An Introduction to Business Plans
Why is a business plan so vital to the health of your business? Read the first section of our tutorial on How to Build a Business Plan to find out.
A business plan is a written description of your business’s future. That’s all there is to it–a document that desribes what you plan to do and how you plan to do it. If you jot down a paragraph on the back of an envelope describing your business strategy, you’ve written a plan, or at least the germ of a plan.
Business plans can help perform a number of tasks for those who write and read them. They’re used by investment-seeking entrepreneurs to convey their vision to potential investors. They may also be used by firms that are trying to attract key employees, prospect for new business, deal with suppliers or simply to understand how to manage their companies better.
So what’s included in a business plan, and how do you put one together? Simply stated, a business plan conveys your business goals, the strategies you’ll use to meet them, potential problems that may confront your business and ways to solve them, the organizational structure of your business (including titles and responsibilities), and finally, the amount of capital required to finance your venture and keep it going until it breaks even.
Sound impressive? It can be, if put together properly. A good business plan follows generally accepted guidelines for both form and content. There are three primary parts to a business plan:
- The first is the business concept, where you discuss the industry, your business structure, your particular product or service, and how you plan to make your business a success.
- The second is the marketplace section, in which you describe and analyze potential customers: who and where they are, what makes them buy and so on. Here, you also describe the competition and how you’ll position yourself to beat it.
- Finally, the financial section contains your income and cash flow statement, balance sheet and other financial ratios, such as break-even analyses. This part may require help from your accountant and a good spreadsheet software program.
Breaking these three major sections down even further, a business plan consists of seven key components:
- Executive summary
- Business description
- Market strategies
- Competitive analysis
- Design and development plan
- Operations and management plan
- Financial factors
In addition to these sections, a business plan should also have a cover, title page and table of contents.
How Long Should Your Business Plan Be?
Depending on what you’re using it for, a useful business plan can be any length, from a scrawl on the back of an envelope to, in the case of an especially detailed plan describing a complex enterprise, more than 100 pages. A typical business plan runs 15 to 20 pages, but there’s room for wide variation from that norm.
Much will depend on the nature of your business. If you have a simple concept, you may be able to express it in very few words. On the other hand, if you’re proposing a new kind of business or even a new industry, it may require quite a bit of explanation to get the message across.
The purpose of your plan also determines its length. If you want to use your plan to seek millions of dollars in seed capital to start a risky venture, you may have to do a lot of explaining and convincing. If you’re just going to use your plan for internal purposes to manage an ongoing business, a much more abbreviated version should be fine.
Who Needs a Business Plan?
About the only person who doesn’t need a business plan is one who’s not going into business. You don’t need a plan to start a hobby or to moonlight from your regular job. But anybody beginning or extending a venture that will consume significant resources of money, energy or time, and that is expected to return a profit, should take the time to draft some kind of plan.
Startups. The classic business plan writer is an entrepreneur seeking funds to help start a new venture. Many, many great companies had their starts on paper, in the form of a plan that was used to convince investors to put up the capital necessary to get them under way.
Most books on business planning seem to be aimed at these startup business owners. There’s one good reason for that: As the least experienced of the potential plan writers, they’re probably most appreciative of the guidance. However, it’s a mistake to think that only cash-starved startups need business plans. Business owners find plans useful at all stages of their companies’ existence, whether they’re seeking financing or trying to figure out how to invest a surplus.
Established firms seeking help. Not all business plans are written by starry-eyed entrepreneurs. Many are written by and for companies that are long past the startup stage. WalkerGroup/Designs, for instance, was already well-established as a designer of stores for major retailers when founder Ken Walker got the idea of trademarking and licensing to apparel makers and others the symbols 01-01-00 as a sort of numeric shorthand for the approaching millennium. Before beginning the arduous and costly task of trademarking it worldwide, Walker used a business plan complete with sales forecasts to convince big retailers it would be a good idea to promise to carry the 01-01-00 goods. It helped make the new venture a winner long before the big day arrived. “As a result of the retail support up front,” Walker says, “we had over 45 licensees running the gamut of product lines almost from the beginning.”
These middle-stage enterprises may draft plans to help them find funding for growth just as the startups do, although the amounts they seek may be larger and the investors more willing. They may feel the need for a written plan to help manage an already rapidly growing business. Or a plan may be seen as a valuable tool to be used to convey the mission and prospects of the business to customers, suppliers or others.
