This article aims to explain the significant points of a business plan, why you should write one, and how to do it. Also, we have included relevant statistics and examples to support each point.
What is a Business Plan?
A business plan is a formal-written document detailing the business objectives, means of achieving these, and the financial projections. It is an internal goal-setting guide for designated team members and an external tool to use with stakeholders such as investors or lenders.
Why You Need a Business Plan?
A business plan is not just a document for external stakeholders, such as investors or lenders. It is an internal guide to help you make informed decisions, plan for growth, and troubleshoot potential challenges. In fact, according to the Small Business Administration (SBA), businesses with a written business plan are 2.5 times more likely to grow and succeed.
Types of Business Plans
Traditional Business Plan: is mainly used when seeking funding. It contains intricate sections that go over a comprehensive form of market research and financial projections that might be useful in securing investment into the business.
Lean Business Plan: a leaner version of the traditional business plan focusing on the essentials only, useful for internal purposes or startups testing new ideas.
Purpose of a Business Plan:
- Clarifies business objectives.
- Attracts potential investors or partners.
- Serves as a benchmark for tracking progress.
Preparation Before Writing
Research and Analysis
Start with a comprehensive analysis of your industry, competitors, and market trend. All of this will lead you to make a more feasible and actionable plan. Tools such as SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) are specifically helpful when assessing competition and product/service placement.
Identifying Goals and Objectives
Define both short-term and long-term goals. Are you looking to secure funding, attract partners, or map your growth strategy?
Understanding Your Audience
Tailor your business plan to your intended audience. For instance, investors prioritize financial data, while stakeholders might focus on the operational aspects.
Section 1: Executive Summary – Setting the Stage
The executive summary is the first section a stakeholder or an investor would see, yet it is also typically the last part of a business plan to be written. The executive summary summarises your business, mission, goals, and what makes your business unique in the market. Think of it as a snapshot of your business’s whole story.
| Example: Let’s take an online business like Shopify, an e-commerce platform. Their executive summary might include: Mission: To make it easy for entrepreneurs to build and scale their online stores. Goals: Expand globally by offering additional services such as marketing tools and shipping integrations. USP (Unique Selling Proposition): The most straightforward and customizable e-commerce platform for beginners and experts. |
Section 2: Company Description – Who You Are
This section outlines your business’s structure, the industry you’ll operate in, and the problem your product or service is designed to solve. In the Company Description section, you need to provide more specific details about your business, including the legal structure (LLC, corporation, etc.), the products or services you offer, and your market’s target audience.
| Example: For a local fitness centre, you could say: Industry: Health and wellness. Target Market: Health-conscious individuals aged 25-40 in the local area. Value Proposition: Offering personalized fitness programs and community-building wellness events. |
Section 3: Market Research – Know Your Industry and Customers
Market research is an essential component of every business plan. This section should define the sector in which your organization operates in, the competitive environment, and your target clients. Accurate data should back it up to show demand for your product or service. Conducting thorough research helps you make informed decisions and strengthens your plan for potential investors.
| Example: For an online education business, research might show that: The global online education market was valued at $315 billion in 2020, with a projected annual growth rate of 10%. Target Audience: High school students, college graduates, and working professionals seeking certification courses. |
Section 4: Organization and Management – Who is Behind the Business?
The organizational structure defines the leadership team and management roles. It is essential to showcase the expertise of your team and the structure that will allow your business to operate effectively.
| Example: For an online subscription box business like Ipsy (a beauty subscription box), the management team might include: CEO overseeing the overall strategy. Marketing team responsible for customer acquisition and branding. Product Managers who curate new products for the subscription boxes. Accounting Team that manages the finances of the business. Development team that administers the technology needed to uphold the client-facing processes, including website and app. |
Section 5: Products or Services – What Are You Offering?
