A traditional business plan is kind of the “meat and potatoes” of your business’ planning paperwork if you will. Your traditional business plan isn’t a time to cut corners, instead it’s a time to be complete and thorough. Explain each point (we’ll talk about what they are in particular below) thoroughly. And most importantly, as you’re writing it, do so with a critical, analytical mindset.
Ask yourself, “Now that I’m writing this down for other people to read and possibly criticize, does this still make sense? Is this still the best plan of attack for my business, or should I consider making some adjustments?” Remember, a traditional business plan is like your house’s foundation. If you find some unstable land or get a worrisome price estimation, don’t worry. That doesn’t mean it’s time to give up or just move forward with construction and ignore the issues, hoping they won’t be problematic later. Instead place the foundation with care so that your business is set up for success in the future.
Of course in the age of quickly thrown together social media businesses and thrown together online courses, this may seem counter intuitive. “Why should I be so thorough? This guy built his business in a month and he’s doing great!”
As encouraging as it may be to look at business models that receive returns quickly – do keep this in mind: 25% of businesses fail in their first two years, and 45% in their first five years.
In the words of Chamath Palihapitiya, billionaire and entrepreneur, a business’ pique is it’s half-life. So, instead of being the next Instagram business that opens, thrives, and closes all in less than five years, try to think of your business as the next Amazon. Or in other words, a business with a strong foundation (your thoroughly researched and well put together traditional business plan) that illustrates a map for strong, steady growth for years to come.
“But, if a traditional business plan is so crucial to a business’ success, then where does the lean business plan come into play?” You may be asking.
Well, conversely, a lean business plan is more of a distilled version of the traditional business plan. It need not be as comprehensive…but at the same time, we wouldn’t recommend you see the traditional vs lean business plan as an “either/or” situation. Instead, think of the traditional business plan as an essential, mandatory document and the lean business plan as an optional add-on.
Because, odds are, if you’re going to see a potential lender or investor, your thorough traditional business plan is going to be the one that’s requested and heavily scrutinized, not your basic lean business plan.
Traditional Business Plan Outline
a) Executive Summary
Many say that the executive summary is the most important part of your business plan, for multiple reasons. First being that it is the first thing that your reader sees, therefore it should be enticing and convincing all at once. Big claims like “We’re the next Facebook” aren’t believable, but a statement such as, “As you will see, our business’ ability to create higher quality products at a faster rate than our competitors make us the more desirable choice for consumers 85% of the time. (See marketing analysis section for supporting statistics)”.
To put this in the simplest terms, your executive summary should be actionable and have measurable words. For example “faster than our competitors” and “85% of the time” are all business metrics that can be measured. This is not only crucial in helping the reader fully understand the vision and purpose of your business, but it’s also important to set achievable goals like these that you and your business partners and employees can look back on, scrutinize, and adjust if necessary.
Have you ever heard of the SMART goal setting system? It stands for Specific, Measurable, Assignable, Relevant, and Time-Based, and even though many people use it as a guideline for setting and achieving goals and their personal life, it words well as the guidelines you want to hit when writing your executive summary. Anyone can make lofty claims, but a traditional business plan that hits all the SMART criteria will really draw the kind of positive attention and interest you want from potential investors and partners because they hold your business accountable.
Nevertheless, for a much more specific explanation of what should be included in your executive summary, check out the article we wrote dedicated to just that topic here: link here
And be sure to give a quick overview of what your business is, what you do, why you’ll be the best at it. Additionally, you can provide information like your company’s size, leadership team, and an overview of what your financial plan is- especially if you’ll be handing this plan over to possible investors.
b) Company Description
In this next section, you’ll really want your business idea to be in the limelight. How did this business idea originate? What common problem does it solve? Why and how will your company blow the other competition away? i.e. Competitive pricing, higher quality products, the perfect location, etc.
It might help you to know that this section is sometimes referred to as the “company summary” or “company overview.” It’s really the spot where you get to convince the reader why your business should exist. It is where the reader should have that very important “aha moment” which confirms for them that this business is viable in terms of its model, the market, and your targeted demographic.
Remember that this is just the second part of your traditional business plan, so if the executive summary is the hook to intrigue the reader, the company description should give them all the reasons they need to keep reading – including confidence in your business model and vision.
Components of the company description section that you won’t want to miss are the business name, location (be specific about whether your products and services are offered only online, in a brick and mortar location, or both), mission statement, target market, management team, company history (such as start date and important achievements, i.e. “went public” or “rebranded”), competitive advantage, legal structure (i.e. LLC or S Corp), a brief description or the products and/or services you offer and how their need in the market, and how your and plans for steady, healthy growth.
c) Market Analysis
Market analysis is one of the most important sections of your business plan, because it proves that there is an audience who wants your product or service. Here you’ll discuss who wants your product i.e. what age, gender, geographic region, etc. and why do they want it?
Additionally, you’ll have to explore the economic background of your market. Are they typically employed? Can they afford a product or service like yours? If it’s a product targeted toward children, why would parents or other influential adults in their lives be willing/convinced to buy it for their little ones? Etc.
Whereas the previous sections of your traditional business plan were all about convincing the reader that your vision and goals of the business are solid, this section should prove that people exist who want your particular product and/or service; which of course, is of the utmost importance.
Without customers, even the best businesses will fail. So the more initial research you do to put this section together, the better the odds you’ll see a promising return on your investment, since you’ll know exactly who your customers are and where to find them.
Questions that potential investors or partners might ask themselves while reading your market analysis section are: “Is the market easily defined?” “Is this market easily reachable?” “Is the market large enough to sustain a business?” “Is the price of the proposed product and/or service appropriate for the market?”
