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A business plan, often called a Business Plan in the corporate world, is nothing more than a guide, a roadmap for your company that describes its goals and details how you plan to achieve them, presenting a written plan from a marketing, financial and operational standpoint.
A business plan is also a roadmap that provides guidance so a company can plan its future and helps it avoid obstacles. The time you spend creating a complete and accurate business plan, and keeping it up to date, is a big upfront effort, but one that pays off, and a lot, in the long run.
Although they are especially useful for new companies, every company should have a business plan. Ideally, a company would periodically review the plan to see whether all the goals have been met, changed or evolved.
Elements of a Business Plan
No two business plans are alike, but they all typically share a few elements. Below are some of the common and most important parts of a business plan:
- Executive summary: this section describes the company and includes the mission statement along with any information about the company’s leadership, employees, operations and location, basically a “Who are you?”.
- Products and services: the company can outline the products and services it will offer, which may include pricing, the product’s lifespan and what benefits it brings to the consumer. In more detailed plans this section may also cover production and manufacturing processes, possible patents the company may hold, a description and technical details of the technology used, and any research and development (R&D) information. Basically a “What do you do, how and why?”.
- Market analysis: a company needs a good grasp of its industry, sector and target market. In this section we describe the market, the competition and how it influences the sector, along with its strengths and weaknesses. Basically a “Who will you compete with?”.
- Marketing strategy: this section is used to describe how the company will attract and retain its customer base and how it intends to reach the consumer. Basically a “Who are your customers and how will you reach them?”.
- Financial planning: this section is an important part of attracting the reader and the company’s potential investors. It includes any financial planning and/or projections. Financial statements, balance sheets and other useful financial information can be included for established businesses. New businesses can include targets for the first years of operation and any current or potential investors.
- Budget: any good company needs to have a budget in place, or in the case of new businesses a projected budget. This includes costs related to staff, development, manufacturing, operations, marketing and any other relevant expenses related to the business.
Types of Business Plan
Although there are no right or wrong business plans, they can fall into a few different categories: Traditional Business Plan and Lean Business Plan.
Traditional Business Plan
The traditional plan is usually the most widely used, with much more detail in each section. They tend to be much longer and require more work, but that is exactly why they become more attractive to readers and potential investors. The formal business plan documents are designed to be read by outsiders to provide information about a business. Occasionally, this type of business plan is also used to recruit, train or onboard key employees.
Lean Business Plan
The lean business plans, on the other hand, use a standard structure, although they are not as common in the business world. They are short, as short as a single page, and have few details. They are usually used internally as strategic planning and growth tools.
It does away with the formalities required by a plan made for a loan or investment and focuses on the strategy, tactics, goals, metrics, budgets and forecasts of the business.
Advantages of Creating a Business Plan
There are only advantages to creating a business plan, especially for new companies. Having an idea is great; the problem starts when you need to put it on paper and describe that idea and how you are going to achieve your goal. Often, while writing the business plan, you become more aware of what you are building, being forced to detail it and take the idea out of the abstract, which often even helps you pivot possible ideas.
For the company’s growth and for attracting potential investors, it is crucial that you already have a business plan in hand; people will hardly want to invest or lend money to your company without this document.
Imagine you are building a company in the healthcare field; besides needing to contain all the items explained above, your business plan will need to tell the reader how you intend to deal with government regulations. Each business plan needs to adapt to its market and present potential investors with solutions to specific hurdles.