Learn why having a business plan is crucial to your entrepreneurial success and how to outline your business plan
Research shows that more than 50% of small enterprises fail in their first year largely in part because they don’t have a clear, defined, and well-thought-out business plan.
Having a business plan is a crucial first step for setting up a business for long-term success. Without it, an entrepreneur can’t secure financing or outline financial projections. The plan documents your business model and highlights the business’s goals and plans for achieving them.
Let’s take a look at what a business plan’s purpose is and what needs to be included in one in order for your business to be successful.
Purposes of a Business Plan
An entrepreneur drafts a business plan for one or more of the following reasons:
Securing financing from investors.
A business plan is used as a tool for sourcing capital. Since its contents revolve around how businesses succeed, break-even, and turn a profit, this document is a way of showing potential investors or lenders how their capital will be put to work and how it will help the business thrive.
Banks, investors, and venture capital firms want to see a business plan before giving you money. Investors usually expect a 10% ROI or more from the capital they invest in a business. A business plan will project if and when they’ll be making their money back.
Documenting a company’s strategy and goals.
While the length of a business plan can span dozens or even hundreds of pages, the idea is to show potential investors that you’ve addressed every question and thought through every possible scenario. As an entrepreneur, you should thoroughly explain your marketing, sales, and operations strategies.
This is your opportunity to explain what a business’ goals are and how the business will achieve them. These explanations should ultimately lead to a business’ break-even point supported by a sales forecast and financial projections, with the business plan writer being able to speak to the why behind anything outlined in the plan.
Legitimizing a business idea.
As you document your process, capital needs, and expected return on investment, you’re likely to come across a few hiccups that will make you second guess your strategies and metrics. Putting your idea in writing can help you work out any kinks in your plan. Writing down your plan says you’re serious about the idea, having put hours into thinking about it and fleshing outgrowth tactics, and calculating financial projections.
What Does a Business Plan Need to Include?
There are broad categories of what you need to include in your business plan. Think carefully and logically about each of these topics.
- Business Plan Subtitle
- Executive Summary
- Company Description
- The Business Opportunity
- Competitive Analysis
- Target Market
- Marketing Plan
- Financial Summary
- Funding Requirements
Business Plan Subtitle
Start with a captivating title and subtitle. The main title states that it is, in fact, a business plan, while the subtitle tells the story of your business in one short sentence.
This section is the last part of the business plan that you’ll write but it’s the first section that stakeholders will read. The executive summary sets the stage for the remainder of the document. It includes your company’s mission statement, vision statement, value proposition, and long-term goals.
This section of your business plan briefly details your business name, years in operation, key offerings, and positioning statement to introduce your business to the reader in a compelling and concise way. You can add your business’s core values or a short history of the company.
The Business Opportunity
This is where you explain how your organization meets the needs of the market in a way that no other company can by clarifying a specific problem your business solves within the marketplace. It will include your value proposition and detailed information about your target market.
It doesn’t matter what kind of business you are starting, you still have competition. Here you’ll take an objective look at the industry landscape and how your business fits into it. A SWOT (strengths, weaknesses, opportunities, and threats) analysis is a great way to organize this section.
In this section, you’ll describe in detail who your core customers are and why. You’ll explain the demographics, psychographics, behavioristics, and geographics of the ideal customer.
It’ll be tempting to cover every type of marketing possible because marketing is so expansive. But you only need a brief overview of how you’ll market your unique value proposition to your target audience followed by a tactical plan. Based on your business structure, you’ll devise a plan to market your products or services. You can make a more detailed marketing plan separately.
Outline a financial summary of where your business is currently and where you’d like it to be in the future in this section. Include any monetary information that will give potential investors a glimpse into the financial health of your business like assets, liabilities, expenses, debt, investments, revenue, and others.
The “team” section of your business plan dictates who’s responsible for putting this plan into action. Even if you are a solopreneur to start, knowing what roles you may need to hire for in the future is helpful when seeking funds from investors.
Include funding requirements you’d like investors to fulfill. The amount your business needs, for what reasons, and for how long will meet the requirement for this section.
Getting Started With Your Business Plan
A business plan is simply an explanation of a business idea and why it will be successful. The more detail and thought you put into it, the more successful your plan can be.
When writing your business plan, you’ll benefit from extensive research, feedback from your team or board of directors, and a template to organize your thoughts.