What Is a Business Plan?
A business plan is a written document that describes in detail how a business—usually a startup—defines its objectives and how it is to go about achieving its goals. Investopedia
Your business plan is the foundation of your business, A good business plan guides you through each stage of starting and managing your business. You’ll use your business plan as a roadmap for how to structure, run, and grow your new business. It’s a way to think through the key elements of your business.
Business plans are important documents used to attract investment before a company has established a proven track record. They are also a good way for companies to keep themselves on target going forward.
Having a business plan will help you in the following ways:
1. Grow your business faster
Writing a business plan is about establishing a foundation for your business. You’re not predicting the future, you’re working through the core strategy of your business that will help you grow. This initial document isn’t meant to be perfect but is designed to be reviewed and adjusted to help you identify and reach your goals
Without a business plan as a baseline, it will be far more difficult to track your progress, make adjustments, and have historical information readily available to reference when making difficult decisions. Creating a business plan ensures that you have a roadmap that doesn’t just outline where you plan to go, but where you’ve already been.
2. Pitch and get funding
Investors and loan providers need to know that you have a solid understanding of the trajectory of your business. You need to prove that there is an attainable and sustainable need for your solution, that you have a strong business strategy, and that your business can be financially stable. This means having the right financial statements, forecasts, and a digestible explanation of your business model available for potential investors.
3. Make confident strategic decisions
Often the biggest decisions you’ll make for your business are amidst volatile periods of growth, decline, or even external crises. This requires you to make highly consequential decisions far more quickly than you may like. Without up-to-date planning and forecast information, these decisions may be less certain or strategic than they need to be.
By having a written business plan that you’re regularly reviewing, you can make confident decisions. You’ll have all the information necessary to know when you can hire new employees, launch a new product line or make a major purchase. At the same time, you can also plan ahead in case a decision doesn’t work out as expected, minimizing your potential risk.
Main Components of a Business Plan:
- Executive Summary
- Overview and Objectives
- Products and Services
- Market Opportunities
- Sales and Marketing
- Competitive Analysis
- Management Team
- Financial Analysis
1. Executive Summary
The executive summary is an overview of your business and your plans. Briefly tell your reader what your company is and why it will be successful. Include your mission statement, your product or service, and basic information about your company’s leadership team
Apple Executive Summary:
Apple Inc is one of the most iconic companies of the
recent decade. Apple has not only been developing and
selling great products. More importantly the company has
been building an incredible platform and an ecosystem for
its loyal users within which it could further sell apps and
services. The company is not immune to general market
trends and some of the product sales are slowing down
either due to markets maturing (e.g. smartphones) or due
to a general industry decline (e.g. music players and
computers). Apple has a formidable competition within
well established and well financed companies such as
Alphabet, Samsung, Amazon, HP as well as newcomers
from China like Huawei and Xiaomi. Despite strong
competition the company managed to grow and thrive
within its industries and enjoys one of the best balance
sheets and financial metrics among its peers.
2. Overview and Objectives
- Goals establish where you intend to go and tell you when you get there. They help improve your overall effectiveness as a company — whether you want to increase your share of the market, for example, or improve your customer service. The more carefully you define your goals, the more likely you are to do the right things and achieve what you wanted to accomplish in the first place.
- Objectives are the specific steps you and your company need to take in order to reach each of your goals. They specify what you must do — and when.
Think of goals and objectives this way:
- Goals tell you where you want to go; objectives tell you exactly how to get there.
- Goals can increase your effectiveness; objectives back your goals and make you more efficient.
- Goals are typically described in words; objectives often come with numbers and specific dates
Use goal-setting ACES
Most goals define positive outcomes that you want your business to achieve, but sometimes you also want to set goals to avoid pitfalls and to eliminate a few weaknesses. To help develop goals that cover all the bases, use the acronym ACES as you tick through the following key questions:
- Achieve: What do you want to attain in the future?
- Conserve: What do you want to hang on to?
- Eliminate: What do you want to get rid of?
- Steer clear: What do you want to avoid?