Plan an Updating Checklist
Here are seven reasons to think about updating your business plan. If even just one applies to you, it’s time for an update.
- A new financial period is about to begin. You may update your plan annually, quarterly or even monthly if your industry is a fast-changing one.
- You need financing, or additional financing. Lenders and other financiers need an updated plan to help them make financing decisions.
- There’s been a significant market change. Shifting client tastes, consolidation trends among customers and altered regulatory climates can trigger a need for plan updates.
- Your firm develops or is about to develop a new product, technology, service or skill. If your business has changed a lot since you wrote your plan the first time around, it’s time for an update.
- You have had a change in management. New managers should get fresh information about your business and your goals.
- Your company has crossed a threshold, such as moving out of your home office, crossing the $1 million sales mark or employing your 100th employee.
- Your old plan doesn’t seem to reflect reality any more. Maybe you did a poor job last time; maybe things have just changed faster than you expected. But if your plan seems irrelevant, redo it.
Finding the Right Plan for You
Business plans tend to have a lot of elements in common, like cash flow projections and marketing plans. And many of them share certain objectives as well, such as raising money or persuading a partner to join the firm. But business plans are not all the same any more than all businesses are.
Depending on your business and what you intend to use your plan for, you may need a very different type of business plan from another entrepreneur. Plans differ widely in their length, their appearance, the detail of their contents, and the varying emphases they place on different aspects of the business.
The reason that plan selection is so important is that it has a powerful effect on the overall impact of your plan. You want your plan to present you and your business in the best, most accurate light. That’s true no matter what you intend to use your plan for, whether it’s destined for presentation at a venture capital conference, or will never leave your own office or be seen outside internal strategy sessions.
When you select clothing for an important occasion, odds are you try to pick items that will play up your best features. Think about your plan the same way. You want to reveal any positives that your business may have and make sure they receive due consideration.
Types of Plans
Business plans can be divided roughly into four separate types. There are very short plans, or miniplans. There are working plans, presentation plans and even electronic plans. They require very different amounts of labor and not always with proportionately different results. That is to say, a more elaborate plan is not guaranteed to be superior to an abbreviated one, depending on what you want to use it for.
- The Miniplan. A miniplan may consist of one to 10 pages and should include at least cursory attention to such key matters as business concept, financing needs, marketing plan and financial statements, especially cash flow, income projection and balance sheet. It’s a great way to quickly test a business concept or measure the interest of a potential partner or minor investor. It can also serve as a valuable prelude to a full-length plan later on.
Be careful about misusing a miniplan. It’s not intended to substitute for a full-length plan. If you send a miniplan to an investor who’s looking for a comprehensive one, you’re only going to look foolish.
- The Working Plan. A working plan is a tool to be used to operate your business. It has to be long on detail but may be short on presentation. As with a miniplan, you can probably afford a somewhat higher degree of candor and informality when preparing a working plan.
A plan intended strictly for internal use may also omit some elements that would be important in one aimed at someone outside the firm. You probably don’t need to include an appendix with resumes of key executives, for example. Nor would a working plan especially benefit from, say, product photos.
Fit and finish are liable to be quite different in a working plan. It’s not essential that a working plan be printed on high-quality paper and enclosed in a fancy binder. An old three-ring binder with “Plan” scrawled across it with a felt-tip marker will serve quite well.
Internal consistency of facts and figures is just as crucial with a working plan as with one aimed at outsiders. You don’t have to be as careful, however, about such things as typos in the text, perfectly conforming to business style, being consistent with date formats and so on. This document is like an old pair of khakis you wear into the office on Saturdays or that one ancient delivery truck that never seems to break down. It’s there to be used, not admired.
- The Presentation Plan. If you take a working plan, with its low stress on cosmetics and impression, and twist the knob to boost the amount of attention paid to its looks, you’ll wind up with a presentation plan. This plan is suitable for showing to bankers, investors and others outside the company.
Almost all the information in a presentation plan is going to be the same as your working plan, although it may be styled somewhat differently. For instance, you should use standard business vocabulary, omitting the informal jargon, slang and shorthand that’s so useful in the workplace and is appropriate in a working plan. Remember, these readers won’t be familiar with your operation. Unlike the working plan, this plan isn’t being used as a reminder but as an introduction.
