What is a business plan?
A business plan is considered an important document which explains the central purpose and objectives of a company and how the company intends to meet them.
Business plans are useful for startup companies, for raising capital with the banks and investors. In contrast, business plan are usefull for companies that have an existing business who want to follow their business ideas, without loosing the direction of their company. In this article, we will address what are the items a business plan should include and how to write business plans which will lead to success.
Understanding business plans
Every new company will have to create a business plan before it starts operating. The chances are that you’ll be asked for a business plan before a bank or venture capitalist funds your new business.
And if you’re not in a position to collect any more investor money – or don’t want to get into that position at all – then a business plan will make sure your business stays on track. After examining a huge sample of entrepreneurs, a 2017 article in the Harvard Business Review reported: ‘entrepreneurs who write formal plans are 16 per cent more likely to become profitable than otherwise identical entrepreneurs who do not plan.’
Ideally, of course, the business plan is also reviewed and revised at regular intervals, if for no other reason than to reflect goals met or modified. A business whose owners have been in business for a while but have decided in recent times to go in a different direction will also create a new business plan for the new direction.
Fiddling with the preparation (and implementation) of its business plan should thus make lots of things possible: for example, it should allow prospective entrepreneurs to think hard about their prospects before spending a lot of money on them. The business plan should encourage the company to think through likely obstacles to profitability as well as dampening some of its more fanciful and simply un-implementable ideas. A firm’s business plan can be opened up to sympathetic trustees to pass judgment on it, and can be used by management to keep an eye on key areas of activity and priority should be given to them.
Yet, keeping aside the specifics and focusing only on bare business structure (same industry, same type of product, same type of business, same type of market and the like), no two business plans look the same. The attributes of business plans, however, do fall into the same buckets and categories, as we describe here.
How to write a business plan
But, thanks to all those business-plan templates, definitely do not write—in any form—any sort of template at all. Your plan should reflect your company’s vibe.
For a large company, with a huge budget to support, the various sections below may easily fill 20 pages written by a team of consultants over several months. But for a small company, a single page summarising two to three concise sections could be enough to get the ball rolling. Following are the sections that many kinds of businesses would include in their business plan, even if each company’s detailed treatment of different sections would probably vary by width, breadth and depth.
Common elements of a business plan
Business plans vary enormously in length; but for whatever size of business you run, you should be able to cover the basics in 15-25 pages. Everything else – patent applications, for instance – you should reference in your main document yet include only in the appendices.
Here are some of the most common elements of many business plans:
This section is an overview of the company, which describes the company’s mission among other things and allows for background information like who the leadership or employees are, how the company is run, where it is located, etc.
Products and services: in here, a company can give more information on the kind of products or services it is dealing with; if they are providing any at that moment they can give some details here, and if there are plans to bring in new products of services, these should be explained here especially in details as to what these products or services are, what the pricing should be and any sort of expectancy in the product lifespan. Other client-related features that may be included here are what they consider making the product or services they are producing very unique, marketability of the said products and services among others.
Outsourced production and manufacturing processes might be included here, and also patents being developed or those that the company holds, also proprietary technology and in-depth information on it including any research and development (R&D) record may be included here.
Your Market Analysis: Do you operate in a crowded industry, with a ton of other people trying to do what you want to do? Then you darn well better spell out why you think you can – word-for-word, detail-for-detail – and who your competition is, and where, and how (and on what basis) you’re going to bring some new ingredient to the world. What competitors worry you the most? Where are you located? Who are your target customers (how will you market your product to them)? This section is where you talk about how easily – or not – you will intrude past business incumbents’ living-room windows.
Marketing strategy: This is where the company describes its proposed customer acquisition and retention strategy, and any publicity and advertising that it plans to do, as well as how it intends to get the product or service to the customer (the selling channel, or channels).
Financial plans and projections: Include financial statements if your business has been established for a while (balance sheet, profit and loss, cash flow, budget, etc). If it’s a new business, include goals statements and financial projections over the next two or three years. Also include a request for grant or loan if you need one.
2 types of business plans
Business plans can take innumerable forms – however the most common sort of distinction is between traditional business plans on one hand versus lean startup plans on the other. The classic business plan is the type that just about every traditional business has.
The traditional business plan:
- Is much longer;
- Is much more detailed;
- Takes much more work;
- Can, despite that, be equally convincing/comforting to investors … all of which are direct consequences of the fact that they require much more work on the part of the company.
Lean Startup business plans: skinny focus on bare-bones basics. These are short (typically one-page) Business Plans that would have the bare-bones essentials. Should a company be submitting this kind, be prepared to furnish more info if an investor/creditor demands it.
Every business should have one. However, if your company changes, or the circumstances around it do, then your business plan needs to change, too. So don’t write your business plan in stone – see it as a document that should grow as your business does.
David Alssema is a Body Language Expert and Motivational Speaker. As a performer in the personal development industry in Australia he has introduced and created new ways to inspire, motivate and develop individuals.
David Alssema started his training career with companies such as Telstra and Optus Communications, and then developed Neuro-Linguistic Programming (NLP) within workplace training as principal of Paramount Training & Development.
As an author/media consultant on body language and professional development David has influenced workplaces across Australia. He contributes to Media such as The West Australian, ABC Radio, Australian Magazines and other Australia Media Sources.
