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A business plan is a written document describing

Business Plan

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

Khadija Khartit is a strategy, investment, and funding expert, and an educator of fintech and strategic finance in top universities. She has been an investor, entrepreneur, and advisor for more than 25 years. She is a FINRA Series 7, 63, and 66 license holder.

Vikki Velasquez is a researcher and writer who has managed, coordinated, and directed various community and nonprofit organizations. She has conducted in-depth research on social and economic issues and has also revised and edited educational materials for the Greater Richmond area.

What Is a Business Plan?

A business plan is a document that defines in detail a company’s objectives and how it plans to achieve its goals. A business plan lays out a written roadmap for the firm from marketing, financial, and operational standpoints. Both startups and established companies use business plans.

A business plan is an important document aimed at a company’s external and internal audiences. For instance, a business plan is used to attract investment before a company has established a proven track record. It can also help to secure lending from financial institutions.

Furthermore, a business plan can serve to keep a company’s executive team on the same page about strategic action items and on target for meeting established goals.

Although they’re especially useful for new businesses, every company should have a business plan. Ideally, the plan is reviewed and updated periodically to reflect goals that have been met or have changed. Sometimes, a new business plan is created for an established business that has decided to move in a new direction.

Key Takeaways

  • A business plan is a document describing a company’s core business activities and how it plans to achieve its goals.
  • Startup companies use business plans to get off the ground and attract outside investors.
  • A business plan can also be used as an internal guide to keep an executive team focused on and working toward short- and long-term objectives.
  • Businesses may create a lengthier traditional business plan or a shorter lean startup business plan.
  • Good business plans should include an executive summary and sections on products and services, marketing strategy and analysis, financial planning, and a budget.
Want Funding? You Need a Business Plan

Understanding Business Plans

A business plan is a fundamental document that any new business should have in place prior to beginning operations. Indeed, banks and venture capital firms often require a viable business plan before considering whether they’ll provide capital to new businesses.

Operating without a business plan usually is not a good idea. In fact, very few companies are able to last very long without one. There are benefits to creating (and sticking to) a good business plan. These include being able to think through ideas before investing too much money in them and working through potential obstacles to success.

A good business plan should outline all the projected costs and possible pitfalls of each decision a company makes. Business plans, even among competitors in the same industry, are rarely identical.

However, they can have the same basic elements, such as an executive summary of the business and detailed descriptions of its operations, products and services, and financial projections. A plan also states how the business intends to achieve its goals.

The plan should include an overview, and, if possible, details of the industry of which the business will be a part. It should explain how the business will distinguish itself from its competitors.

While it’s a good idea to give as much detail as possible, it’s also important that a plan be concise to keep a reader’s attention to the end.

Elements of a Business Plan

The length of a business plan varies greatly from business to business. Consider fitting the basic information into a 15- to 25-page document. Then, other crucial elements that take up a lot of space—such as applications for patents—can be referenced in the main document and included as appendices.

As mentioned above, no two business plans are the same. Nonetheless, they tend to have the same elements. Below are some of the common and key parts of a business plan.

  • Executive summary: This section outlines the company and includes the mission statement along with any information about the company’s leadership, employees, operations, and location.
  • Products and services: Here, the company can outline the products and services it will offer, and may also include pricing, product lifespan, and benefits to the consumer. Other factors that may go into this section include production and manufacturing processes, any patents the company may have, as well as proprietary technology. Information about research and development (R&D) can also be included here.
  • Market analysis: A firm needs a good handle on its industry as well as its target market. This section of the plan will detail a company’s competition and how the company fits in the industry, along with its relative strengths and weaknesses. It will also describe the expected consumer demand for a company’s products or services and how easy or difficult it may be to grab market share from incumbents.
  • Marketing strategy: This section describes how the company will attract and keep its customer base and how it intends to reach the consumer. A clear distribution channel must be outlined. The section also spells out advertising and marketing campaign plans and the types of media those campaigns will use.
  • Financial planning: This section should include a company’s financial planning and projections. Financial statements, balance sheets, and other financial information may be included for established businesses. New businesses will include targets and estimates for the first few years plus a description of potential investors.
  • Budget: Every company needs to have a budget in place. This section should include costs related to staffing, development, manufacturing, marketing, and any other expenses related to the business.

Unique Business Plans Help

The best business plans aren’t generic ones created from easily accessed templates. A company should entice readers with a plan that demonstrates its singularity and potential for success.

