For most small business owners just starting out, a business plan is the first serious step. But that first step is often met with a perhaps more serious question: "What's in a business plan?"
Let's start with what a business plan is...
A business plan, in short, is a statement of the goals for a business, support for why those goals are reachable, and concrete plans for how you plan to make it all happen. Business plans also sometimes also contain information on the organization or team that is responsible for executing the plan.
But if it's just me, do I really need a business plan?
It's easy to think that as a solopreneur, you don't need a business plan. But if the idea is to grow, you'd be doing yourself a disservice by not having a business plan from the get-go. Need more convincing? Here are a few reasons why a business plan makes sense...
A Business Plan Keeps You Grounded—And Focused
With the excitement of a new business or fulfilling your life dream, you have to ensure that you’re not living in la-la land and a business plan can help you realistically understand the challenges you’re facing. And it can help you stay focused on them. But be sure to hang on to that enthusiasm—it's going to be critical to help you tackle what you’re up against.
Seeking Investment? A Business Plan is a Prerequisite
Most new ventures require some start-up capital. That means you may need to recruit investors—and they're going to want to see a business plan.
Your business is only going to be as good as the people in it. A business plan is going to help you define roles and responsibilities and know what existing shortcomings need to be addressed. Plus, when you know your business plan inside and out, you'll be able to communicate it effectively to potential hires who are essentially taking a leap of faith in joining a new venture.
Knowing What to Do Next
When you have a plan there’s a roadmap to success. Sure that map may change and morph into something new and different as you go, but with everyone literally on the same page, it’s easier to mitigate twists and turns and stay the course.
So What is in a Business Plan?
Business plan templates vary, but there are some basic elements investors and stakeholders want to see covered...
This is a short overview of the plan, no more than a page. Someone can read it and get the gist of the business, the market opportunity and how the business intends to make money.
This is a one-sentence statement of purpose that guides the company. It answers the question, “Why are we here?” A well-honed mission statement will keep the company on track and focused on the big picture, not the trivialities that can derail progress.
Think of this as an expanded version of the executive summary. A business description answers...
- What does the business do?
- Who is the customer and what is the market?
- What is the product or service?
- What is the competitive advantage?
- What is the corporate structure?
These are just a few of the questions a business description will answer. There will undoubtedly be others in yours.
This is a deeper dive into the specific industry and where your company fits. It's a market analysis in which you'll define things like market size, trends, growth rate, profitability, etc. It should also look at the specific competitors in your industry: who are they, what are they doing, and how do you measure up against them?
And speaking of competitive analysis, a SWOT (Strengths, Weaknesses, Opportunities, Threats) is a global analysis of all the pros and cons of your company, the industry, competitors, and other external factors that are able to influence your business. Potential stakeholders will appreciate seeing this in your business plan.
This shows a reader who’s on your team, their individual values, specific roles and responsibilities, and why they're essential to success.
You may have the best product in the world, but if you can't bring it to market you don’t have squat. Have a plan for how to get the message out there, build credibility and reach the right audience at the right time with the right information. A specific list of marketing tactics and when they will occur throughout the early life of company is a critical component of any business plan.
An operations plan defines how will work actually get done, what the procedures are, and how will customer fulfillment will occur All the steps and logistics spelled out for everyone to understand.
Ah, the good stuff! If nothing else, your business plan must include a financial plan. The financial plan should have the following:
- Three primary reports that make up a financial statement: A balance sheet, the income statement, and the cash flow statement
- An annualized projection of income and expenses
- Current and expected future capital requirements
A business plan should include projections, usually related to revenues and profits. If you're just starting out, project what Year One is going to look like, then Year Two, Year Three, Year Five, and Year Ten. (Tip: Don't be afraid if your early projects are low—or even a loss! Investors will appreciate the realistic view.)
Different Business Plan Formats
Depending on the audience, a business plan can take a variety of formats. The standard is the multipage document (complete with financial appendices), but there are a few others...
This is your business in a nutshell. It's a 60-second description designed to hook a listener and get them asking more about your business. Think cocktail party discussion.
A Pitch Deck is a clear, straightforward, and perhaps most importantly, well designed presentation that captures your business, the market need, the financial model, the customer description, the pain points, etc. These make for great introductory conversation starters or leave-behinds. (Bonus Tip: Check out Guy Kowasaki's 10-20-30 Rule.)
Detailed Operational Plan
This is where you get down to the nitty gritty of what needs to be done, by when and who needs to do it. This contains all the details that company insiders need, but external investors don’t necessarily want to pour through.
So there are the building blocks for what is in a business plan. Have something to add to the conversation? Tell us on Twitter.