You’ll also have to include some added elements. Among investors’ requirements for due diligence is information on all competitive threats and risks. Even if you consider some of only peripheral significance, you need to address these concerns by providing the information.
The big difference between the presentation and working plans is in the details of appearance and polish. A working plan may be run off on the office printer and stapled together at one corner. A presentation plan should be printed by a high-quality printer, probably using color. It must be bound expertly into a booklet that is durable and easy to read. It should include graphics such as charts, graphs, tables and illustrations.
It’s essential that a presentation plan be accurate and internally consistent. A mistake here could be construed as a misrepresentation by an unsympathetic outsider. At best, it will make you look less than careful. If the plan’s summary describes a need for $40,000 in financing, but the cash flow projection shows $50,000 in financing coming in during the first year, you might think, “Oops! Forgot to update that summary to show the new numbers.” The investor you’re asking to pony up the cash, however, is unlikely to be so charitable.
- The Electronic Plan.The majority of business plans are composed on a computer of some kind, then printed out and presented in hard copy. But more and more business information that once was transferred between parties only on paper is now sent electronically. So you may find it appropriate to have an electronic version of your plan available. An electronic plan can be handy for presentations to a group using a computer-driven overhead projector, for example, or for satisfying the demands of a discriminating investor who wants to be able to delve deeply into the underpinnings of complex spreadsheets.
Continue on to the next section of our Business Plan How-To >> Plan Your Plan
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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.
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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.
- 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.
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.
Business plan writer meaning
Every business needs to have a written business plan, whether creating or expanding a business. Formulating a business plan should be one of the first things done when starting a new business, because the primary goal of most business plans is to raise outside-investor capital. The business plan is the tool to convince others their investment is worthy.
Although a comprehensive and well thought out business plan is important to the success of your business venture, many people drag their feet when it comes to preparing one. The major reason people don’t want to write a business plan is that it is extra work that they don’t find enjoyable. But if you are serious about creating a successful business, you need to be serious about creating a good business plan.
A business plan is not the same thing as a feasibility study. The feasibility study determines whether the idea/project of a good or service is viable. The business plan is formalized, after the business opportunity is created. A feasibility study includes financial analysis, while the business plan focuses more on implementing well-thought out tactics and strategies. See Information File C5-69, Create Your Own Business Plan, for a business plan outline and template.
Reasons for Writing a Business Plan
Before you start writing your business determine the purpose of your plan. That means you need to identify why you are writing it and how to prepare it properly. Below are eight reasons for writing a business plan. Identify which ones are relevant in your situation.
1. Putting the pieces together – Determine the purpose of your plan. Until you prepare your business plan, you won’t know if the internal logic of your proposal is consistent. In other words, do the pieces fit together? Writing the business plan will lead you to well-researched and insightful answers ahead of time to identify holes in your project and force you to critically think through various aspects of your plan that you previously had not identified. Building a business plan allows you to proactively determine the most tangible answers to some of the most critical business decisions. Think of the business plan like a substitute teacher, ready to answer questions anytime there’s an absence (because odds-are you won’t make every decision yourself).
2. Creating a blueprint for action – The business plan provides you with a “blueprint” or “action plan” for creating your business or business expansion. The more specific your business plan, the easier it is to implement the plan and build your business. Without a business plan, objectives often become arbitrary, while business planning tends to make benchmarks more intentional and consequential.
Business planning is a 2-stage process. The first stage is creating the plan and the second is implementing the plan. A great business plan is worthless if it is not properly implemented. This is why it is critical that you are intimately involved in writing the business plan. If you are not involved in writing the business plan, how can you implement it?
3. Focusing founders/management team – During this stage of business development, the founders often become weary from the relentless onslaught of issues facing them. The business plan helps to focus their activities and presents issues in an organized manner. It tends to bring structure and organization to a process that may be become chaotic.
Many small businesses employ contractors or freelance professionals, e.g. accounting, marketing, legal assistance, etc. With a business plan in place, the pertinent sections can get to the right support staff, while keeping everyone on the same page.
Writing a business plan can go a long way in better understanding the competition and the market by more broadly illuminating consumer trends and preferences, potential disruptions, or other pitfalls that aren’t plainly visible.
4. Obtaining financing – Business plans are often used to obtain financing from venture capitalists and banks. These capital sources will likely need a business plan and many times business plans are the most-effective way of proving business viability. In this sense the business plan is a promotional piece to present and describe your business venture, how you will put it together and why it will be successful. The basic premise is to show that you know what you are doing and why your business will be successful.
