Whether you are starting a new business or running an existing business, it’s important to create a guideline for running and growing it. The best tool to do this is a Business Plan. A Business Plan is a document that you create that helps you plan how you will structure your business, run it on a day to day basis, and how you will continue to grow it. A good business plan can help with funding, investing, and bringing new people into the business.
Types of Business Plans
The type of business plan that you create will depend on the type of business that you are running. There are six types of business plans:
- Start-Up Business Plan – these are businesses that are new
- Internal Business Plan – used for targeting a specific group within the business
- Strategic Business Plan – used for giving a higher-level view of the goals of the company and how it will achieve those goals
- Feasibility Business Plan – used for proposing a business venture, this plan focuses on who will be buying the product or service, and whether it will be profitable
- Operations Business Plan – this is an internally used plan that outlines the operation of the company
- Growth Business Plan – also referred to as an expansion plan, this is an in-depth outline focused on growth proposal
Creating a Business Plan
The most important thing to do is choose a business plan format that will work for you. There really isn’t a wrong or right way to do this. It just needs to meet your needs and the needs of your business. The majority of business plans will fall under one or two categories: lean startup and traditional.
A lean startup plan will focus on the key elements and important points of your business. These are more of a summary and easier to write but are less common to use. The most common is the traditional business plan, which is a bit more structured and detailed. When you are looking for investors or funding, it’s the more detailed business plan that is requested.
Writing a Business Plan
Since the traditional business plan is more often used, we will look at what key elements you will need to include in it. Depending on your business type, you may not need all of the sections listed below.
Your business plan should start off with an explanation of what your company is, as well as why you feel it will be a success. Be sure to include:
- Your company’s mission statement
- The services or product you are offering
- Basic details about the employees, leadership team, and the location
- If you are planning to ask for financing, you should also include your financial information along with a growth plan.
In this section, you will give more detailed information about your business. You should cover what issues your company solves with its product or service. Outline the businesses, consumers, or organizations that your company will be serving. Make sure to be as specific as possible. You should also explain what advantages your business has over the competition that will make your company a success. You want to highlight the strengths of your business.
Running a market analysis will help you understand your target market and industry outlook. It can show you what other companies are doing to be a success. Include your findings in your business plan and show how your company can do better.
Management and Organization
For this section, explain the legal structure of your company, as well as who is running it. Explain whether your company will be a limited liability company, sole proprietor, have a general limited partnership, and if you are considering becoming an S or C corporation. One good way to do this is by using an organizational chart that indicated which people are in charge of what area of the company. Highlight the unique abilities that make that person perfect for the area they are in charge of.
Product Line or Service
For this section, you will be describing what services or products you will be offering. Be sure to outline the benefits to the clients and the lifecycle of the products. Also, be sure to explain any plans for patents, copyrights, and intellectual property.
Sales and Marketing
For this section, you will need to explain your market strategy, or rather how you plan on gaining and keeping your customers. Describe the sales process and strategies. Keep in mind that this is something that will change and evolve as you shape your company.
Request for Funding
Use this section if you are requesting funding. Explain in detail your requirements for the coming 5 years and how you will be using that funding. Be specific regarding whether you want equity or debt, what terms you would like, and the time length it should cover. Be sure to give clear details on how the funds will be utilized until your revenue increases, such as whether the funding is for materials, equipment, specific bills, or salaries. You should also include your financial plans for the future, for example, to pay off any debts.
Another section to include, if you are requesting funding, is your financial projections. You want to be able to show that your business will not only be stable but a success financially. If you have an established business, you can include the company’s balance sheets, income statements, and cash flow for a 3 to 5 year period. Also, be sure to list any collateral that you can use for the loan.
You should also complete a 5-year forecast that includes your forecasted capital expenditure budget, balance sheets, income statements, and cash flow statements.
You can download one of our free templates or samples to get a better idea of what a Business Plan should look like.
When creating a successful business plan, you will want to avoid these common mistakes:
- Financial projections that are nor realistic – don’t over-estimate the value of your company. Your financial projections need to be backed up by realistic explanations.
- Not defining your target audience – being too vague o stating that your business will appeal to everyone is not realistic.
- Over-Hyping – it takes more than hyped-up words to convince a person that our business plan is great. You need to back up what you are saying with facts.
- Bad or very little research – be sure the information you use for research is not out of date or incorrect.
- Not focusing on the competition – there is always competition, regardless of how unique you think your company is. You need to show investors what you have that your successful competitors don’t have.
- Not showing weaknesses – you should try to hide any potential weaknesses in your business. Instead, show a strategy that you will use to address the issue.
- Not knowing distribution channels – you need to have a secure plan regarding how you will be getting your service or product out into the mainstream, along with why those channels are the right ones for your business.
- Too much information – no one has time to read a 100-page business plan. The point of your business plan is to focus on your business’ key elements. Make sure you are concise and clear.
- Inconsistencies – make sure the statistics and information you give are consistent and not conflicting. It will make an investor feel that you don’t know your own business or the market.
- Not proofreading – you should have a few people review the business plan to make sure there are no errors.
What is the difference between a business plan and a pitch deck?
A pitch deck is a brief presentation that gives a quick overview of your business plan. A business plan is more detailed.
What is the difference between a business plan and an executive summary?
An executive summary gives an overview of a longer proposal, in this case, a business plan.
When should you write a business plan?
On average, those who wrote a business plan between 6 to 12 months of starting their business tended to be successful because they had viable data over a few months. When you write a business plan before you start the business, a lot of the data is going to be guesswork.