A business plan is an important tool for any entrepreneur. It can help you decide what direction your company should go in and how to reach your goals. While the length of your plan isn’t as important as its content, it should at least include all the details needed to make informed decisions about starting up or expanding your company. If you have any questions about writing strategies or need help with research, feel free to contact us!
In this guide, we find out What Do You Need A Business Plan For, how to write a business plan, why is a business plan important to an entrepreneur, and types of business plan.
What Do You Need A Business Plan For
A business plan is a document that details your goals, strategies for achieving those goals, and an estimate of how much money you’ll need to get started. It’s the most important tool that any entrepreneur can have because it helps you figure out if your idea has legs and whether or not it will be worth pursuing. But what exactly does a good business plan look like? How detailed should it be? What do you need in order to write one? These are all questions we’re going to answer today.
To map out your goals and create a strategy for reaching them
You should create a business plan to map out your goals and create a strategy for reaching them. Your business plan will include a SWOT analysis, which stands for Strengths, Weaknesses, Opportunities and Threats.
A SWOT analysis is basically an assessment of your company’s strengths and weaknesses; what opportunities and threats exist in the market; what you have to offer that competitors don’t; who are your competitors; how much money do they have; etc..
To test the feasibility of your goals
A business plan is a tool to help you test the feasibility of your goals and make sure you have a good idea. The purpose of writing a business plan is not to generate cash flow, but rather to ensure that your efforts are being spent wisely and effectively. To do this, you need to understand how much money will be needed to get started, what all the costs will be, who will help you achieve your goals and how much time it’s going take.
You should also consider whether or not people want what you’re selling (if it’s something tangible). Is there anyone out there who would actually want this product? How many people are interested in buying it? Are there any competitors with better products? How does yours compare? Do customers really care about customization options or will they just buy whatever is cheapest?
Make sure that before writing up anything official – like submitting an application for funding – everything has been triple-checked for accuracy first so that no mistakes slip through later on down the line when more important things may depend on them (like getting approved for funding).
To use as a sales tool for investors and lenders
A business plan is an extremely useful tool for securing investors, and it will likely be required if you’re looking to get funding. Investors want to know that you’ve thought carefully about your idea, and they want to see that you can back up all of the claims in your plan with data. A strong plan will show investors that you have a solid grasp on what it takes to run a successful business and how much money it’s going to take for you launch it.
A business plan can also help secure loans from banks or other lenders. Lenders want proof that there is enough demand for your product or service before they commit their money, so they will want to see evidence of market research and other similar studies demonstrating that people are interested in what you have on offer.
To help you attract a team of talented workers
A business plan is a great way to attract talented workers. If you’re looking for help with the day-to-day operations of your business, you should be able to find plenty of individuals who can assist on specific tasks or projects. If you have an idea in mind but aren’t sure how it will be received by the public, having a business plan around as proof of concept may help others see the potential value in what you’re trying to do.
A business plan can also help attract investors and lenders if they like what they see in your plans and projections. They know that having a solid set of plans and projections will increase their chances of getting paid back on time, so they may be more willing go into debt with someone who has laid out their goals clearly and succinctly than someone who hasn’t thought through all their options yet (which means there could always be changes later).
To give you an idea of how big your business can be
If you’re reading this article, I’ll assume that you already have an idea of what a business plan is and have probably seen one before. If not, let me give you a quick overview: A business plan is a document that helps you plan your business. It contains all the information needed for someone to understand your business, how it works and how it will make money.
Most people think the word “plan” means something like “master blueprint” or “detailed outline.” That’s not true at all! In fact, a good plan should be detailed but concise so anyone can read it easily in under an hour (or even less).
A good business plan doesn’t have to be 50 pages long, but it needs to be detailed.
A good business plan isn’t just a list of goals and a summary of your company history. It isn’t just an outline of your products and services, or even a detailed description of your competition. You may be wondering: then what is it?
A good business plan is one that helps you answer all the questions an investor might have about your company. And I mean all the questions—investors are looking for as much information as possible about every aspect of your business before they invest in it.
how to write a business plan
A business plan is a document that outlines your business’s financial goals and explains how you’ll achieve them. A strong, detailed plan will provide a road map for the business’s next three to five years, and you can share it with potential investors, lenders or other important partners.
Here’s a step-by-step guide to writing your business plan.
1. Write an executive summary
This is the first page of your business plan. Think of it as your elevator pitch. It should include a mission statement, a brief description of the products or services offered, and a broad summary of your financial growth plans.