If you find while writing up your traditional business plan that you are unable to answer some of the above questions- thank your lucky stars. That’s half the reason for writing a traditional business plan, to better define your business and understand possible points for improvement. See any deficit your business has while writing this section, or any other, as a much needed and welcome opportunity for growth, because no business ever got successful without a few missteps along the way.
P.S. To write a convincing market analysis, feel free to use these free and accurate demographic statistics: https://www.sba.gov/business-guide/plan-your-business/market-research-competitive-analysis#section-header-5
Remember, the more logic and facts you include in your business plan to support your claims, the better!
d) Organization and Management
This next section will likely have a lot of components, but don’t let that overwhelm you; break it down into three easy sections:
1) the structure of your business (i.e. what is your business model? Are you business to business? Business to consumer? Do you solely operate online or do you have an actual brick and mortar store location?)
2) how your company is legalized (i.e. are you a sole proprietor, partnership, or limited liability corporation- read here for more info: https://www.sba.gov/business-guide/launch-your-business/choose-business-structure)
3) key, influential high-level members of your company (What are their credentials, why is it beneficial for your company to have these particular people in charge?).
In this section of the business plan, it’s also a good idea to provide a visual chart breaking your business down from the highest-level founder/CEO down to the hourly employees. This way the reader can understand your business model at a quick glance.
Even if it feels as though your business is completely self-run, odds are if you are at the stage of drafting a traditional business plan, there are a few people you count on for daily operations, even if those are freelancer or contracted workers like writers and virtual assistants. At any rate, you’ll want to include these types of roles in your management flowchart as well, as it clarifies the structure of your business, workflow, and chain of command.
When it comes to specifying members of your company, their job title is not the only thing you’ll want to mention. Their educational background, awards and recognition, and the type of employee they are i.e. salaried or hourly is crucial too. If they are part owner, including the percent of the company they own, their type of ownership i.e. general partner or stock option, and their degree of company involvement i.e. silent or active partner, is also important to include.
e) Service or Product Line
This section should be easy enough for you to write: what does your business sell? Or what service do you provide? Outline it in clear, precise, simple to understand terms. Additionally, explain why or how your business’ product(s) or service(s) benefits your intended customers.
Details of how your service or product gets from the production stage all the way to the consumer is crucial as well. Are their packaging costs? Shipping costs? Distribution costs? What does it cost to produce your product or service and what do you retail it at? What is your profit margin percentage? Why is your method and model of creating and delivering this intended product or service better or more profitable than your competitors?
It might seem overwhelming to think about all these factors at once, but trust us when we say this is not a place in your traditional business plan to cut corners. This section shows that you’ve done your research and are on track to become and/or stay a profitable business.
Finally, if it applies to your business, you’ll want to also share any paperwork regarding patents, copyrights, and/or research and development findings.
f) Marketing and Sales
As you can already tell from the title of this section, it sort of applies to two different facets of your company, the first being marketing. What is your initial marketing strategy in order to get your initial customer base? Additionally, what in your marketing plan will entice those customers to stay and continuously generate you profit (i.e. customer retention)?
For the sales subsection, you’ll be expected to describe how a sale happens. Does a customer walk into your store, meet a salesman/saleswoman, and have a personalized buying experience from beginning to end? Or is a customer funneled into your website, directed to answer a few questions, and ultimately receive a list of personalized products they can purchase without ever speaking to someone?
Although the way your business gets customers and makes sales might seem obvious to you, it’s important to spell this out clearly for someone who’s reading about your business for the first time.
g) Funding Request (optional)
This section is optional and should only be included if you hope to have financial help launching your business, in the form of an investment or loan. If this is something you intend to ask for, then make sure this section is well thought out and easy to understand.
Explain how much money you’re seeking, what you intend to use it for, and what are the terms of the funding request (i.e. if it’s a loan- what interest rate are you seeking? How long do you intend to need to pay it back? If it’s an investment, how much stake in the company does the investor receive for x amount of dollars? Etc.)
Additionally, if you have long term financial plans for your company, such as selling it or expanding it, include that here as well.
h) Financial Projections
And finally, we get to one of the most exciting parts of your business plan: How much money will you make as your company grows? This is another great time to include graphs and visuals to enhance reader’s comprehension. It’s expected that you predict the next five years of your company’s financial future, including cash flow statements, balance sheets, and income statements.
Note: If you are an established business with some history, feel free to include in this section real, proven numbers and financial history. This makes for a stronger argument that your business is profitable versus projections.
- Appendix (optional)
This is another optional section of your business plan that should only be included if you have relevant or requested paperwork to add. This could be resumes of key members of the company, product pictures, permits, patents, and/or credit histories.
If your appendix has multiple pages, consider listing them out and numbering/lettering them for easy reference i.e. “Exhibit A” “Exhibit B” Etc.
We hope this traditional business plan was helpful in giving you the guidance you’ve been looking for to take your business to the next level. Your traditional business plan is so much more than a way to “impress” potential lenders or partners, it also proves that your company is viable and sets up goals you can use to keep your business on track for years to come.
Remember, traditional business plans are just a starting point and can certainly be adjusted as your business grows and finds its own way, but the better you build your business’ foundation, the more grateful you’ll be in the long run.
And before you go and get started working on your very own traditional business plan, be sure to drop your email in the newsletter sign up box below. This is the best way to get the latest Business Plan King tips and tricks straight to your inbox – because as an entrepreneur like you can appreciate- knowledge is power, especially when it’s delivered to you for free on a weekly basis!