Types of Business Plans

Business plans help companies identify their objectives and remain on track to meet goals. They can help companies start, manage themselves, and grow once up and running. They also act as a means to attract lenders and investors.

Although there is no right or wrong business plan, they can fall into two different categories—traditional or lean startup. According to the Small Business Administration (SBA), the traditional business plan is the most common. It contains a lot of detail in each section. These tend to be longer than the lean startup plan and require more work.

Lean startup business plans, on the other hand, use an abbreviated structure that highlights key elements. These business plans aren’t as common in the business world because they’re short—as short as one page—and lack detail. If a company uses this kind of plan, it should be prepared to provide more detail if an investor or lender requests it.

Special Considerations

Financial Projections

A complete business plan must include a set of financial projections for the business. These forward-looking financial statements are often called pro-forma financial statements or simply the “pro-formas.” They include an overall budget, current and projected financing needs, a market analysis, and the company’s marketing strategy.

Other Considerations for a Business Plan

A major reason for a business plan is to give owners a clear picture of objectives, goals, resources, potential costs, and drawbacks of certain business decisions. A business plan should help them modify their structures before implementing their ideas. It also allows owners to project the type of financing required to get their businesses up and running.

If there are any especially interesting aspects of the business, they should be highlighted and used to attract financing, if needed. For example, Tesla Motors’ electric car business essentially began only as a business plan.

Importantly, a business plan shouldn’t be a static document. As a business grows and changes, so too should the business plan. An annual review of the company and its plan allows an entrepreneur or group of owners to update the plan, based on successes, setbacks, and other new information. It provides an opportunity to size up the plan’s ability to help the company grow.

Think of the business plan as a living document that evolves with your business.

What Is a Business Plan?

A business plan is a document created by a company that describes the company’s goals, operations, industry standing, marketing objectives, and financial projections. The information it contains can be a helpful guide in running the company. What’s more, it can be a valuable tool to attract investors and obtain financing from financial institutions.

How Do I Write a Business Plan?

The well-considered and well-written business plan can be of enormous value to a company. While there are templates that you can use to write a business plan, try to avoid producing a generic result.

Start with the essential structure: an executive summary, company description, market analysis, product or service description, marketing strategy, financial projections, and appendix (for documents that support the main sections). Your plan might include any funding requests you’re making. Keep the main body of your plan to around 15-25 pages.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is an option when a company prefers a quick explanation of its business. The company may feel that it doesn’t have a lot of information to provide since it’s just getting started.

Sections can include: a value proposition, a company’s major activities and advantages, resources such as staff, intellectual property, and capital, a list of partnerships, customer segments, and revenue sources.

WHAT S BUSINESS PLAN  Definition: A written document describing the nature of the business, the sales and marketing strategy, and the financial background,

Presentation on theme: “WHAT S BUSINESS PLAN  Definition: A written document describing the nature of the business, the sales and marketing strategy, and the financial background,”— Presentation transcript:

1 WHAT S BUSINESS PLAN  Definition: A written document describing the nature of the business, the sales and marketing strategy, and the financial background, and containing a projected profit and loss statement

2 WHAT DO I PUT IN IT. S  The following components:  Title Page and Contents  Executive Summary  Description of the Business  Description of the Product or Service  Market Analysis  Competitive Analysis  Operations and Management  Financial Components of Your Business Plan  Supporting Documents

3 PAGE AND TITLE  A business plan should be presented in a binder  With a cover listing the name of the business  The name(s) of the principal(s),  Address, phone number,  E-mail and website addresses,  And the date.

4 EXECUTIVE SUMMARY  Executive Summary The executive summary, or statement of purpose, encapsulates your reason for writing the business plan.  It tells the reader what you want and why, right up front.

5 BUSINESS DESCRIPTION  Begins with a short explanation of the industry.  Discuss what’s going on now as well as the outlook for the future.  Research providing information on all the various markets within the industry,  Reliable data footnote and cite your sources of necessary information.

6 SERVICE DESCRIPTION  Service or Product  Short, One paragraph and Clear  How will people use your product or service  Key People involved  Suppliers  Location

7 MARKETING ANALYSIS  Define Your Major Customer (Age range, Location, Price and Gender)  Define Your Market  (size, demographics, structure, growth, trends, and sales  Sales and Marketing Strategy Create and list benefits  Identify the wants & needs of your customer

8 COMPETITIVE ANALYSIS  Identify the Competition.  Competitions Strengths/Weakness Assessment.  Overcome the competition

9 COMPETITIVE ANALYSIS  USP  Limit it to 3 bullet points which could be in one of the following 3 areas: Price Quality Innovation Convenience Extensions

10 OPERATIONS & MANAGEMENT  Describes the daily business functions  Logistics of the organization, (Responsibilities of the management team)  Task assigned to each division  Expense related to each operation

11 FINANCIAL MANAGEMENT  Management of Finance Cash flow Sales forecast Break Even Survival Budget  Managing Income Pricing (Set price at what the market will bare Payment Method (Will customers be paying cash, electronically, cheque or other amenities.)

