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What Is A Business Plan And Why You Need One

Posted by Gary Henderson on Jul 6, 2020 11:45:00 AM

Launch a startup of your own, or work with a well-established venture – it is likely that you will come across the phrase ‘business plan’, sooner or later.

So what exactly is a business plan?

Consider a business plan as a business guide or roadmap that outlines your goals and provides details on how you plan to achieve them.

It is a written description that talks about your business’s future.

You could jot down a paragraph on a piece of paper describing your business plan, and voila! You have written a plan or at least a basic outline of it.

But that’s not just about it. A business plan performs a range of tasks, and could also help you in securing funding.

It is written and used by entrepreneurs looking for investment to convey their goals and objectives to potential investors. Additionally, a business plan is also used by firms to attract quality talent, deal with suppliers, and collaborate with other businesses and to manage their companies more effectively.

Yes, this is how important a business plan could be. Undoubtedly, such an important piece of business strategy must be written with due diligence.

So, how long is a business plan? Depending on its purpose of usage, a business plan could of any length, varying from the size of a napkin to a file of 100 pages.

On average, the length of an ideal business plan is somewhat close to 15 to 20 pages, but you can add more or skip a part of it, depending on your requirements, nature of the business, and the goal.

For instance, if you want your plan to attract funding, you might have to do a lot of explaining, and convincing. On the other hand, if you need it internally for orientation purposes, a summarized version will also work fine.

What Are The Types Of Business Plans

As business plans serve different purposes, they come in various forms. Let’s explore the three most common types of business plans:

One-Page Business Plan

A one-page business plan, quite predictably, provides a quick summary of your business on a single page. The entire plan is explained very concisely, and directly.

This type of plan is a great medium to introduce your company to outsiders, like investors and stakeholders. This plan is the right fit for early-stage companies who want to lay out the concept of their business in a broader sense.

The Lean Business Plan

The next on the list is the lean business plan. It is more detailed than a one-page plan, but still not as long as a traditional plan. It contains more financial information and is generally used internally to assist in strategic planning and growth.

These business plans do not talk about company history and management as all the involved parties with whom this plan is shared probably already know about it.

Standard Business Plan

Also known as an external business plan, a standard business plan is formulated for outsiders to provide them with a glance at your business. It is used to convince the investors to fund your business and to secure a loan.

This document is an extension of the lean plan. However, a lean business plan could somewhat lack formality; a formal business plan is extremely professional, well-presented, and polished in terms of language and format.

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Who Should Have A Business Plan?

The only person who doesn’t need a business plan is the one who is not venturing into business.

You will be investing a significant amount of resources in terms of energy, time, and money – all this to make a profit.

This is why it makes sense to dedicate some time to draft a business plan which could keep you on track and aligned with the business objectives.

If you are working on multiple business plans simultaneously, a business plan can help you streamline your thoughts and help you in focusing on the ones that have the highest chances of success. Having a business plan also makes it easier for you to collaborate and partner with other businesses.

Here is how a business plan helps both startups and well-established firms alike.

Startups

A startup owner knows how important it is to have a business plan. History is evident that many great companies of today once started with a business plan on paper that convinced their investors to fund their idea.

However, it would be wrong to say that startups need a business plan only to seek financing. Instead, such a plan also helps them in investing their surplus effectively.

Established Firms

Not all business plans are written by entrepreneurs venturing out. Business plans are also written by and for companies that are already well-established but want to expand their network, open a sister company, or launch a marketing campaign.

These enterprises might also use business plans to acquire funding similar to startups, however, the amount they seek may be larger and the investors be more open to their ideas.

A Step-By-Step Guide To Create A Business Plan

How to create a business plan?

So, are you all ready to draft a business plan for your business? But how should you move ahead? What factors should you consider?

Since your business plan is a blueprint of your business’ goals and how you plan to move ahead with them, here are the key elements that it must contain.

Every Business Plan Should Include These Key Elements: 

An Overview Of Your Business

This section introduces your company with all the essential information, like the year in which your business was incorporated, the milestone achieved to date, and so on. 

Truth be told, writing a company overview could prove to be a tricky task, especially when you are just starting up and don’t have much to discuss. Take a deep breath, and relax. Focus on your target market, analyze what type of company you are, what makes you stand apart from the rest.

If you own an existing business, you could talk about your growth trajectory so far, the problems you solved, and what you plan to do next.

