Whether you’re a large or small business, a good business plan will help you secure the right financial backing. Take the next steps as an entrepreneur with our easy business plan maker.
Last Update August 2nd, 2021
What is a Business Plan
A business plan is a detailed document that explains the key features of a new or current company. It contains critical information about how the business is to be structured, financed, and how it will run operationally.
Business plans are often expected by banks and investors when owners wish to gain loans and finance capital to start a business. These will help the financer to see that your company is a serious venture and that you have planned out all the necessary details for its running.
However, there’s more to business plans than just getting banks and investors to back your new organization. These essential planning documents can also help companies see the bigger picture of their strategy. Enterprises and entrepreneurs will often also create detailed business plans for the following reasons:
Studying the market to find strengths and weaknesses with your strategy
Finding new opportunities to pursue within your startup or business
Getting a better, in-depth idea of the competition and sector
Planning strategies for any potential issues that could arise
Working out when your business will reach profitability
Learning more about your target market
Having a full 360º view of your business and its goals
Convincing new investors to finance your business
Most entrepreneurs follow a standardized template, however, there’s more than one way to organize your final document. There are two main types of business plan, these are:
Traditional business plans: These are the most in-depth and detailed forms of business plans. They will normally span over 10 pages and each section will provide essential information about a feature of the enterprise.
Lean business plans: This type of business plan on the other hand is a much more concise document. They can be as little as one page long and can provide a quick introduction to the company and its plans to investors or other interested parties. Whilst serious investors will often expect to see a more expansive proposal before they part with their cash, a lean business plan can help pique their interest in your organization.
How to Write a Business Plan
The different parts of a business plan work to communicate the key necessities that financiers need to know about your organization before offering the investment. This will help you gain a better chance of securing capital to get your operation off the ground.
When you write your business plan, you’ll need to focus on creating an informative yet convincing document. This will help you spark interest in your proposal.
The text you draft should come across as well researched and authoritative. It also should answer questions before they even arise in the mind of the potential investor and ideally be written in a clear and comprehensible way.
Online pre-prepared business plan templates can help take a lot of the time and effort out of this task. These will help you take a lot of the complexity over structuring out of the process of drafting your document.
Business Plan Format
The majority of business plans will follow a standard format containing nine important sections. These will often be found in business plan templates and cover every essential detail that investors will need to know to have confidence in your plans.
A traditional business plan outline will normally contain the following areas:
Executive Summary: This should be a simple description of what your business is and why it’ll be a success.
Company Description: Following on from the summary, you should go into further detail about what your company will do, who it will target and the main strengths it has in its market.
Market Analysis: You should show that you’ve carefully investigated the market you wish to enter. In this section, you’ll be able to show how you measure up against the competition and the key trends that you’ll be looking to exploit in the sector.
Organization and Management: In this part of the plan you’ll explain how your new business will be structured and who will be in charge. This should clarify the legal framework of your organization (such as whether it’s a partnership, corporation or LLC)
Operational Plan: At this stage of the plan you should give the reader some idea about how your company will function. It should go into the types of services or products that you will offer as well as how you will provide it functionally. This section should also consider essential legal protections such as patents, copyright, and trademarks that will need to be acquired.
Marketing and Advertising Plan: You should give an explanation of how you’re going to communicate the new business and its services to the public as well as the marketing channels you’ll go through. This will also be essential for making your financial projections later in the document as this will help you calculate the cost of a sale.
Financial Backing: In this section of the plan you’ll need to explain what financial backing you need and what you’ve already secured. This should indicate the amount of time you’ll need the money for (for example over 5 years) and the precise necessities it will be put to use with.
Financial Projections: An investor’s key goal in putting money into your business is to eventually turn a profit. Therefore in this part of the plan, you need to show when you expect to make your first profits and what will need to happen to reach that goal.
Appendices: In this last part of the business plan you should attach any supporting material. This could include patents, legal documentation, licenses, or credit histories. The precise documents will normally be requested by the lender or investor before the business plan is presented.
Business Plan FAQs
There are a lot of questions that arise when starting business plans. We’ve taken a look at some of the most common queries below with our answers to some of the most frequently asked questions about these essential planning documents.
Why Do Managers Develop a Business Plan?
Company managers will often develop business plans for numerous reasons. The most important of these is to demonstrate that a company is a serious venture to a potential investor.
However, other reasons that a manager or business owner could produce a plan is to properly analyze the marketplace of their company and profitability. This is because these documents often create projections of the organization’s financial future. This then allows those in charge of strategy to get a clearer picture of what options are available to them.
What Are the 3 Main Purposes of a Business Plan?
There are a number of reasons that companies may need to produce a business plan. The three main purposes of these documents include:
Securing financial investment
Assessing the feasibility of management goals
Planning future strategy for the business
What Are the 5 Elements of a Business Plan?
There are nine sections that will often be found in a complete and detailed business plan. However, not every one of these segments has to be used. It is possible to produce a document with fewer sections.
If for any reason one of the nine doesn’t apply to your situation or you are looking to produce a quick and simple business plan in a hurry, the following five sections should appear a the very least:
Marketing and Advertising Plan
What Is a Business Continuity Plan?
A business continuity plan is quite different from a conventional business plan. It is designed for a more established enterprise, to strategize for situations where a company must function following a crisis or major operating issues.
This will normally include details on identifying risks that are within and outside your power of control. It will also set out a recovery plan for the event that any of these situations occur.