Most business owners know they need a business plan. However, they’re not sure what a business plan is and the information it should include. Here’s everything you need to know to develop a business plan presented in a simple, step-by-step and easy-to-understand way.
What is a business plan?
Your business plan is a guide that clearly explains how you plan to take your business from where it is today to where you envision it being at some point in the future.
Who needs a business plan?
If you’re a freelancer working part time, you probably don’t need a written plan. However, if your business requires a significant amount of time, money and other resources to run, you need one.
Business plans are particularly necessary if you’re:
- Starting a new business
- Applying for business loans or seeking funding
- Growing your business or taking it in a new direction.
In short, all significant operations should have business plans that they maintain and update as economic changes occur, market conditions change or new opportunities arise. A written plan is the only way to gain a clear picture of how all kinds of factors, from financing to marketing and economic conditions to key personnel, come together to move your business into the future.
Tip: Having a business plan does not guarantee success, but it makes it more likely.
What factors go into building a solid business plan?
- It should be based in reality and not filled with hyperbole, sketchy data or unreasonable projections of success.
- It must be clear and compelling so investors are willing to back you.
- It should help you identify gaps in your thinking during the planning process, not while you’re running a business or dealing with a crisis.
- It must be objective and not filled with personal biases.
- The logic should make it clear your business concept makes sense. If you can’t explain it in an end-to-end story, it’s likely not a viable business.
- It must present a compelling reason for the company and vision for its future. If you can’t do this, buyers won’t find your operation interesting enough to do business with.
- It should be a living document that guides how you run your business over the long term.
Who are the audiences for a business plan?
- Yourself. You’re not just the author of the plan, you’re also the person responsible for carrying it out.
- Sources of financing. It should convince financiers to put their money behind your venture.
- Partners. A plan gets multiple business owners on the same page, working together to achieve common goals.
- Employees. A solid plan attracts top talent to a new venture and ensures your team shares a single vision.
- Joint ventures. If your business is dependent on others for success (most are), a plan will help people at partner companies understand how you will work together and what’s in it for them.
- Vendors. Your plan should encourage suppliers to provide you with what you need to operate effectively.
What should a business plan include?
The sections typically included are:
- Executive summary
- Overview
- Objectives
- Products and services
- Market opportunities
- Sales and marketing
- Competitive analysis
- Operations
- Management team
- Financial analysis.
Here’s a breakdown of each.
Executive summary
This is a brief, one or two page outline of the purpose and goals of your business. It should include:
- A business overview
- The objective of your business
- A description of product and service offerings
- An overview of markets served
- An explanation of why your business is viable
- A brief competitive analysis
- A simple statement about your growth potential
- An explanation of your funding needs.
You owe it to yourself to nail your executive summary. It’s your make-or-break chance to convince people to read to the end of your plan. If you don’t hook them early on, you won’t win their support.
Forcing yourself to limit your executive summary to a page or two will help you understand what’s really important about your business so you can set priorities.
Tip: Think of your executive summary as a snapshot of your entire plan.
Overview
Coming up with an overview of your business can be challenging, especially if you’re still planning your operation. If you own an existing business, summarizing it should be relatively easy.
The best way to come up with an overview is to take a step back. Think about:
- What products and services do you provide?
- How do you create and deliver your offerings?
- Where do you supply your products and services (storefront, online or both)?
- Who provides them and who do you provide them to?
- What makes them different?
- What pain points do you solve and how do you solve them?
Once you answer these questions, you should be able to come up with a business overview.
Objective
Ask yourself: Why do you do what you do? Is it to:
- Earn revenue?
- Educate and inform customers?
- Offer a unique product or service or selection of them?
- Demonstrate you invented something new?
- Prove your business is better than your competition?
Answering these questions will help you understand your objective for owning a business. In other words, you’ll finally “get” why you do what you do and what makes your business different. If you can’t figure it out, maybe you shouldn’t own a business.
Products and services
In this section, clearly describe the products and services your business offers. Keep it simple and easy to understand. Avoid industry jargon and buzzwords. Don’t get too detailed or technical.
Make it a point to explain:
- How your products and services are different and better than those of competitors.
- Why your products and services are necessary if comparable offerings aren’t available or if no market currently exists.
- If your offerings exist or are in development.
- Whether you’re already in business or your timeline if you’re not.
- How your offerings are made or acquired.
- Any patents, copyrights and trademarks you own or have applied for.
- What happens if you run out of supplies.
- How you price your products and services and your rationale.
Depending on your type of business and it’s complexity, this section of your
plan could be long or short. It depends on what it takes to make interested parties understand what you offer and what makes it unique. You also have to prove that your business is viable over the short and long term.
Markets
Clearly understanding who you sell to is critical to success. The only way to do this is by conducting thorough research about your target markets.
Your business plan should provide a thorough analysis and evaluation of:
- Customer demographics
- Buyer purchasing habits
- Buying cycles and patterns
- Buyer openness to trying new products and services
- The overall opportunity available to you.
Ask yourself:
- Who do you plan to target?
- Who are the purchasing decision makers?
- What are their demographic characteristics (age, income, education, household size, location, etc.), mind-sets and buying habits?
- What is the size of your market?
- Is it increasing, stable or declining in size?
- If the size of your industry increasing, stable or declining in size?
- Is demand for what you offer increasing or decreasing.
- Do your customers understand what makes your offerings different?
- Is your market sensitive to price?
