There is no shortage of business requirements: registering your business, acquiring a tax ID, developing a structure, and getting all the necessary permits. Even though all these are important, coming up with a business plan is vital for the growth and success of your business. A business plan is an integral document describing a business and how it intends to achieve its short- and long-term goals.
Whether starting a new venture or trying to advance the one you already have, knowing how to write a business plan is critical. An impactful business plan is carefully crafted using the correct knowledge and understanding of the business.
In this guide, we will discuss a business plan, why a business needs one, and the structure and different types of business plans. We will also talk about how to write a business plan.
A business plan is a written document that outlines a company's goals and the strategy for achieving them. It summarizes the financial projections, market research, mission statement, company background, and management overviews. If other vital components help the company achieve its goals, it should be included in the business plan and its timeline. All the information in the business plan is essential for running a successful company. The plan lays out the road map for each department from finance, marketing to operational. This written document is meant for both internal and external stakeholders. Internal business plans are meant for people who work inside the company. They can be specific for each department. Internal goals are focused on the purposes of the company. On the other hand, external plans are meant for people outside the company, such as investors, banks, etc.
Business plans provide a course of action for companies to build and grow efficiently. There are different types of business plans commonly used by businesses.
When new businesses are created, they have to develop a document detailing how they expect to achieve their goals. Usually, this plan is given to investors in the hope of receiving funding. This document is called a startup plan. It contains different sections such as market evaluations, products or services the business will sell, expected startup costs, and the management team.
This is a shortened version of the standard plan. They are used to modify a plan for a specific audience. Some of the sections could be deliberately omitted to keep the plan secret.
Lean business plans can also be used to send a summary of the key ideas of the company. This plan is sent to multiple clients, who can then reach out to the company for more details.
This type of business plan is more common in businesses using handwritten reports and research studies. These types of reports are done on paper and follow a standard structure.
This type of plan showcases a deeper view of a company’s goals and how it intends to achieve them, thus laying out a foundation goal for the entire company. A strategic plan is more focused on building and marketing the business brand. It will include the following: the company's vision, mission statement, strategies for achieving the company's objectives, and timeline.
This type is similar to a traditional plan; the only difference is the medium through which a plan is created. Whereas a traditional plan is written on paper, a standard plan can be developed digitally. You can download the available Microsoft Word, and Excel templates, add your content, and create a perfect business plan.
These types are small, compact, and straight to the point. You have to fill in all the necessary content of the business plan on a single sheet. This means there is no room to ramble on about irrelevant information, such as business brands.
As the name suggests, this type of business plan is created once a year. In this plan, you must present the brand's marketing strategy for a specific financial year. When writing, you have to clearly demonstrate the goals of the company for a particular period. Please take note that the business plan should be limited to a year.
This type of business plan focuses on the products or services a company is involved in. The whole plan is centered on answering two questions: who will purchase the products or services, and if there will be any profit. Feasibility plans include information such as the need for the products or services, who the target audience is, and the amount of capital needed. This type of plan ends with a statement of how to move forward.
Also known as an expansion plan, this type of business plan outlines an in-depth description of how the company is expected to grow. It tells potential investors where the company will be in the stated years. If the growth of the company requires any funding, the plan will include a comprehensive description of the company, financial sales, and estimations of the expenses to satisfy any questions the investors might have.
Compared to other types of business plans, this one is more action-oriented. When writing this type of business plan, you should focus more on the execution rather than the technical aspect of the business. Discuss the goals of the company and how you intend to achieve them.
The operation plan contains figures, statistics, charts, and research studies to support your argument.
The following are reasons why you need a business plan in your business.
During the onset of any business, there needs to be a clear plan of how it is expected to grow. A business plan acts as GPS guiding the company through each stage of a business. It provides guidelines on how to structure, steer and grow the business to success.
The beginning of any business can be in chaos. There is a lot to think of and do, which can all be stressful if you are not focused on what's really important. Therefore, as a business owner, knowing where to put your focus and attention is essential. You don't want to be caught up on irrelevant and fail to acknowledge the real issues.
A well-written business plan will help you sell your ideas to potential investors. If you are looking for funding, you will approach potential investors or a financial institution with financial statements and proof of how well you will spend the money. Having a plan that clearly shows
The following is a basic structure you can follow when figuring out how to write a business plan.
A cover letter is a document you give to your investor informing them of their business plan. It introduces and summarizes the content of the business plan to potential investors and serves as a first impression of the business. A big mistake people sometimes make is spending time writing the perfect business plan but failing to work on the cover letter correctly. The cover letter is an essential part of the business plan.
When writing a cover letter, you should state immediately that the letter is accompanying a business plan. Also, note the reason for the business plan; for instance, if you seek funding to develop your business, state it. Also clearly states what benefit the investors will yield if they agree to your request. Ensure the cover letter is written, concise, and persuasive.
A table of contents acts as an outline of your business plan. It is placed at the beginning of a business plan to guide readers to the specific sections of the document. Readers will quickly dive into a particular area of the plan that interests them, thus building confidence in what you do. Furthermore, the table of contents will help readers judge the scope of your business. Therefore, when writing it, you have to mirror the exact essence of the plan.
Consider the following example of a table of contents.
This section provides a synopsis of the business plan. It provides the company's mission and describes the product or services the company is selling. If you have difficulty writing the executive summary, consider writing all the other detailed sections first and then extracting your information from there. Limit this section to one or two pages only.
The introduction provides a management overview of a business. It highlights the description of the company, its goals, and why it was necessary to start it. You must summarize all other parts of your business plan in your introduction. To help you write a good introduction, use the following questions to guide you:
Most of these questions will be answered while writing the business plan. Please remember the introduction aims to excite readers about what is to come and get them to read the business plan.
