“What is a business plan?” If you’re new to the entrepreneurial lifestyle, odds are this question has been crossing your mind quite a bit lately, and for good reason. But even more than that, you might be wondering: “Is a business plan really necessary for my new company? And if so, how do I write one successfully?”
Luckily for you, there are plenty of tools out there to help you, including this business plan software.
But, even more than that, today we’re excited to tackle all of your more specific questions about business plans, so that your dream business can become one step closer to a successful reality.
So, what is a business plan, anyway?
According to Dictionary.com, a business plan is: “A document setting out a business’s future objectives and strategies for achieving them.” And at its most basic level, that’s true. But, to be honest, a thorough business plan is so much more than that.
Typically a business plan is at least 25 pages, if not closer to 100, with a step by step outline of what your business is, what problem(s) it solve(s), who’s in charge, how you’ll be profitable, and what goals your company has for the near and distant future; (although if you want to lay out multiple long term goals for your business, you might also want to consider writing a strategic business plan).
Basically, a business plan is really your business’ foundation. And perhaps even more importantly, it’s meant to prove to yourself and future partners, investors, and/or lenders that your business really will be successful through the use of thorough research, past business data, and current statistics as it relates to demographics, market trends, and customer behavior.
The 10 Sections of a Business Plan
As we said earlier, a business plan is more than just a list of objectives and strategies. There is a specific template that should be used, and experienced partners and lenders will keep an eye out for each and every part to be included. Therefore, try not to think of any of these sections as “optional” or to interpret the template below as a “pick and choose” type of formula. Instead, you’ll want to make sure you include every component in the order it’s listed.
At a quick glance, the necessary sections of a business plan are: Executive Summary; Company Description; Marketing Analysis; Organization and Management; Service/Product Line; Marketing and Sales; Financial Projections; and Exit Plan. But we’ll go into them in more depth below.
Although, in the spirit of keeping things simple, many entrepreneurs like to think of all ten of these components as three big overarching questions: Who are we? How do we operate? And how will we improve?
So, let us help you understand how to answer all that, and more.
Section 1) Who are we? Aka: Executive Summary and Company Description
The first two components of your business plan, the Executive Summary and Company Description (in that order), should explain who you are as a company. And, more specifically: What consumer problem do you solve? And how do you do it better than the rest?
These two introductory sections are sort of a “sneak preview,” if you will, into the rest of your business plan – outlining what type of business you are and piquing the reader’s interest to get to know you better.
Each of these sections should be about one page, and should be written in concise, yet enticing language. They are the hook for the reader to get interested about your business and want to know more. It should answer their basic questions, like “What is this company?” while at the same time intriguing them to want to get involved.
|Executive Summary||Introduces/summarizes all the information in the business plan as a whole What product or service do you offer? How will you remain competitive in your market?/How do you do what you do better than anyone else?|
|Company Description||When did you open? Where are you located? I.e. primarily in person or online? How will you make profit? What is your company’s mission statement? (This should allude to your brand identity and goals you have for your business as a whole.)|
Section 2) How do we operate? Aka: Marketing Analysis; Organization and Management; and Service/Product Line
These next three components, Marketing Analysis; Organization and Management; and Service/Product Line; speak more to the operations of your business. For example, your Marketing Analysis should lay out exactly who you sell to: Who are your main customers? Where do they live? How old are they? Why do they want your product? And are they easy to connect with?
Whereas the Organization and Management section will explain who is in charge of the major operations of your business. Like, who’s the CEO? Who’s the CFO? Who’s in charge of HR? What qualifies these people to be in these positions? What does the chain of command or flow of information look like? And yes – graphic aids like flowcharts are encouraged in this section, and beyond!
Finally, in the Service/Product Line section, you’ll want to lay out in detail arguably one of the most important things about your business: what exactly do you sell? Oftentimes this is just an itemized list with small descriptions about your product and service line, explaining why they are better than what’s already out there for customer purchase.