In this section, you detail the products or services you’ll offer, how they benefit the customers, and why they are unique. Any applicable images of your product, the features, and the pricing strategies can be included. It’s also sensible to include financial details on the production costs, market pricing, and processes you need to manufacture products or provide the service.
| Example For an online e-commerce store: Product: T-shirts and merchandise, customized. Benefit: Customers can create their clothing by uploading the designs or using your tools to create their items. Uniqueness: The store provides high-quality fabrics and custom designs to cater to sustainable fashion enthusiasts. Processes: Once a customer submits and pays for the design on the website, an order is set to your printing providers. The designs are printed over the fabrics sourced from manufacturers that fit the company’s quality checks. |
Section 6: Marketing and Sales Strategy – How Will You Attract Customers?
This section should explain how you plan to reach potential customers through social media, advertising, and sales channels. This strategy should be flexible and scalable with the growth of your business.
The Marketing and Sales strategy section could also be brief regarding marketing budgets if your strategies are untested. You should focus on understanding how to convey the messaging surrounding your products and services, build sales funnels, and show that you can grasp the strategies that will ultimately bring sales in.
| Example: For a local business, such as a coffee shop, the marketing strategy may focus on: Local SEO: Improving Google My Business for Local Search. Email Campaigns: Promotional mailers to events or discount offers to regular customers. Social Media: Connects the community to behind-the-scenes stories, coffee tips, and promotions. Facebook Advertising: Promote video reels on Facebook and Instagram with a link to order online. |
Section 7: Financial Projections – The Money Talk
Financial projections are essential in proving that your business will indeed be profitable. As outlined in other sections revenue forecasts, profit margins, and costs for at least three years should be presented in this section. Break-even analysis, showing when you expect to have covered all the expenses and made a profit, is also to be included.
Use this section to go deeper into all financial details that pertain to your business strategy. Forecasts over a long period of time, say 3 years, will help you define rail tracks to run on and prevent a wreck early on.
| Example: For an e-commerce business that dropships, financial projections may include the following: Startup Costs: Website development ($2,000), initial marketing ($3,000). Revenue Forecast: Project $50,000 in sales in the first year, scaling to $100,000 by year three. Break-even Point: Expected to break even in month 6 after vigorous advertising and organic growth. For a brick-and-mortar business like a local boutique, projections might be: Startup Costs: Inventory ($10,000), store setup ($20,000). Revenue Forecast: $250,000 in sales in the first year, with a growth rate of 15% annually. Break-even Point: Break-even by month 9 after attaining a loyal customer base. |
Section 8: Funding Application – If you require it
If you are soliciting funding through loans, investors, or crowdfunding, this should be included in this section-thereby detailing how much you are looking for and what you’ll use it for. For example, your specific funding amount, your repayment time frame, and return on investment (ROI). If you are looking for private investors, you’ll need to detail the required capital and the amount of shares you are looking to exchange for it.
| Example: For a new online business, funding might be requested to: Amount Needed: $150,000 to launch an e-commerce platform, stock inventory, and drive initial marketing. Use of Funds: $50,000 for website development, $50,000 for inventory, and $50,000 for marketing and customer acquisition. |
Common Mistakes to Avoid
- Neglecting thorough research.
- Unrealistic financial projections.
- Failing to align your plan with your target audience’s needs.
- Overloading with technical jargon.
Reviewing and Revising
Importance of Proofreading
Errors can undermine credibility. Review the document for grammatical and factual accuracy.
Seeking Feedback
Get input from trusted advisors or mentors to refine your plan.
Updating the Plan
A business plan is a living document. Revisit it periodically to reflect changes in your business environment.
FAQs on How to Write a Business Plan
What is the ideal length of a business plan?
Do I need a business plan for a small business?
How often should I update my business plan?
Can I write a business plan myself?
Is a lean business plan enough for investors?
What financial data should I include?
The Bottomline
An essential business plan in any business, online or offline, has to be a well-written piece. You put down the cornerstone of a flourishing venture by highlighting key issues such as your business model, market research, financial projections, and marketing strategies.
With these steps in mind and the knowledge of successful businesses, you’ll be on your way to creating a solid business plan that drives growth and profitability.
