Business Plan

What Is a Business Plan?

Business plans are documents showing the company's goals and the process by which they plan to achieve them. In addition, these plans can have details such as suppliers, manufacturing plans, marketing plans, and other financial and operational viewpoints. 

These plans are extremely important for internal users and external viewers. Internal users, such as company management, can use this plan to ensure they stay on track and focus on the right objectives. 

External users can be investors or banks issuing money as an investment. Many investors and banks will require a plan to be submitted before they invest money into one company. This document helps investors understand how the company plans to provide an ROI.

All companies will need a business plan as they are just beginning to try and prove themselves. However, mature and well-established companies should review and revise theirs as they continue to grow; having objectives and plans is crucial. 

Understanding Business Plan

A business plan is utilized as a tool for obtaining financing since it focuses on how businesses succeed, break-even, and generate a profit. An entrepreneur uses this document to demonstrate to possible lenders or investors how their money will be used and how it will support the growth of the company.

Before transferring funds, banks, investors, and venture capital firms will all want to see a business plan, and investors usually demand a 10% return on investment (ROI) or higher.

As a result, these investors are required to know whether and when they can expect to receive their money back, plus more. The context supplied by sales, marketing, and operations plans will be important to them as they learn about the business's approach and plan for achieving those financial targets.

Also, entrepreneurs should thoroughly explain their marketing, sales, and operations strategies — from acquiring a physical location for the business to explaining a tactical approach for marketing penetration — to prospective investors to demonstrate to them that they have thought through every scenario and answered every question.

Entrepreneurs are sure to encounter some bumps in the road that will cause them to reevaluate their tactics and KPIs as they document their go-to-market approach, capital requirements, and estimated return on investment. This is precisely the purpose of the business plan.

A business plan should include all of the above-mentioned aspects and ways an organization plans to address them.

Types Of Business Plans

There are many different types of business plans for companies that are in various stages of life. Plans can be used for start-up companies, internal goals, strategic plans, growth plans, and feasibility plans.

These are the preliminary plans used to help companies and investors.

1. Start-up companies 

Start-up companies' plans outline the details of a business when it is just beginning. Elements such as the business values, goals, and standards; however, it also lists details such as operational and financial standing points. 

These plans will outline core questions such as who the company serves, why it is in business, and how it will generate money and profit. Having a detailed plan is a great way for companies and investors to answer the whys and hows of the company. 

2. Internal plan

Internal company plans will focus on a specific group or audience. For example, a company may create an internal plan for the factory management group of a company and make a different plan for the corporate audience. 

These plans will again outline the operational and financial viewpoints to be followed, as well as a specific plan. The plans may also include details for costs and revenues. 

3. Strategic Plan

Strategic plans cover a company's whole business strategy. They go into strong detail across all company categories and how they will operate. Making a strategic plan includes almost all the components needed to operate.

4. Growth Plan 

Growth plans will allow companies to forecast their goals and objectives for the next one to two years. These plans will outline goals such as reducing costs, increasing revenue, making up for old losses, and minimizing future risk. 

Companies will make plans to reduce costs by enabling goals to increase production per machine or employee. They can also increase revenues through better marketing and customer service. Making these plans helps ensure management will stay the course.

5. Feasibility Plan

These types of plans answer mainly two questions for companies. First, who will buy the product or service, if anyone will? It also answers the question: can the company turn a profit? These are two vital questions to be answered for any company. 

A feasibility plan assesses and makes a plan based on specific factors that will produce a desirable outcome. 

Elements Of A Business Plan

Companies use many different elements to plan their success. Although other companies have different ideas and lengths of plans, these documents can range from fifteen to twenty-five pages. In addition, they contain many crucial details.

Although one company's plan is always different from another, many documents share the same contents and characteristics, such as products and services, analysis, executive summaries, marketing strategies, etc.

1. Products and Services: Under this plan section, companies list the products and services they sell to their customers or clients. Lists may also include the selling and production prices of the products and services. 
2. Executive summaries: This section of the documents contains the company's purpose and mission statement. It also includes the entire outline of the company. 
3. Market analysis: Before a company can enter a market or industry, it will need to understand the market they are entering. In addition, they will need to understand their competition, customers, and other market factors that can affect their business. 
4. Marketing strategy: Marketing strategies are listed in the plans because they play a crucial role in a company's success, especially when dealing with e-commerce businesses with no brick-and-mortar shops. This will detail how they plan to attract customers for sales. 
5. Financial planning/Budgets: Under this category within the documents, they will formulate methods and policies for financial planning and budgets. For example, they can create general or weekly, monthly, or quarterly budgets for different sectors within the company. 

Not all companies have these specific sections within their documents; however, many of the plans that businesses formulate have some genre. Most discuss the categories above because they are all vital to a company's success.

How to Write a Business Plan

Writing a plan for the company that you or a client are trying to plan out can be a long and grueling process, or it can be very quick and easy, depending on the size and complexity of the prospective business. In this process, there are primarily nine steps. 

