailed company description and its relationship to the market in which your company operates.
This section of the business plan should include the following details:
- what your business does
- what products or services does it offer
- which market segment it serves
- who are its clients
When describing your business, you should ensure that the reader understands the market environment in which it operates and how it can thrive competitively in that environment.
Element 3. Marketing Plan
This business plan section requires an in-depth knowledge of your market as well as how your business positions itself and competes with established players.
You should include the following in your marketing plan:
- Market analysis
- Marketing budget
- Product or service features
- Strengths & weaknesses
- Target audience
- Threats & opportunities
Element 4. Management & Operations
The people and processes that enable your business to function daily are critical to maintaining a competitive edge. They assist you in developing a superior product while delivering it more efficiently and at a lower cost.
Your management and operations team must be capable of delivering on the promises made in the preceding sections. Additionally, investors and banks will review this section to understand salary costs since these are frequently significant expenses.
Element 5. Financial Plan
Your financial plan is, without a doubt, the most critical component of your business plan. Emphasize assumption explanations that underpin your forecasts than directly on the estimates themselves.
Every sound financial plan will include the following:
- Breakeven analyses
- Capital requirements
- Cash flow statement and forecasts
- Profit & loss projections
- Pro forma template
The financial plan is generally the most lengthy and detailed part of the business plan. Most business plan writers include the details in a section following the appendices. Include complex spreadsheets and calculations to prepare the financial statements in this section for a more thorough approach.
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Purpose of a Business Plan
A business plan’s purpose is to analyze a business opportunity for a new or existing business. The document should consider several areas, including human resources, external forces, marketing, finance, technology, and business law. Your business plan can also operate as a formal and polished introduction to your organization if investors want to learn more about your operations.
Types of Business Plans
Business plans are not a one-size-fits-all solution. Several types allow you to customize your efforts to your growth stage and investor target.
Below, we have described the five types of business plans your company can use:
Type 1. Startup Business Plan
A startup plan is a business plan that a new business presents to prospective investors to secure startup funding. Startup plans serve as a starting point for companies that you can adjust as the business grows.
Type 2. Strategic Business Plan
A strategic business plan outlines the tactic that a business will employ to accomplish its overall objectives. Typically, strategic plans are used internally as a foundational plan for an entire organization.
Type 3. Feasibility Business Plan
A feasibility business plan will help you introduce a new product or service within a given geographic region. Typically, it focuses exclusively on how well a product will sell or whether the proposed market exists for targeted returns.
Type 4. Operational strategy
An operations plan, also known as an annual plan, is a component of strategic planning that focuses on day-to-day operational activities. It details management’s, departments’, and employees’ responsibilities and how they contribute to its overall success.
Type 5. Business Expansion Plan
You can use a business expansion plan when growing your company in size or area. The development requires additional resources such as financial investment, materials for new products, and an increased workforce. Companies can develop expansions plans for external or internal reasons.
Get Help with Business Planning
It’s not always easy to get a jump start on your business planning efforts. Get help with this strategy by speak with a business lawyer . They can offer guidance and legal advice while helping you avoid costly errors.
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