A business plan in its simplest form is a roadmap for your business success. It’s a document that outlines the business goals and detailed plan to achieve those goals. A business plan is a must for anyone planning to start a business. It may not be required if you are looking to do some freelance work to supplement your income, but if you are considering a business idea that’s likely to consume a significant amount of your time, money, and resources, you do need a business plan. Read more about why you need a business plan here.
Before we start details on how to write a business plan, let’s clear those old school ideas and myths about business planning and business plan writing. You must know that:
1- Business plan is not just for starting a new business or applying for business loans, it’s equally important for running a business.
2- The obsolete idea that the business plan must be a long and formal document, is no more effective. You can always start with a one page business plan and keep on tweaking it as needed. Check this article to know how long a business plan should be.
3- A business plan should only become a printed document on select occasions, i.e. when you need to share it with the outsiders when there is no access to the computer. Otherwise, you can always maintain and update the document on your computer.
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4- Just in case, if you need a formal business plan, i.e. when applying for funding, it must include following elements:
- An executive summary
- A company overview
- Products/Services overview
- Financial statistics & Financial goals
- Marketing plan
- A list of major company milestones
- Information about the key people
5- A business plan is a dynamic document which must be revised and updated periodically. Ideally, you should update it at the end of every month.
6- In order to develop a business plan, you must do a thorough research, as it is the only way to create a realistic business plan. Check this article for getting started to write a business plan.
How to Write a Business Plan
A good business plan contains all the details mentioned in the point #4 above, but there is a slight difference in the order of writing. Moreover, there can be two difference scenarios for presentation, i.e. when you are writing a business plan for internal use and when you want to present a convincing document to potential investors.
Let’s see where and how to start writing a business plan in each case:
The Lean Business Plan; for Internal Use:
A Lean Plan is more popular choice when it comes to develop a business plan for internal use. It relatively longer than one-page plan and includes more details on business strategy, tactics, milestones, metrics, budgets, and forecasts. It is, however, not as long as a traditional business plan, but it can still be used (with a little tweak) to present the plan externally for a loan or investment.
Ideally the lean business plan should use bullet points to define strategy, tactics, concrete specific dates and tasks, and essential numbers including projected sales, spending, and cash flow etc. and it should not exceed 10 pages when printed.
The best thing about a lean business plan is that it is easy to update and quick to present. It skips sections like company history and management team since everyone in the company almost certainly knows this information.
Here’s how to write a lean business plan:
1- Start with the Business Vision; where you want to see your business after one year, two years and five years? Summarize your vision in a paragraph only. Also include a brief about what you are going to do in order to accomplish the vision stated above.
2- Strategic Analysis; define your business strategy with a few key bullet points that can serve as a reminder of strategic focus. These bullet points should include:
- The problem
- Your solution to that problem
- Your specific target market
- Why your solution is the best match for the target audience
- Who is your competition and where do you stand in the market
- User behavior
- Impact on the market due to changing trends
- Assumptions, milestones, tasks, responsibilities, performance measurements, and expectations.
- You approach to enter the market/acquire users
3- List Objectives; a bullet list will suffice the purpose. Remember that objectives are short term goals with a timeline and measurable results, i.e. % of market share, gross sales, number of subscribers etc by the end of 1, 2 or 3 years.
4- Financial Plan & Budgeting; it is the crucial part, especially for startups on a tighter budget. Make sure to include all the essential business numbers, i.e. sales forecast, spending budget, and cash flow projections. This article guide you on how to set startup marketing budget.
5- The Action Plan; the action plan can be devised by listing your approach/tactic/method/technique etc. against each objective. For instance, the objective is acquire 1000 subscribers. Now you have to list all the activities required to achieve this objective.
The action plan can be a simple table listing tasks with approximate deadlines, responsible person, frequency/momentum, status and any specific note (if any task needs).
Presentation of Lean Business Plan for External Purposes:
A business plan should be well documented when presented externally. Remember, that your business plan can speak on your behalf, even when you are not there to explain the details. You can either go for a traditional business plan or just tweak the lean business plan when you need one for funding purposes. Tweaking the lean business plan sounds a better idea as it saves the time for both the parties.
Let’s see what should you add to the lean business plan to make it perfectly presentable:
1- Make your Mission statement more exciting to catch readers’ attention, i.e. support it with a Motto or a Tagline!
2- Add an interest for potential investors, i.e. explain how well your business is growing and how great they will feel backing the business.
3- Adding the details about the key people behind the business is always great idea to make your business plan stand out. Add their past achievements.
4- Clearly mention how will you pay back, especially when you are seeking funds through the business plan. i.e. from the cash flow from the business, collateralized by the assets of the company etc. Moreover, the guarantees, i.e. the character, experience, and personal guarantees of the owners.
5- The Business Plan Summary; well, the business plan summary is the first page of the document when it is presented to a reader, but for the creator of the plan, this is the last part as it summarizes everything in one or two pages.
Once you have added these sections to your lean business plan, you need to arrange all the details in proper order.
Here is the order in which your business plan should be presented to the readers.
Executive summary; a quick overview of the problem your business solves, your solution to the problem, the business’s target market, key financial highlights, and a summary of who does what on the management team.
The opportunity; overview of the market, including market analysis, data, projections, descriptions, and competition.
Target market; who you are selling to.
Market trends; important changes happening in your target market right now and how those trends will favor your products or services over those of your competitors.
Market growth; how your target market has been growing or shrinking in recent years.
Products/services; the problem you are solving and how you are solving it.
Competition; the other options that your customers have to address their needs and what makes you a better option.
Marketing and sales; a plan that details the strategies that you will use to reach your target market.
Operations; depending on the specifics of your business, include details about locations/facilities, technology, and regulatory issues.
Milestones and metrics; concrete tasks that you plan to accomplish, with due dates and the names of responsible people.
Financial plan; including sales forecast, personnel plan, profit and loss statement, cash flow statement and balance sheet.
Company overview; a brief summary of the company’s legal structure, ownership, history, and location.
Team; details of key people will suffice the purpose.
The Bottom Line:
Writing a perfect business plan may seem difficult if you are doing it for the first time, but it doesn’t have to be. If you know your business, the market and you are passionate to make it success, writing a business plan will surely leverage your plan for growth.
Start with a quick business plan outline and you will find the cues to go further. For a quick reference, here are some samples and guidelines to write industry specific business plans: