What Is a Business Plan?
The business plan definition is a document that outlines what you intend for your business to do and how you’ll do it. A successful business plan will act as a guide for you to follow as your business grows and changes over time. It will also become a tool for presenting your ideas, goals, and plans to others who get involved in the business.
Before deciding what to include in a business plan, you’ll need to take the time to research and collect data. Look into other businesses in your industry, find out what customers are looking for, and find out just how much money you’ll need to get your company up and running.
When writing a business plan, keep length in mind. According to Business Plan Thrive, the average length for a well-written plan is 15 to 25 pages. Remember that your audience of readers could range from potential investors to customers to friends and family members.
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Why Is a Business Plan Important?
You may be wondering, “Why is a business plan important?” Creating a plan is important for every business, regardless of size, revenue or potential for growth. Your business plan can serve many purposes, including the following:
- Finding Funding: For startups, a business plan is the best way to present a company to potential funders. It outlines what your business is and how you plan to make it a success. An easy business plan to read and understand will give funders all the information they need to know you’re worth investing in.
- Staying on Track: According to Forbes, 80% of businesses fail within the first 18 months. The failure can often be traced back to the inability of leaders to communicate their ideas and stick to the plan for executing their ideas in a successful way. A business plan can create a detailed guide to help everyone involved to stay on the same page.
- Sorting out the Details: That detailed guide for staying on track won’t appear out of thin air. Determining what to include in a business plan is an excellent way to nail down details for the company’s leaders themselves. The conversations that will take place while writing the plan can help set up guidelines and protocols that will come into play as the company grows.
- Saving Time and Money: A common problem among new businesses is underestimating the amount of money that will be needed for each stage of growth. As you’ll see in later sections, financial planning is a big part of the business plan definition and one that will help business owners form a realistic view of how much money will be needed. This can prevent setbacks and headaches caused by lack of funds and errors in judgement down the line.
As you can see from above, there are several factors regarding the question, “Why is a business plan important?” While the plans involved may be complicated, making an easy business plan is absolutely possible.
Seven basic sections, outlined below, will give you a solid plan that will help you successfully guide your business.
A list of what to include in a business plan should start with an executive summary. This section should serve as an introduction to the company. When writing an executive summary, keep in mind that your reading audience might range from employees to potential investors. Make it an easy business plan to read by keeping this section short and to the point.
To keep the executive summary condensed and on track, focus on the following key points:
- Mission Statement: This one paragraph section is how to start a business plan that will be memorable for your audience. It should summarize what your business stands for and serve as the guide for how the business will be run.
- Company Information: This a section for describing the history of your business and where you’re at today. When describing the company history, include the date when the company was formed and the names of the founders. Include how many employees currently work for the company and where the company is currently located as well.
- Timeline Highlights: Share any especially significant milestones that your company has reached along the way. If you’re running a startup, what to include in a business plan will differ slightly, and you’ll focus more on the next few sections of the executive summary.
- Products and Services: What do you have to offer? Describe the products and services provided by your company in this section.
- Financial Information: This is an important section for startups. Include information about any current investors and banks that are involved with your company.
- Future Plans: You’ve covered where you’re at; now discuss where you’re going. How do you see your business growing over time? This is a section for briefly describing the direction that your company’s leadership would like to move in.
These sections make sense for an established company, but what is business plan protocol for brand new companies? Inc.com describes how a startup owner should design an executive summary. The section should focus on describing the current market and the research you’ve done on the area.
Before forming a company and deciding what to include in a business plan, you should start by being sure that there is a problem or something lacking in your industry that your company could solve. An article from Entrepreneur illustrates this point, using examples like Amazon, a company that filled the need for a simplified online shopping experience.
The company description portion of your business plan is where you’ll describe this hole in the market and how your company will fill the void. When looking at how to put together a business plan – and this section in particular – start with an elevator pitch and build on it.
Include specifics about who your audience is or will be, how your location might help your business, and how you are or will be a competitive force in the market.