Look upon lenders as partners. They can point out shortcomings and deficiencies of the plan. Lender concerns about financing your business should be looked upon as opportunities to strengthen your project and increase its chances of success. However, understand the lenders role in your project. It is not the lender’s responsibility to be the financial manager of your business and make it successful. The lenders purpose is to generate returns for the lending institution while protecting their investment in your business.
Business plans can be used to attract equity investors to your business. A business plan forms the basis of the offering presentation to potential investors. The business plan is the tool you’ll use to convince people that working with you (investing in your company) is a smart choice. Your attorney will use the business plan in the creation of your offering documents.
5. Attracting key managers and employees – An important element of creating a successful business is your ability to attract key managers and employees. These individuals will want to be assured that you know what you are doing and that your business concept is viable. A well designed business plan is essential in this process. If a general manager has already been selected, the business plan should describe why this person is capable of achieving success.
6. Obtaining contracts – Entrepreneurship is a risky business. That risk becomes more manageable once tested against a well-crafted business plan. The success of many businesses is based on their ability to have commitments or contracts in place from users. However, potential users need to be assured that you can actually deliver on the commitment. Once again, a well-designed business plan is essential for these commitments.
7. Creating joint ventures, mergers and acquisitions – Create a company profile, including history of the organization, your product or service offerings, target market and audience, what makes your business unique, etc. These profiles, found best in the first written parts of your plan, can be used to attract customers and talent.
Many rural businesses focus on moving up the supply chain to take advantage of profit opportunities closer to the consumer. To achieve this, it is common for businesses to create relationships with existing business in the supply chain through joint ventures, mergers or acquisitions. One of the purposes of this strategy is to take advantage of skills and experience of these businesses. Once again, a well-designed business plan is essential for creating these relationships.
8. Avoiding the big mistake – About half of small businesses are not around to see their 5th anniversary. While there are many reasons for failure many of the most common are purposefully addressed in business plans: no market need; lack of capital; inadequate managerial team; stiff competition; or pricing.
Research, research, research! Consider spending twice as much time researching, evaluating and thinking as actually spent writing the plan.
How to Write the Plan
Business plans help to run your business, determined viable from the feasibility study! A good plan guides you through each stage of starting and managing. The business plan should be written in plain, easy-to-read language. Use short simple sentences and easy to understand terms. Avoid jargon and terms that are unfamiliar to people outside of your industry.
There is no right or wrong way to writing a business plan. What is important is picking the format where the plan meets your needs. Determine what you want to cover in your business plan and make headings for each of the items. Begin each major section on a new page with the appropriate title (e.g. Marketing Plan). Make sure your business plan covers all of the relevant topics. To help you organize your business plan use Information File C5-69, Create Your Own Business Plan.
Fine tune your business plan. It is extremely rare to achieve the finished version of a plan in the first draft. It may need to be re-written several times. So, review, revise and rewrite.
The purpose of rewriting the plan is to fill in gaps, solidify the logic and make the plan easier to understand by the reader. It is not to add extraneous materials. So if you find the length of the plan expanding greatly after each rewrite, your efforts are probably counterproductive. At some point in time you need to declare the plan finished – for now – remembering that the plan will need to be updated as conditions change.
The business plan is a promotional document. So, in addition to your own purposes, consider the viewpoint of others you are writing the plan for (banker, investor, customer, etc.). The business plan may be used as a sales document. The content and quality of the plan should be representative of your company. Represent your company’s image and convince the reader you understand all aspects of the business.
Be honest. Do not be overly optimistic or try to hide limitations or weaknesses. Be sure to support the goals and the claims you make in the business plan. Include supporting evidence. This includes statistics, studies and other research support.
It is usually a good idea to have someone proofread your business plan who is not involved in the project. He/she can help you identify aspects of your business plan that may need additional clarification and explanation.