Remember as well, that the Product/Service Line section is a great place to highlight why your business shines. Don’t supply run-of-the-mill product descriptions. As a businessman or woman, you’re always selling; and your business plan is no exception. Write your product/service descriptions as enticingly as possible so that your reader is just as excited about your company and what you offer as future customers should be.
|Marketing Analysis||Who is your target demographic? How big is your target market? What are their buying patterns? How will you be able to reach them?/What marketing channels can you use to reach them? I.e. radio, TV, mailing lists, social media ads, etc.|
|Organization and Management||Who founded the company? Why are they qualified to do so? What is the chain of command/flow of information i.e. A flow chart of who’s in executive positions and who are in entry level positions How many salaried and how many hourly employees do you have? How many of your hourly employees will be full time and how many will be part time?|
|Service/Product Line||Complete list of the products/services you have for sale A short description of each, especially detailing why yours are better than the competitor How is each item sold? i.e. separately, as a bundle; solely online, in person, etc.|
Section 3) How will we improve? Aka: Marketing and Sales; Financial Projections; and Exit Plan
A business is nothing without a plan for future growth, and the Marketing and Sales section should outline all of that. For instance: How do you plan to market to your intended audience? And, how will your marketing technique ensure sales and build long-lasting relationships with your company?
In the Financial Projections section, show any current profit and loss data you have and show how you plan to improve up on it. The more data, the better! And keep in mind, since your business is relatively new, financial projections for the next year are plenty, no need to project too far into the future. But down the line, if you’re interested in documenting your projections for 3 to 5 years out, you might want to consider writing up a strategic business plan.
And finally, you’ll want to close out your business plan with an Exit Plan. This section should detail what your ultimate goal is with this business. Do you plan to pass down your business to future generations? Is your final goal to sell for a profit and walk away? Wherever you ultimately see your business heading, outline it here; because as you might imagine investors and lenders are very interested in what your long term goals are as a business owner.
|Marketing and Sales||What’s your intended marketing plan and channels look like? How will you get new customers? How will you retain customers? How will you constantly grow your customer base? Will you offer any special deals or promotions like referral programs or a membership program that comes with special deals? This is a great time to mention specific tactics like an email list, text messaging campaign, social media strategy, etc. and explain why they’ll be effective with your target demographic specifically|
|Financial Projections||Charts and graphs detailing what you anticipate your earnings to look like in the next month, quarter, and year If you are using your business plan to request funds, this is a good place to add how much funding you need and what you plan to use the funds for If you have past financial data, also include that here to validate your projections|
|Exit Plan||How will you pay off any loans you have incurred? What are your ultimate goals for this company, and how will you achieve them? I.e. Pass it down to family members, sell it, expand to a franchise, etc.|
Optional Section 4) Appendix and Additional Documents
While this section isn’t mandatory, or related to one of our three big overarching questions, it still is worth mentioning. Sometimes there are important documents that you should include in your business plan, but that don’t necessarily belong anywhere else; like patents or business to business agreements. If that’s the case, an appendix is the best way to include them, that way they are available for the reader’s reference without cluttering the main part of your business plan.
|Possible Items to Include in the Appendix||Patent or copyright information Business to business agreements securing key resources Contracts with partners Loan/funding agreements your company already holds Photographs of products Graphs or statistics of previous marketing performance Examples of marketing tactics i.e. sample marketing email or social media ad Details about past branding or ownership of the company, if applicable|
…So, tell me: Do I REALLY need a business plan?
So perhaps after all that reading you’re still asking yourself, “A business plan sounds great and all…but it also sounds like a LOT of work…Do I really need one?”
And our answer is an enthusiastic YES! While writing a business plan may not be the most fun thing to do, it is quite necessary. It works out any kinks in your business model and proves to you, and the reader, that your business will be successful. And at the end of the day, isn’t that what everyone really wants?
A business plan proves there’s a market for your product or service. It proves that your business will remain competitive in your market sector. And it proves that you’ve thought about how your business can continually keep growing.
So while it may feel like a lot of work right now, you will thank yourself when one year down the line your company is still raking in profit, all thanks to a well written business plan!
We hope this helped you better understand what a business plan is, what should be included, and why you need one!
If you feel overwhelmed by the prospect of writing one yourself, remember that there are plenty of specialists out there that can write one up for you! Or, better yet, you can teach yourself using some tried and true online tools, like our personal favorite business plan builder.
Whatever you choose to do, we applaud you for opening your own business and embarking on this exciting new entrepreneurial adventure. Like anything else worthwhile in life, it will have its ups and its downs, but if you start it all with a well-researched business plan, you’ll be very grateful, and more profitable, in the long run!
And don’t forget – before you set off writing your own business plan – to drop your email address in our mailing list below. That way you’ll be the first to know about the latest and greatest business hacks and tips every entrepreneur ought to know.