3. Products and Services
The products and services section of your business plan outlines your product or service, why it’s needed by your market, and how it will compete with other businesses selling the same or similar products and services. Your product and services section should include:
- A description of the products or services you are offering or plan to offer
- How your products and services will be priced
- A comparison of the products or services your competitors offer in relation to yours
- Sales literature you plan to use, including information about your marketing materials and the role your website will play in your sales efforts
- A paragraph or so on how orders from your customers will be processed or fulfilled
- Any needs you have in order to create or deliver your products, such as up-to-date computer equipment
- Any intellectual property, such as trademarks, or legal issues you need to address
- Future products or services you plan to offer
4. Market Opportunities:
Market research is critical to business success. A good business plan analyzes and evaluates customer demographics, purchasing habits, buying cycles, and willingness to adopt new products and services.
Start by evaluating the market at a relatively high level, answering some high-level questions about your market and your industry:
- What is the size of the market? Is it growing, stable, or in decline?
- Is the overall industry growing, stable, or in decline?
- What segment of the market do I plan to target? What demographics and behaviors make up the market I plan to target?
- Can I differentiate myself from the competition in a way customers will find meaningful? If so, can I differentiate myself in a cost-effective manner?
The key is to understand the market in general terms and then to dig deeper to understand whether there are specific segments within that market–the segments you plan to target–that can become customers and support the growth of your business.
5. Sales and Marketing
In this section of the plan, you’re actually going to spell out how you’ll market your idea, along with the specifics of how you’ll get business. Sales and marketing are what will grow your business and help you achieve success.
4 Things Your Marketing Plan Must Cover
Explain in detail the product(s) or service(s) you’re offering, particularly how they are different from or better than what’s already available. What benefits do they provide to your potential customers? In what ways is your product or service unique? What makes doing business with you preferable to dealing with someone else? All of these things will help make up your marketing message
It’s important to talk about where you’ll be located and how you’ll get your products and services to your customers.
How you decide to price your product or service is key to how much you’ll sell and how much profit you can make
how are you going to reach your target audience and turn them into customers?
A sales strategy plan is a company’s roadmap for securing dependable, long-term revenue through the retention and acquisition of new and existing customers.
sales plan will help you:
- define a set of sales targets for your business
- choose sales approaches that are suited to your target market
- identify sales tactics for your sales team
- activate, motivate and focus your sales team
- budget and clarify steps you’ll take to achieve your targets
- review your goals periodically and improve your approaches to sales.
The Competitive Analysis section of your business plan is devoted to analyzing your competition–both your current competition and potential competitors who might enter your market.
Every business has competition. Understanding the strengths and weaknesses of your competition–or potential competition–is critical to making sure your business survives and grows.
The operations section of your business plan is where you explain – in detail – you company’s objectives, goals, procedures, and timeline. An operations plan is helpful for investors, but it’s also helpful for you and employees because it pushes you to think about tactics and deadlines.
Structure the management team section to include:An organizational chart of your small business, including departments, department managers and employees. Biographical information about you, the owner, and any other owners. Specify your ownership percentage and exactly what your day-to-day responsibilities will be.
The financial analysis section of a business plan should contain the data for financing your business for the present, what will be needed for future growth, and an estimation of your operating expenses.
Most business plans include at least five basic reports or projections:
- Balance Sheet: Describes the company cash position including assets, liabilities, shareholders, and earnings retained to fund future operations or to serve as funding for expansion and growth. It indicates the financial health of a business.
- Income Statement: Also called a Profit and Loss statement, this report lists projected revenue and expenses. It shows whether a company will be profitable during a given time period.
- Cash Flow Statement: A projection of cash receipts and expense payments. It shows how and when cash will flow through the business; without cash, payments (including salaries) cannot be made.
- Operating Budget: A detailed breakdown of income and expenses; provides a guide for how the company will operate from a “dollars” point of view.
- Break-Even Analysis: A projection of the revenue required to cover all fixed and variable expenses. Shows when, under specific conditions, a business can expect to become profitable
What Goes Into Business Plan Appendix?
- Additional descriptions of products and services
- Legal agreements
- Organizational charts
- Photographs of potential facilities, products, etc.
- Backup for market research or competitive analysis
- Additional financial documents or projections
for further information read our blog post about proposal writing