Starting a company plan with a blank page can be a little challenging, so the first thing that one can do is write down the general idea of the company and how it will work. This outline should also include a rough draft of the mission statement. Below is a list of steps to follow:

Step 1. Formulate the executive summary 

Writing an executive summary is one of many very important parts of the summary. To get a good grasp of the entire company, one should note the summary last once they have finished the rest of the plan. 

An executive summary should be detailed enough to understand the entire business and how it will run, but it should be simple enough to be one page in total. 

Step 2. Describe your company

The next part of the document should answer two questions about the business: who you are and what you plan to do. Answering these questions will allow executives and investors to understand how the company is different from others. 

You should include an overview of the company and how it works. You can answer and cover topics such as your business structure, i.e., limited liability, partnership, etc., business model, the industry operating in, background information, and objectives. 

The answers to some of these topics must have data and analysis behind them and must be factual. However, some solutions will require much more thought and reflection; for example, the mission will take much thought and consideration. 

Step 3. Conduct a market analysis

Once you have figured out which business you plan to start and the products, labor, etc., that it will take to run the company, it would be best to conduct a market analysis. This is imperative for the success of any company. 

Conducting a market analysis will enable a business to truly understand where and in what market it should be placing its products in. Whether or not anyone will read it, this is one of the most important sections of any business.

Step 4. Management and organization

This plan section will tell the banks and investors who will run the company. It will also elaborate on the positions that will be filled within executive management but should also cover lower management personnel. 

This report will cover the positions and should also include the hierarchy of the positions and the responsibilities that should be accomplished. 

Step 5. Lists of the products/services 

This section within the plan should outline the products and services that will be listed for sale. This would be a good place to give a detailed outline of the products and services, how they work, what they will provide, and who will buy them.

Step 6. Customer segmentation 

When defining who will buy the products, you should list the time demographics of the customers and clients. Demographics include age, gender, where they live, where they work, how they spend their free time, etc. These details are important. 

Details like those can be very important for selling your products or services.

Step 7. Formulate a marketing plan

This portion of the written plan involves designing and communicating a marketing plan, which is how the company will advertise directly to customers. Therefore, this section should also include why you chose your plan. 

For example, if you plan to use a social media platform for marketing to customers, you should include why you chose the platform, i.e., it has been proven to produce conversions.

Step 8. Formulate a logistics and operations plan

Logistics and operations are the backbones of someone's company. In this section, you will need to include information about the suppliers, production, facilities, equipment, fulfillment, and inventory. 

This section should ensure that the reader or investor understands how your company works. It should also ensure that you know how your company's supply chain and industry operate. 

Step 9. Financial Plan

This section of the plan should prove to the reader that, financially, your business will work. Without revenue coming into your business, it will not run; no matter how well the company can operate, it must all add up on the financial statements. 

Depending on the size of the company and who you are trying to reach through your business plans will determine how to clear your goals must be. However, all plans should have a balance sheet, income statement, and cash-flow statement. 

Including these steps will help one make a successful plan for their company or business. To create the best method, you must know the goals that you want to reach and how to get them. The written plan helps the company stay on track and helps investors understand the company.

Tips to Help a Successful Business Plan

Writing a plan for a prospective company or updating and revising the plan for a mature company can be very complex and take time. However, a few points can be made to help one achieve the end of a successful method. 

Knowing the objective of a company you are working to get started or grow is extremely important. If someone doesn't know the goals of the company, then they cannot write a plan to reach them. Therefore, you must create a clear plan once you have developed your goals.

That said, here are three tips to help make a successful business plan:

Tip 1. Brainstorm 

When creating your plan, brainstorm before, meaning think about what you truly want to get out of your business. Then, think long and hard about what it will take to fulfill those goals and ensure there is more than one way to achieve them. 

Once you have brainstormed and feel you have the right plan, it is time to start writing!

Tip 2. Know your audience 

When you write your plan, make sure you know who your audience is. If your plan is primarily for yourself, you can be a little less formal and leave out details you may know, but others do not. However, it is different when writing for banks and investors.

If you are writing to banks or investors through your plan, then you will want to be formal and have it proofread several times. Details must be included in the document if it sees investors' eyes. Details can make or break your plan if you require investors.

Tip 3. Know all of the answers to any questions 

As the owner or founder of a company, you must know your company front and back. This way, if there are any questions from investors, there is no doubt you have the answer and can help them.

Summary

Business plans can be simple or complex; however, there are many ways to write them. In addition, depending on your company's size and maturity, you will have different goals and aspirations; thus, your projects will be distinctively different. 

There are many types of plans, including start-up, internal, strategic, growth, and feasibility. However, many plans share the same details, such as the executive summary, market analysis, and a list of products and services. 

Every company needs a plan, but these plans can take a lot of work to complete because of their complexity. Following a template or a few steps can be extremely helpful when trying to develop a plan. 

Before you start creating your plan, you should first brainstorm ideas and situations to ensure the company is something you want to dive into. Then, once you have gone through scenarios, i.e., different costs, selling prices, number of employees, etc., you can write your plan. 

Writing strategic business plans may take time; however, they are much needed. Formulating a plan will increase your chances of success. Working without a plan can be reckless, and most investors and banks are required to view a plan for giving up their capital. 

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