Goals And Objectives

This section should talk about the short and long term goals of your business, and how you plan to achieve those milestones.

Business Operations

Here, you must focus on your company’s objectives, goals, and timeline. While this section helps investors in understanding your company, it also aligns your employees according to your objectives.

A Marketing Strategy

The marketing plan provides a succinct look at your marketing and promotions strategy – both online (paid marketing, organic marketing, content marketing), and offline. Ideally, it also includes information about key services and products that you intend to sell.

A Content Strategy

Content strategy must talk about the branding and voice of your brand. It should also talk about the types of content that you will be pushing on social media, blogs, websites, and the like.

Competitor Research

As they say - keep your friends close but competitors closer. Here, you talk about the industry or market you will be dealing with. This section could be used to answer questions like the scope of the market, how to plan to seize the various opportunities in the market, the size of the market, and so on.

It must also talk about your direct competitors. Discuss their strengths and weaknesses and focus on the gaps that you will be bridging.

Audience Research And Segmentation

A business is nothing without its customers. This is the reason that it is a must to talk about your customers. This section outlines the various details related to your target customers – the number of target customers your business has, their demographic profiles, and preferences.

When you understand your ideal customer, you are in a better position to serve them flawlessly with the products or services that the right fit for them. We recommend making use of the #R3MAT method that helps you show the right thing to the right person at the right time.

Working from home, and looking for an integrated solution that could connect you with your employees and customers at once? And that’s when you come across an ERP solution on the Facebook that meets all these needs while also proving to be affordable. This is nothing but #R3MAT marketing strategy – you understand what your target audiences are looking for, and you present your solutions/services to them, at the right time, thus ticking all the boxes correctly.

Affiliate Partnerships

Talk about affiliate partnerships if you plan to network with businesses, influences, and other affiliates. Such strategic relationships help you in building a reputation while also building a word.

Employee Roles And Responsibilities

Quite predictably, this part is dedicated to the team behind the business – the founder, and key employees. You can highlight their experience and skills.

Must Have A Budget

This section focuses on the financial health of your company and forecasts its income statements, cash flow statements, and balance sheets for the next 5 years.

 

Why You Should Have a Business Plan

Still not sure if you should have a business plan? Here are the reasons compelling enough to convince you of its importance:

To Understand Your Market

When you start writing a business plan, you need to research your target market and customers thoroughly. This helps you understand your market.

Essentially, the market research you conduct this way not only helps you in exploring your business idea in-depth but also helps you target all those areas that your competitors are ignoring,  thus providing you with an edge over them.

To Track Your Business’s Progress

A business plan focuses on your short and long term goals. It helps you identify the objectives of your company.

All the chaos involved in running a business would likely keep you occupied, and in many cases, it might also leave you off-track. This is when having a business plan helps.

Revisit your business plan monthly to evaluate your progress and to track how aligned you are to your goals.

To Attract Funding

We have talked about the relationship between funding and a business plan quite a few times in this article, and we still can’t stress much.

Undoubtedly, an investor won’t fund your idea unless they feel confident about it. This is when a business plan answers their queries, provides them with a solid background, and adds to your company’s credibility.

All these factors help you in securing funding.

To Partner With Your Stakeholders

The right business plan can help you in partnering with your stakeholders, whether they be employees, mentors, or partners. If you can inspire them to join your cause, you can make the heads turn with your achievements.

The Wrap Up

As you can see, having the right business plan determines the success of your business to a large extent. In addition to keeping your stakeholders oriented to your objectives and goals, it also helps you in securing funding. What’s more, you can also use it for self-introspection, and reflection purposes to ensure that you are moving ahead as expected.

Ideally, a business plan helps you in:

  • Identifying your industry: whether you belong to the service, retail, manufacturing, or wholesale industry.
  • Identifying your customers: who your target audiences are, not all consumers out there are your customers.
  • Identifying the problem that you intend to solve: the best way to create a successful business is by creating customer value and solving their problems.
  • Identifying the solution to the problems: focus on the problems that you intend to solve, and how do you plan to do that.

So, this is all a business plan does, and even much more.

What are your views on this? How important, in your opinion, is it to have a business plan? Do share your experience with us in the comments below.

If you would like to have more conversations like this, check out The Entrepreneur Cooperative.  It's our group of inspiring entrepreneurs helping other amazing entrepreneurs connect with each other and get through the difficult times life throws at us!

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