- How do your customers find out about offerings similar to yours?
- Where do people in your target audience buy comparable things?
- What percentage of your target market can you realistically serve?
The purpose of this section is to prove that there is an adequate market for what you offer. If you can’t make the case, your business isn’t viable.
Marketing and Sales
Defined marketing and sales plans are critical to business success. Customers have to know your offerings are available and be able to purchase them easily.
Your marketing plan should include information about:
- Your brand, how it reflects your business and the visual and messaging elements that express it
- What makes your brand different and special
- Your marketing and advertising budgets
- The return you expect to earn on your investment in marketing (the sales return on your marketing spend)
- How you will spend the money (creative, media, talent and more)
- How you will connect with people in your target market (advertising, content marketing, social media, public relations, etc.)
- What you plan to do to break through the competition
- The metrics you’ll track to prove your marketing is successful.
Tip: Include mock-ups of marketing assets in your business plan. It will help bring your brand and marketing vision to life.
Your sales plan should include:
- A sales budget
- How much you’ll spend to generate each sale (apart from marketing)
- An end-to-end map of your overall sales process, from initial contact to final deal to future up sells and cross sells
- Descriptions of the types of people you need to sell your products
- The compensation and rewards program for your sales team
- Sales goals and how you will reach them
- How you will monitor progress toward achieving your goals
- What you’ll do if you miss your goals.
Stakeholders need to come away convinced that you have a clear vision for marketing your offerings and getting people to buy them.
Competitive analysis
Business isn’t done in a vacuum. You must keep your finger on the pulse of your competition — both current and potential — so you can always differentiate your operation from their businesses.
Your business plan should include a thorough analysis of the strengths and weaknesses of your competitors and how you plan to respond to them. This process isn’t once-and-done. During dynamic times, competitors could release new product and service offerings — or positioning — at any time. Being unaware could leave you vulnerable.
Start by asking yourself these questions about each competitor:
- Are they a primary or secondary competitor?
- What are their strengths (things that could leave your business vulnerable)?
- What are their weaknesses (opportunities that you can take advantage of)?
- What are they trying to achieve (market share, attract a certain type of client, own a segment of the marketplace)?
- What is their market share?
- How do they market and sell their offerings?
- Have they made news?
- What does the industry look like through their eyes?
- What can you do to beat them?
- What could they do to beat you?
Visit their websites, social media properties and physical locations — and talk to their customer service reps — to find out what they’re about.
Tip: Smaller businesses are typically more vulnerable to competitive changes, especially when new operations enter a limited marketplace.
Operations
This is where you explain how you will operate your business including:
- How you will serve customers
- What you will do to keep operating costs in check and ensure profitability
- How you’ll staff your business and manage your team
- How you plan to handle the nuts and bolts of inventory, manufacturing and fulfilment.
Ask yourself:
- What facilities, supplies and equipment do you need to be successful?
- How will you structure your organization?
- Who is responsible for managing the different parts of your business?
- What are your staffing requirements?
- What’s your compensation structure?
- How will you train your team?
- How will you identify the best vendors and suppliers?
- What processes and procedures will you need to develop?
- How will operations evolve as the business grows?
- Where will you do business and how will you find, design, renovate, clean and manage spaces?
- What are parking requirements?
- What utility services are needed?
- What insurance do you need?
- Are special licenses or permits required?
- What will you do if things don’t work out as planned?
The operations plan should convince interested parties that you know how to run your business.
Management Team
Businesses are only as good as the people who support them. This is a key section people check when evaluating businesses.
Include information about your leaders or the type of people you plan to hire for those positions, such as:
- Work experience
- Educational background
- Pertinent skills
- Duties performed
Include both internal people and external ones, like lawyers, accountants and bookkeepers, that make your operation successful.
Financial analysis
Numbers don’t lie. Bottom line results prove the success or failure of any organization.
Financial projections and estimates will help people evaluate your company’s potential for success. That’s why this section of your business plan is so important. If you don’t feel you can handle it on your own, it’s worthwhile to hire a professional to help you.
Your financial plan should include the following reports or projections:
- Balance sheet, including assets, liabilities and earnings retained to fund future operations or to serve as cash for expansion and growth.
- Income statement, including projected revenue and expenses.
- Cash flow statement, including a projection of cash receipts and expense payments.
- Operating budget, including a detailed breakdown of income and expenses.
- Break-even analysis, including a projection of the revenue required to cover all fixed and variable expenses.
Your financial analysis must be as comprehensive and accurate as possible. It’s the only way you and your stakeholders will feel secure about the financial future of your organization.
Finally
You’re creating your business plan for your investors and yourself. In the end, it should prove your business is viable and worth the talent, time and money it takes to run it.
Need help writing your business plan? Check out our helpful workshop. It will provide the support you need to write a top-notch plan.
At the completion of this Writing Your Business Plan workshop, you should be able to:
- Describe the importance of a plan
- Identify the elements of an effective plan
- Write an effective business plan
Who it’s for?
Anyone who is:
- in the early stages of starting their business
- needs to secure external funding
- already has a business but wants to develop a plan to clarify their thinking and look for new opportunities.
No previous business knowledge is required to attend this workshop.
CLICK HERE TO JOIN THE WORKSHOP ONLINE
The workshop content formats:
- Text documents
- Images and charts
- Videos
Support for this workshop provided through email, phone and video conferencing (Zoom or Skype)