Products and Services
In previous sections, you covered how your products and services fill a need that isn’t currently being met. In this section, you’ll elaborate on that and dig into the details by discussing the benefits your products and services will offer your customers. Think about the information that your company’s employees, customers, and investors would want to know. The following information can be relevant and worth adding to this section.
• A more detailed description of your products or services, beyond the general description given in previous sections.
• Where your product is at in its life cycle and how you foresee the product going through the remaining life cycle stages.
• Any existing, pending or future patents that you’ll have for your products or services. Make note of any information that might be considered confidential.
• Research you’re currently working on or will be working on for future products. Include research about trends in the market and product development from other companies similar to your own.
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The business plan definition doesn’t focus solely on your own company. It should also examine the rest of the industry and how your company fits in. This means closely examining your competitors to compile data that can help prove that your company is valuable, important, and built to hold up against competition.
Discover Business offers an excellent step-by-step process for developing a competitive analysis. The information included in each of the steps should be found during a research phase, taking place before sitting down to write the business plan. Doing this research beforehand will help you determine what to include in a business plan, along with deciding whether your company is even able of competing in the industry.
- Make a list of competitors. Take special note of any competitors located near your own company. Outline the products or services offered from each, their pricing information, how they market their products, and any other relevant information.
- Discuss the strengths and weaknesses of your competitors. Does a company excel in customer service but fail to reach a particular target audience? Does another offer low prices but fail to deliver a high quality product? This information will help you figure out which gaps your own company will fill.
- Look at your own strengths and weaknesses. Use this as an opportunity to show how you’ll make the most of your strengths while minimizing the effects of your weaknesses.
- Show where your company will fit within the industry. In this section, you’ll discuss your target customer audience, offer data based on the industry research you’ve completed, and compare your plan to the competition.
Marketing and Sales Strategy
You’ve given details about your products and services and described how other companies go about making sales, now it’s time to present your own marketing strategy. When it comes to marketing, what is in a business plan will depend on who your competition is, which customers you’ll be targeting, and how you plan to get your product or service to that targeted group.
The Marketing Donut has a guide for identifying your target audience. Using that guide, or your own research, determine your audience and describe how your marketing campaigns will reach that audience. Be sure to include a communication plan, noting how you’ll reach out to potential customers and ensure repeat purchases from existing customers.
What to include in a business plan for your company’s marketing department includes plans for advertising, social media, in-person sales, and print materials to promote your business. Provide details for each of these strategies, along with information about who will be dedicated to carrying the plans out.
What is a business plan role in the day-to-day operating of your business? That’s the question that you’ll answer in this section of the business plan.
Start by introducing the leadership of your company. Outline who the key players in the business are, showing potential investors that your company’s team has the skills and experience to lead efficiently and successfully. If you’ve developed a hierarchy for management positions, include that here.
The rest of the operations plan should act as a reference for management to run the business from day to day. Why is a business plan important for simple daily tasks? The procedures and guidelines described in the plan create a standard that can be carried out across all departments and offices, keeping everyone on the same page and the company moving forward.
The final section of your business plan may be one of the most difficult to create. When asking, “What is a business plan?” the financial section is likely to be one of the first to come to mind. It’s an area that is extremely important, requires expertise to create, and sets goals for the future of the company.
If your company is already up and running, you’ll want to start this section by offering historical financial information. This means you’ll need to show balance statements, proof of income, and your cash flow for the past three to five years. This information is important to creditors and can help to show where your company is coming from before showing where you plan to go moving forward.
After discussing where you’ve been, provide a plan for where you’ll go. Why is a business plan important to investors? They want to know that you have a solid plan in place to generate a profit. Prospective financial data should be presented for the next five years. Using your research, make an educated prediction of income and cash flow for each quarter to give readers an idea of how your business will grow over time.
After presenting the data, include an analysis of the trends. In many cases, charts and graphs can help to illustrate your ideas. Feel free to include those at the end of the section.
Updating Your Plan
All businesses evolve over time. It’s necessary to stay relevant and profitable. As your business grows and changes, what is in a business plan should also evolve to reflect that. When reviewing and editing your plan, be sure that you’re staying true to your mission and continuing on a positive path.
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