Provide a rundown of all the crucial aspects and some background information so that readers can understand the company, who the management team is, and the target customers.
The company overview should be short and to the point. The readers should grasp the necessary information even if they have limited time.
This section describes the position of the business in the particular industry. When learning how to write a business plan, you must understand what’s going on in the industry the business is involved in. This section describes the major competitive players in the industry. It would be best if you also told the industry the company is operating. Use tools such as SWOT, PESTEL, VRIO, Porter’s 5 Forces, Blue Ocean Strategy, or VRIN.
This section is essential because it tells how you plan to generate income and profits. It also shows how you intend to market the company's products and services to the target audience. The sales and marketing section is crucial because it will grow the company and help it succeed. Even if a company has excellent products and services, it will all be for nothing if the marketing and sales are not up to the mark. Thus, the marketing and sales plan is the key to finding the right buyers for a company's products and services.
This is where you go into detail about what the company is all about. You have to list the objectives, goals, procedures, and timeline for achieving expected growth. Even though an operations plan is meant for investors, management and employees can all benefit through the set deadlines and strategies or campaigns.
A written operations plan should be able to answer the following questions:
This section is the focus of investors and financial institutions because it tells whether the business idea will be viable. You have to briefly analyze the income statement, cash flow projection, balance sheet, and shareholders' equity.
Budgeting is a critical aspect of any business that wants to succeed. It is a tool that makes a lot of difference in decision-making and monitoring the operations of a business. A budget shows the cost you will likely incur from your venture. Investors want to know how you can reach your business goals and face any operational challenges you may encounter. Budgeting ensures that a company is aware of its priorities. This helps determine how resources (financial, human, time, etc.) can be allocated.
A budget is determined by a business’s income and expenses. The target audience can tell the business's available capital and estimate its spending.
Follow these steps to craft the perfect business plan.
Decide what you want to write about in your business plan. Having all the correct information with you will help you know how to write a business plan and ensure that you have all the accurate information on marketing, trends in the industry, financials, competitors, etc. Having the correct data with you provides relevant insights you would have missed.
Please note that a business plan's purpose is to identify its objective, strategies, the market it is in, and financial projections for reasons such as measuring its success or seeking funding. So being aware of all these ensures that you write the plan from a place of knowing.
An executive summary is like an elevator pitch-style sentence that aims to grab readers' attention and get them to read the document. It is two pages of detailed information about the business and its goals. If the aim of writing a business plan is to ask for funding from potential investors, then make this section appealing and worth the reader's time. Talk about what the business is about and what you hope to achieve from the readers.
Consider writing an executive summary as your last section because you will know every detail about the business better. Some of the things to include in this section are:
Don't go into details; provide an overview of all the above information.
A company overview is a more detailed description of the business and what it does. This section provides background information about the company and why you think it will succeed. Also, provide a comprehensive overview of the history, mission, objectives, and vision of the business.
Consider also including the following information in the company overview.
This is your chance to describe the products and services the company is offering. Ensure this information is straightforward, so don't be too technical about it. Talk about the unique selling point and how your products and services stand out from the rest. Also, talk about the advantages of choosing your business over the others.
In addition, talk about the progress the business has made through developing the products and services. Also, mention whether there is room for improvement. If there are any unique features in the industry that are posing a challenge to the success of the products and services, mention them in this section. Other information you can add to the area includes the product catalog and future product releases.
A successful business is one that is aware of the current market and current competition. Market and competitor analysis helps you identify trends, opportunities, and challenges you have specified in the industry. Also, identify who your competitors are and what the business is doing to stand out. Show how the business plans to persuade people to buy the products and services. Additionally, show how you intend to develop customer loyalty leading to repeat business.
Create a marketing strategy that shows the business will position the products and services in the market. Talk about the best promotional methods for the company as well as whether the business will utilize traditional or digital marketing strategies.
A business must have individuals who will help it scale to success. In the business plan, identify who this people are and how they are organized in the company. Identify who the management team is and their strengths. Also, include any experts in the business and show their specializations. Show how all these people have helped the company grow since it was created. If there are any significant contributions to the business, make sure you mention them.
This is an excellent place to talk about the business's legal structure. Talk of a sole proprietorship, limited liability company (LLC), partnership, or corporation. Ensure you specify how much ownership each individual has in the business.
Writing the financials of a business can be tricky if you don't have background knowledge in finance and accounting. So, you should consult someone with this knowledge before you begin writing. The financial section must include sales and gross margin, which is part of historical data and financial projections for the next three-five years. Make sure you provide both current and future projected income statements to support the forecast.
Understanding how to write a business plan also includes knowing what the strengths, weaknesses, and opportunities are in the business. A SWOT analysis is an in-depth analysis of your strengths, weaknesses, opportunities, and threats, which shows that you understand your business and all the factors impacting it.
When discussing the weaknesses, opportunities, and threats, show how you plan on dealing with each one of them.
This is where you include information not listed in the business plan and supporting documents. This information may not be necessary, but it could be relevant, so you must figure out what to include and leave out. Some of this information includes bank statements, business credit history, contracts, legal documents, letters of reference, licenses, permits, etc.
So, there you have it; a business plan is an important document that defines a business and why it will grow. It can help you pitch to potential investors and identify damaging issues before they become a problem. We know that there is a lot that goes into writing a good business plan, but we promise the effort will pay off. We hope that the above tips will guide you into writing a good one so that you can finally stop wondering how to write a business plan.
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