12 CONCLUSION  If you intend to have any sort of successful business, you NEED a Business Plan.  Just as you wouldn’t start off on a cross country race without a road map, you should not embark on a new business without a business plan to guide you.  Only by putting a business plan together can you decide whether your great idea and vision is worth your time and investment.

What Is a Business Plan?

Susan Ward wrote about small businesses for The Balance Small Business for 18 years. She has run an IT consulting firm and designed and presented courses on how to promote small businesses.

Vikki Velasquez is a copy editor, researcher, and writer. Vikki earned her Bachelor of Arts with honors in Gender, Sexuality, and Women’s Studies, and minored in Religious Studies at Virginia Commonwealth University.

A business plan is a document that summarizes the operational and financial objectives of a business. It is a business’s road map to success with detailed plans and budgets that show how the objectives will be realized.

Keep reading to learn the basic components of a business plan, why they’re useful, and how they differ from an investment plan.

What Is a Business Plan?

A business plan is a guide for how a company will achieve its goals. For anyone starting a business, crafting a business plan is a vital first step. Having these concrete milestones will help track the business’s success (or lack thereof). There are different business plans for different purposes, and the best business plans are living documents that respond to real-world factors as quickly as possible.

In a nutshell, a business plan is a practice in due diligence. When it’s done well, it will prevent entrepreneurs from wasting time and money on a venture that won’t work.

How Does a Business Plan Work?

If you have an idea for starting a new venture, a business plan can help you determine if your business idea is viable. There’s no point in starting a business if there is little or no chance that the business will be profitable, and a business plan helps to figure out your chances of success.

In many cases, people starting new businesses don’t have the money they need to start the business they want to start. If start-up financing is required, you must have an investor-ready business plan to show potential investors that demonstrates how the proposed business will be profitable.

Since the business plan contains detailed financial projections, forecasts about your business’s performance, and a marketing plan, it’s an incredibly useful tool for everyday business planning. To be as effective as possible, it should be reviewed regularly and updated as required.

Business owners have leeway when crafting their business plan outline. They can be short or long, and they can include whatever detail you think will be useful. There are basic templates you can work from, and you’ll likely notice some common elements if you look up examples of business plans.

Market Analysis

The market analysis will reveal whether there is sufficient demand for your product or service in your target market. If the market is already saturated, your business model will need to be changed (or scrapped).

Competitive Analysis

The competitive analysis will examine the strengths and weaknesses of the competition and help direct your strategy for garnering a share of the market in your marketing plan. If the existing market is dominated by established competitors, for instance, you will have to come up with a marketing plan to lure customers from the competition (lower prices, better service, etc.).

Management Plan

The management plan outlines your business structure, management, and staffing requirements. If your business requires specific employee and management expertise, you will need a strategy for finding and hiring qualified staff and retaining them.

Operating Plan

The operating plan describes your facilities, equipment, inventory, and supply requirements. Business location and accessibility are critical for many businesses. If this is the case for your business, you will need to scout potential sites. If your proposed business requires parts or raw materials to produce goods to be sold to customers, you will need to investigate potential supply chains.

Financial Plan

The financial plan is the determining factor as to whether your proposed business idea is likely to be a success. If financing is required, your financial plan will determine how likely you are to obtain start-up funding in the form of equity or debt financing from banks, angel investors, or venture capitalists. You can have a great idea for a business, along with excellent marketing, management, and operational plans, but if the financial plan shows that the business will not be profitable enough, then the business model is not viable and there’s no point in starting that venture.

Business Plan vs. Investment Proposal

Business Plan vs. Investment Proposal
Business Plan Investment Proposal
Internal document External document
Guides decision-making within the business Attempts to convince those outside the company to invest in the business

A business plan is similar to an investment proposal. In fact, investment proposals are sometimes called investor-ready business plans. Generally speaking, they both have the same contents. You can think of an investment proposal as a business plan with a different audience.

The business plan is largely an internal document, intended to guide the decisions of executives, managers, and employees. The investment proposal, on the other hand, is designed to be presented to external agencies.