A business plan is a written document that explains how a company—usually a startup—defines its goals and plans to achieve them. From the marketing, financial, and operational perspectives, a business plan is a documented roadmap for the company.
Business plans are critical papers that are used to entice investors before a firm has a track record. They're also a terrific approach for businesses to stay on track in the future.
This section will go in-depth into analysing what is a business plan. You'll have to explain why your company is needed and how it will be different from its competitors. This is when your business plan will come in handy. It gives investors, lenders, and potential partners a clear picture of your company's structure and objectives.
In many circumstances, those who wish to start a new business don't have the funds to do so. If you need start-up funding, you'll need an investor-ready business plan to convince potential investors how the planned business will be lucrative. There are approximately 10 important components that will be explained briefly below:
Business plans are crucial for various reasons, one of which is that they give a clear path for organisations to follow to achieve their objectives. These plans can help a firm understand how feasible their business is and what it takes to develop and succeed.
The video below summarises how to write a business plan in steps.
The length of a business plan differs substantially from one company to the next. A 15 to a 20-page document should contain all of the material. If important parts of the business plan take up a lot of space, such as patent applications, they should be included in the main plan and included as appendices.
In your business plan, the executive summary should come first. It should state what you hope to achieve with your company. It is recommended to write this section last because it is supposed to highlight what you intend to discuss in the rest of the plan.
A strong executive summary is enticing. It includes the company's purpose statement as well as a brief summary of the company's products and services. It's also a good idea to explain why you're beginning your business and add information about your previous expertise in the field. The summary or statement should be no more than half a page in length and should touch on the following key elements:
What is a business plan without the description of the business itself. A company description contains important information about your organisation, its aims, and the clients you wish to service. This is where you explain how your firm differs from other industry competitors and break down its strengths, such as how it provides client solutions and the competitive advantages that will help your firm prosper.
Indicate whether your company is new or established, as well as what area it belongs to (wholesale, retail, food service, manufacturing, hotel, etc.). Then indicate if the company is a Private Limited, Limited Liability or a partnership. After that, make a list of the company's owners and explain what each offer to the table. Continue with information on who the business' customers are, how big the market is, and how the product or service is distributed and marketed.
A company must have a thorough understanding of its industry as well as its target market. It will describe the competition, including who they are and how they fit into the industry, as well as their strengths and limitations. It will also outline the predicted consumer demand for the products that the company sells, as well as how simple or difficult it will be to take market share from competitors.
Begin your market study by determining the size, demographics, structure, growth prospects, trends, and sales potential of the market. Next, figure out how frequently your target market will buy your product or service. Then calculate the cost of an annual purchase. Then calculate what proportion of this annual total you have or can achieve. Keep in mind that no one has a 100 percent market share, and even a 25 percent market share is considered dominant. Your market share will serve as a barometer for how well you're performing in comparison to your market-planning projections.
You'll have to explain your positioning approach as well. "Positioning" is the process of distinguishing your product or service from those of your competitors and then determining which market niche to fill. Positioning aids in the identification of your product or service in the eyes of the buyer.
All of the ways you communicate with your markets to make them aware of your products or services should be included in your promotion strategy. Advertising, packaging, public relations, sales promotions, and personal sales should all be part of your promotion strategy for success.
Perhaps the most significant marketing decision you'll make is how much to charge for your goods or service. Because there are no immediate formulas, it's also one of the most difficult for most small business owners to make. You have a variety of options for determining prices, but these are the most typical.
A detailed competition study that clearly defines a comparison of your organisation to your competitors should also be included in your business strategy. Outline the problems and strengths of your competition, as well as how you expect your organisation to compare. This section should also highlight any market advantages your competitors have and how you aim to differentiate your company.
A strong business plan will show how your company compares to its direct and indirect competitors. This is where you demonstrate your industry knowledge by analysing their strengths and flaws.
The operations and management section of your business plan is intended to describe how the company operates on a regular basis. The operations plan emphasises the organization's logistics, such as the management team's roles, the tasks given to each division within the company, and capital and spending requirements connected to the business's operations.
Don’t forget to indicate whether your business will operate as a partnership, a sole proprietorship or a business with a different ownership structure. If you have a board of directors, you’ll need to identify the members.
A detailed breakdown of your products and services is meant to provide a more in-depth look at the things you're making and selling, as well as how long they'll endure and how they'll fulfil current demand. This is where you should mention your suppliers, as well as other key information about how much it will cost to make your products and how much money you are hoping to bring in. You should also list here all relevant information pertaining to patents and copyright concerns as well.
Make sure your potential customer understands what you're talking about when you describe your product or service. Describe how customers use your product or service and how it differs from similar products on the market. Make a list of what distinguishes your company from that of your competitors.
This section of your business plan should explain how you intend to run your business. Include facts about your company's operations, such as how and where it will operate, how many employees it will have, and any other relevant information. Your operations strategy should address the following questions on a daily basis:
An operation plan is a highly detailed strategy that outlines how a team or department contributes to the company's overall objectives. It lays out the day-to-day responsibilities of running a firm. When correctly prepared, an operating plan ensures that each manager and employee are aware of their unique responsibilities as well as how they should be carried out within a set timeframe.
Financial planning: The company should incorporate its financial planning and future estimates in order to entice the party reading the business plan. For already-established businesses, financial statements, balance sheets, and other financial data may be included. Instead, new enterprises will include targets and projections for the first several years of operation, as well as any potential investors.
The income statement is a plain and easy report on a company's ability to generate cash. It's a scorecard for your company's financial performance that shows when sales are made and when expenses are incurred. The cash flow statement is one of the most important financial tools for your company since it reveals how much cash you'll need to meet obligations, when you'll need it, and how much you'll need it.
Balance sheets are used to calculate a company's or individual's net worth by comparing assets to liabilities. If you're writing a business plan for an established company, you should include the balance sheet from the previous reporting period.
Include any other documents important to your business plan in this part, such as your resume, contracts with suppliers, customers, or clients, letters of reference, letters of intent, a copy of your lease and any other legal documents, tax returns for the preceding three years, and anything else.
Some individuals believe that unless you're looking to borrow money, you don't need a business plan. Of course, if you want to contact a lender for startup financing, whether it's a banker, a venture capitalist, or any other source, you'll need a sound plan. A business plan, on the other hand, is more than a pitch for funding; it's a roadmap to help you establish and achieve your business objectives.
A business strategy is important for any firm, but it's especially important for new firms. The plan should be reviewed and revised on a regular basis to check if goals have been accomplished or if they have changed and evolved. A fresh business plan is sometimes written for an existing company that has opted to take a different path.
A business plan isn't supposed to be a one-dimensional document. The business strategy should change as the company develops and evolves. A yearly assessment of the plan allows an entrepreneur to make changes to it as markets change. It also gives you a chance to reflect on what has been accomplished and what has not. Consider it a living document that changes as your company does.
You can find a few business plan templates to use below: