Definition of a Business Plan
A business plan is a document that contains a series of steps to guide you in your business. It helps you lay out the big picture and create a precise plan for success.
A business plan consists of:
- A vision for your organization
- Your values and principles
- Objectives for the future
- A framework for what you’ll do on your path to success
- The markets you'll serve and how you'll do it
What Is the Purpose of a Business Plan?
Every business needs to have a business plan. Business plans are important because they serve as a roadmap to the future of the company.
Business plans are a snapshot of what your future could look like if you follow the plan. You can use a business plan to identify potential risks and opportunities while outlining goals and objectives.
Sections of a Business Plan
Most business plans include the following sections:
- Executive summary — Snapshot of all the sections of your business plan (save for last).
- Company description — Describe your company.
- Products and services — Describe what your company is selling.
- Market analysis — Describe your ideal customer and perform market research.
- Management team — Describe who will be responsible for managing the company.
- Financial plan — Describe how it will be funded, where money will be invested, etc.
- Operational plan — Describe how your company will operate daily, weekly, monthly.
- Appendices — Add supplemental information here (e.g., owned patents, logos, etc.).
Starting Strategy When Writing a Business Plan
We recommend identifying the purpose of your business and the target audience. After this, draft a compelling narrative for your business.
Think of this story as a vision in your head for your business. How do you see your business functioning? Get as detailed as possible, nailing down the narrative for your business completely. Doing this first will assist you in drafting your business plan. It will also make the process of writing a business plan quicker and more fun.
Use the narrative when sharing your business plan with others. This narrative will help them to see your vision and understand your business better.
Write Your Business Plan
Remember that a business plan is a set of guidelines or a roadmap that helps the business owner understand the purpose of their company and how they should be operating. It's also a document that investors and lenders use to determine whether they want to invest in your company or not. The plan provides an outline of how you will start and grow your company.
A business plan can be summed up with eight key pieces of information. Let’s look at and define each step in detail:
- The company's name — Start with a good name that’s easy to remember and brandable. We recommend our Business Name Generator to help you come up with an idea for a good name.
- An executive summary — The executive summary should include an overview of the company’s vision and an explanation of its value proposition to consumers. Save this section for last. It is essentially a short summary of all these steps in a single, digestible snapshot.
- A market analysis, including target market and competition — A market analysis is a study of the demand and supply of a product or service in the marketplace. It is also an examination of the economic opportunities that exist for a business. A market analysis can be conducted by looking at statistics and data gathered from research, surveys, and trade papers. It provides insight into what consumers want and what they will buy. For example, if you are looking to open a new restaurant, you would need to do market research to see what kind of food people like eating in your area. This way you can make sure your restaurant is different from the others and will meet customer needs.
- The company's products or services, including the brand identity and the USP (unique selling point) — A unique selling proposition is a statement that sums up the most important advantage of the product or service it is promoting. It should also show how it is different from other products and services in its category. Your USP will help you get investments and funding for your company by showing potential investors that you have a competitive advantage that others haven't seen before.
- The company's target audience or consumer base — This is the ideal market for the business. This part of the plan looks at data surrounding target demographics and psychographic research.
- The company's geographical location and distribution channels — Where will the company operate, and what markets will it serve? How will the company get its products to its customers?
- Financial projections, including income statements for three years and cash flow statements for two years — There are some great business accounting software that can help with generating these forward-looking reports and simplifying the process. Income statements and cash flow statements give investors an idea of what opportunities exist and how they may benefit. It is important to be conservative with your estimates — basing your information on sound market research.
- Projections on growth — Explaining how you will grow your business and how long growth will take over a period of time helps you and investors see the progress as it happens.
A well-written business plan is a detailed document that contains a description of the company's current situation, products or services, and future goals. This document provides the reader with insight into the financials of the company. A business plan paints a picture that tells your business’s story.
A good business plan should be able to differentiate your company from others, while providing a strategy for future success.
Frequently Asked Questions
When should I develop a business plan?
Business plans are generally written during the early stages of a startup when there is no actual revenue coming in. A plan can also be used at any point in a company's life cycle when changes need to be made or priorities need to be reassessed.
If you have not been profitable for at least three consecutive years, then it is time to evaluate your business plan and see how you can improve it.
What are the different sections of a business plan?
Business plan templates can vary, depending on the needs of a business. These are the sections of a typical business plan:
- Company Name
- Executive Summary (including Mission and Vision Statements)
- Market Analysis
- Products / Services
- Target Market
- Growth Projections
How often should I update my business plan?
Business plans are essential for any business, but they are also supposed to be living documents. These documents should be updated every six months or so to make sure that they remain relevant.
Update a business plan by following these four steps:
- Identify the changes in the external environment that might have an impact on our current plan.
- Identify changes in the internal environment.
- Review financials and forecast into the future.
- Get feedback from stakeholders and other people who need to approve the document.