A great business plan will always have a strategic and aggressive marketing plan, including marketing objectives like:
- Introducing new products
- Extending or regaining market for existing products
- Entering new territories
- Boosting sales in a particular product, market or price range
- Cross-selling or bundling
- Entering into long-term contracts with desirable clients
- Raising prices
- Refining a product
- Having a content marketing strategy
- Enhancing manufacturing or product delivery
Proofread your plan for the following:
- Poor organization
- Vague statements
- Errors in logic
- Gaps in the plan
- Repetitive statements
- Misspelled words
- Poor grammar
- Incomplete sentences
- Mathematical errors
Questions to Answer in Writing the Plan
There are certain elements that are critical for a business plan. Below are eight questions your business plan should answer. The quality of your business plan will depend on how well you can answer them. You can use these as a “checklist” of the completeness of your plan.
1. Who are we?
2. What do we do?
3. What do we have to offer?
4. Why will someone pay for our product or service?
5. What resources do we have?
6. Why will we be successful?
7. Why would someone participate/invest?
8. How will we measure performance?
Who Should Write the Plan
Involvement in creating the business plan is critical. Although it is common and often preferable to have someone help you write the business plan, the founders are ultimately responsible for creating the ideas and content of the business plan. Stated simply, if you are not intimately involved in writing the business plan, you will not know what it contains. If you don’t know what the business plan contains, how can you implement the plan? If you cannot implement the plan, how can you create a successful business?
So, the primary responsibility for writing the business plan is with you, the founders. You can hire someone (consultant) to help prepare the plan. He/she can challenge and question assumptions and conclusions. But you are responsible for the content of the plan. The role of consultants or professional writers is only to assist you in this important process.
Place one person in charge of preparing the plan. You may divide the responsibility of preparing and/or writing various sections of the plan among the founders, or you may hire a consultant to assist you in preparing the plan. However, one person needs to be responsible for moving the process forward and integrating the various sections.
It is often a wise investment to hire a consultant to review a draft of the plan. Having an outsider review the plan, especially someone who knows the industry and is familiar with writing business plans, can be invaluable in pointing out deficiencies and shortcomings of the plan. Finding and correcting these deficiencies can greatly improve your odds of business success.
How Long Should It Be
Focus on the quality of your business plan, not its length. The length of the business plan should be the shortest version needed to adequately cover the topic. The business plan should properly and succinctly tell your story. Does it address the relevant issues? Anything more is not a sign of depth or completeness. Rather, it will dissuade people from reading the plan because of its length. Remember, focus on content – not length.
How is Your Business Unique
Rural agriculture includes many types of businesses. Businesses range from a few producers marketing products directly to local consumers to large-scale integrated processing/manufacturing businesses. So, a business plan is a unique document. The actual content of the business plan will vary depending on the nature and complexity of the business, the stage of development and the type of financing needed. Likewise, the individuals whom you are writing the business plan for can vary substantially.
The plan must fit the needs of the business. For example, the marketing needs of a commodity processing business like ethanol are much different than those of a niche food business. The financial needs of a processing business are much greater than those of a direct marketing business. So the focus on investors and lenders is much greater. In addition, the need for risk management strategies is much greater due to the capital intensive nature of the business and the volatility of commodity markets. Conversely, the management needs of both types of businesses are substantial, although of a different type.
Because your business is unique, the role of developing a strategy to achieve success is important.
1. Where are we now?
2. Where do we want to be?
3. How do we get there?
Although all three questions are relevant, it is essential the business plan answers the question “how do we get there?”.
Who are the Readers of Your Plan
Make your business plan adaptable based upon your audience. Although this is a diverse group, it is a finite one. Strive for versions directed at a particular audience, by including the specific reader’s interest (lender, supplier, etc.).
Most businesses have several types of stakeholders. A stakeholder is someone who has a stake or interest in the outcome of the business. In addition to the business founders, stakeholders include equity investors, bankers, key employees and others. Different stakeholders have different priorities. These priorities need to be balanced in the business plan.
Table 1 shows issues to emphasize or deemphasize depending on whom the plan is written for. For example, bankers are usually looking for cash-flow while investors may be looking for growth. This is not to say that the content and direction of the business plan should be altered. However, it does mean that the focus of the plan may shift.
This means that you may have more than one version of the business plan. This works well, as long as the same story is told – just with different emphasis.
Implementing the Business Plan
Preparing a business plan is only one step in creating a viable business. Writing a great business plan is meaningless unless you properly implement the plan. Many start-up business ventures fail because they do not focus their efforts on properly implementing the plan. Essentially this is a plan for implementing the plan. A portion of the business plan should focus on the steps required to implement the plan. It should include a timeline and milestones for when various aspect of the plan are accomplished.