Though the executive summary is the first thing your investors will read, it can be easier to write it last. That way, you can highlight information you’ve identified while writing other sections that go into more detail.
2. Describe your company
Next up is your company description, which should contain information like:
Your business’s registered name.
Names of key people in the business. Make sure to highlight unique skills or technical expertise among members of your team.
Your company description should also define your business structure — such as a sole proprietorship, partnership or corporation — and include the percent ownership that each owner has and the extent of each owner’s involvement in the company.
Lastly, it should cover the history of your company and the nature of your business now. This prepares the reader to learn about your goals in the next section.
3. State your business goals
The third part of a business plan is an objective statement. This section spells out exactly what you’d like to accomplish, both in the near term and over the long term.
If you’re looking for a business loan or outside investment, you can use this section to explain why you have a clear need for the funds, how the financing will help your business grow, and how you plan to achieve your growth targets. The key is to provide a clear explanation of the opportunity presented and how the loan or investment will grow your company.
For example, if your business is launching a second product line, you might explain how the loan will help your company launch the new product and how much you think sales will increase over the next three years as a result.
4. Describe your products and services
In this section, go into detail about the products or services you offer or plan to offer.
You should include the following:
An explanation of how your product or service works.
The pricing model for your product or service.
The typical customers you serve.
Your supply chain and order fulfillment strategy.
Your distribution strategy.
You can also discuss current or pending trademarks and patents associated with your product or service.
5. Do your market research
Lenders and investors will want to know what sets your product apart from your competition. In your market analysis section, explain who your competitors are. Discuss what they do well, and point out what you can do better. If you’re serving a different or underserved market, explain that.
6. Outline your marketing and sales plan
Here, you can address how you plan to persuade customers to buy your products or services, or how you will develop customer loyalty that will lead to repeat business.
7. Perform a business financial analysis
If you’re a startup, you may not have much information on your business financials yet. However, if you’re an existing business, you’ll want to include income or profit-and-loss statements, a balance sheet that lists your assets and debts, and a cash flow statement that shows how cash comes into and goes out of the company.
You may also include metrics such as:
Net profit margin: the percentage of revenue you keep as net income.
Current ratio: the measurement of your liquidity and ability to repay debts.
Accounts receivable turnover ratio: a measurement of how frequently you collect on receivables per year.
This is a great place to include charts and graphs that make it easy for those reading your plan to understand the financial health of your business.
» NerdWallet’s picks for setting up your business finances:
8. Make financial projections
This is a critical part of your business plan if you’re seeking financing or investors. It outlines how your business will generate enough profit to repay the loan or how you will earn a decent return for investors.
Here, you’ll provide your business’s monthly or quarterly sales, expenses and profit estimates over at least a three-year period — with the future numbers assuming you’ve obtained a new loan.
Accuracy is key, so carefully analyze your past financial statements before giving projections. Your goals may be aggressive, but they should also be realistic.
9. Add additional information to an appendix
List any supporting information or additional materials that you couldn’t fit in elsewhere, such as resumes of key employees, licenses, equipment leases, permits, patents, receipts, bank statements, contracts and personal and business credit history. If the appendix is long, you may want to consider adding a table of contents at the beginning of this section.
why is a business plan important to an entrepreneur
Why a Business Plan is Important for Entrepreneurs
With anything you set out to do in life, it’s a good idea to have a plan. This same advice holds true when you start your own business.
A business is a risky venture. You can make a lot of money, you can break even or you can lose a lot of money. Every entrepreneur has high hopes for a profitable venture, but sometimes a closer look shows that your business might succeed after all.
A business plan is a chance to evaluate your business. You will get a closer look at how you propose your business will be organized, the financial situation of the business and smaller details, like marketing and planning a budget. You get to see every aspect of your business at once.
A business plan can help you clarify your goals and see if your idea will be profitable in the long run. Plus, you’ll be able to foresee problems you may experience down the road. While writing the business plan, you may examine various areas and see that the business is actually not going to be profitable. This will help you save time and money in the long run.
What is in a Business Plan?
A business plan outlines your plans for the various aspects of the entrepreneur’s proposed business. It may include information about human resources, marketing, finances, operations and intellectual property. It is essentially a document that outlines sub-plans for each area of business. If the goal of the business plan is to obtain a loan, then it will focus primarily on finances and ways you plan to raise money.
Why Do You Need a Business Plan?
