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No business can be successful without a solid business plan. In fact, a business plan could be the thing that makes or breaks your entrepreneurial enterprise, especially if you haven’t started a successful business in the past.
Let’s break down what a business plan is, why it’s important, and a step-by-step guide on how to write one in detail.
What Is a Business Plan?
Put simply, a business plan is a detailed outline explaining what a business will be, how it will work, and how it will bring in money. Business plans can range heavily in terms of length and complexity, but they all include an explanation of what the business will do and how it will turn a profit, dealing with everything from financial statements and pricing to potential customer segments and business development.
Think of business plans as the guiding documents for for-profit organizations. A business plan guides business owners and employees or other executives at existing businesses and helps inspire investor confidence when seeking financing in the earliest days of a business’s life. There are a few types of business plans, but they all do the same things.
Related: An Introduction to Business Plans
Why Is a Business Plan Important?
A small business plan is important for any new enterprise, regardless of industry or niche. Why?
By far, the most crucial thing a good business plan does is improve investor confidence. When an entrepreneur or startup executive needs to secure funding and business loans, they have to convince investors that their business is worth investing in. It’s impossible to do that without a solid business plan explaining:
- What the business will provide or make
- How the business will make money (i.e., financial projections for a new business)
- Who the business will advertise to
- And similar forecasts or discussions lenders need to see
By looking through a business plan, investors (both individuals and large firms) can tell whether a business owner (or would-be entrepreneur) has a good idea or is merely flailing in the wind.
In addition, a business plan is important since it will help guide your actions as a business owner and executive. With a business plan to keep your head on straight, you’ll know what to do, how to scale your business, and what objectives you need to meet in order to achieve the goals outlined in your business plan.
Elements of a Traditional Business Plan
Business plans are usually comprised of several key elements. These include:
- A title page, which breaks down a rough overview of the startup business and its name
- An executive summary, which essentially describes what you want the business to achieve as its owner
- The business description, which describes the business, its structure, what it sells or produces, and related information. It should also include the value proposition and any intellectual property you have for your business idea
- Market research and strategies, which will help convince potential investors that you know how you will market and sell your products to your target audience
- Management and personnel, which should outline your projections for the employees or labor force you’ll need to achieve your business goals. If you plan to hire team members, don’t worry about stating too much about them here
- Financial documents, including any capital you have already raised, the funding you need to get your business off the ground, and so on. This can include a balance sheet or cash flow statements if you already have a financial plan or have operated your business for some time
- A competitive analysis page, breaking down the status of your competitors in the same industry. This can include company descriptions or business models based on what you know
- A design and development plan, exploring how you will design and develop your business for ultimate success. Think of this as a roadmap or mission statement for how your brand will hit milestones and gain a competitive advantage over other brands
- An operations and management plan, which should explore and explain how you will run and operate your business as its owner or chief executive
With each section of your business plan, an investor or venture capitalist can determine the viability of your sole proprietorship, LLC, or other business.
Related: How to Write a Business Plan
Now that you understand why you need a business plan and you’ve spent some time doing your homework gathering the information you need to create one, it’s time to roll up your sleeves and get everything down on paper. The following pages will describe in detail the seven essential sections of a business plan: what you should include, what you shouldn’t include, how to work the numbers and additional resources you can turn to for help. With that in mind, jump right in.
Within the overall outline of the business plan, the executive summary will follow the title page. The summary should tell the reader what you want. This is very important. All too often, what the business owner desires is buried on page eight. Clearly state what you’re asking for in the summary.
Related: How to Start a Business With (Almost) No Money
The business description usually begins with a short description of the industry. When describing the industry, discuss the present outlook as well as future possibilities. You should also provide information on all the various markets within the industry, including any new products or developments that will benefit or adversely affect your business.
Business Plan Guide “
Before Writing Your Plan
Writing Your Business Plan
Business Plan Tools
Market strategies are the result of a meticulous market analysis. A market analysis forces the entrepreneur to become familiar with all aspects of the market so that the target market can be defined and the company can be positioned in order to garner its share of sales.
The purpose of the competitive analysis is to determine the strengths and weaknesses of the competitors within your market, strategies that will provide you with a distinct advantage, the barriers that can be developed in order to prevent competition from entering your market, and any weaknesses that can be exploited within the product development cycle.
The purpose of the design and development plan section is to provide investors with a description of the product’s design, chart its development within the context of production, marketing and the company itself, and create a development budget that will enable the company to reach its goals.
The operations and management plan is designed to describe just how the business functions on a continuing basis. The operations plan will highlight the logistics of the organization such as the various responsibilities of the management team, the tasks assigned to each division within the company, and capital and expense requirements related to the operations of the business.
Financial data is always at the back of the business plan, but that doesn’t mean it’s any less important than up-front material such as the business concept and the management team.
Business Plan Templates
Want to see some of these principles in action? You can check out business plan templates in this detailed guide. Feel free to use some of these templates when drawing up business plans for your organization in the future!
As you can see, business plans aren’t as complex as you may have initially thought. Furthermore, they are important parts of any business enterprise. Don’t forget to write a business plan for your upcoming endeavor before seeking funding!
For more guides, resources, and information, check out Entrepreneur!