A good business plan can help you accomplish the following:
The primary goal of a business plan is to raise money. Therefore, your plan should focus on how will business will work and what you will be spending money on. It should be well-researched and well-written if you want an investor to back you up financially. Investors want to see your future goals and how you see your company in the future, so include a cash flow projection and profit and loss analysis. Plus, a study showed that start-ups with a business plan raised twice as much money as those that didn’t.
Learn More About Drafting a Business Plan
A business is a significant undertaking. You need to start with a business plan that will outline what you hope to achieve in the end. You wouldn’t build a house without plans, so why would you start a business without one?
If you’re considering entrepreneurship, Godfrey Legal business firm in Orlando can help you get started on the right foot. With more than three decades of experience, we can help you draft a viable plan so your business venture has the greatest chance of success. Contact us at (407) 890-0023 today for a consultation.
types of business plan
In their book Write Your Business Plan, the staff of Entrepreneur Media offer an in-depth understanding of what’s essential to any business plan, what’s appropriate for your venture, and what it takes to ensure success. In this edited excerpt, the authors describe four different types of plans you could write and what you’d use each one for.
Business plans can be divided roughly into four distinct types. There are very short plans, or miniplans, presentation plans or decks, working plans, and what-if plans. They each require very different amounts of labor and not always with proportionately different results. That is to say, a more elaborate plan isn’t guaranteed to be superior to an abbreviated one. Success depends on various factors and whether the right plan is used in the right setting. For example, a new hire may not want to read the same, elaborate version of your plan that might be important to a potential investor.
The miniplan is preferred by many recipients because they can read it or download it quickly to read later on their iPhone or tablet. You include most of the same ingredients that you would in a longer plan, but you cut to the highlights while telling the same story. For a small-business venture, it’s typically all that you need. For a more complex business, you may need the longer version.
The Presentation Plan
The advent of PowerPoint presentations changed the way many, if not most, plans are presented. And while the plan is shorter than its predecessors, it’s not necessarily easier to present. Many people lose sleep over an upcoming presentation, especially one that can play a vital role in the future of their business. But presenting your plan as a deck can be very powerful. Readers of a plan can’t always capture your passion for the business nor can they ask questions when you finish. But in 20 minutes, you can cover all the key points and tell your story from concept and mission statement through financial forecasts.
Remember to keep your graphics uncluttered and to make comments to accentuate your ideas rather than simply reading what’s in front of your audience.
While a presentation plan is concise, don’t be fooled: It takes plenty of planning. The pertinent questions who, what, where, why, when and how all need to be answered.
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 can afford a somewhat higher degree of candor and informality when preparing a working plan. In a plan you intend to present to a bank loan committee, you might describe a rival as “competing primarily on a price basis.” In a working plan, your comment about the same competitor might be “When is Jones ever going to stop this insane price-cutting?”
A plan intended strictly for internal use may also omit some elements that you need not explain to yourself. Likewise, you probably don’t need to include an appendix with resumes of key executives. Nor would a working plan especially benefit from product photos.
Internal policy considerations may guide the decision about whether to include or exclude certain information in a working plan. Many entrepreneurs are sensitive about employees knowing the precise salary the owner takes home from the business. To the extent such information can be left out of a working plan without compromising its utility, you can feel free to protect your privacy.
This document is like an old pair of khakis you wear to 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 What-If Plan
When you face unusual circumstances, you need a variant on the working plan. For example, you might want to prepare a contingency plan when you’re seeking bank financing. A contingency plan is a plan based on the worst-case scenario that you can imagine your business surviving—loss of market share, heavy price competition, defection of a key member of your management team. A contingency plan can soothe the fears of a banker or investor by demonstrating that you have indeed considered more than a rosy scenario.
Your business may be considering an acquisition, in which case a pro forma business plan (some call this a what-if plan) can help you understand what the acquisition is worth and how it might affect your core business. What if you raise prices, invest in staff training and reduce duplicative efforts? Such what-if planning doesn’t have to be as formal as a presentation plan. Perhaps you want to mull over the chances of a major expansion. A what-if plan can help you spot the increased needs for space, equipment, personnel and other variables so you can make good decisions.
What sets these kinds of plans apart from the working and presentation plans is that they aren’t necessarily describing how you’ll run the business. They’re essentially more like an addendum to your actual business plan. If you decide to acquire that competitor or grow dramatically, you’ll want to incorporate some of the thinking already invested in these special purpose plans into your primary business plan.