What is a business plan – and why do I need one?

A business plan is an important document for entrepreneurs of all stripes – whether you are just starting out or have been in business for a while. Your business plan tells lenders and investors who you are, what your business does, and where you stand financially. It also outlines goals and objectives for your business with a clearly detailed path to achieving them.

What belongs in a business plan?

Your business plan is an important document for lenders and investors because it tells them who you are, how you do business, and what your business finances are. It also helps them assess more thoroughly whether a company represents a good risk or a good opportunity. A business plan can also be useful internally to align your team towards common goals.

There is no single standard format or template for creating a business plan, but generally covers four key areas.

There is no single standard format or template for creating a business plan, but generally covers four key areas. While the information in your business plan may be arranged in a different order or format, the basic details are usually the same. They include:

1. Company Profile

This section of your business plan should contain information about your company or new business idea. You should provide information about your business (e.g. location, etc.) and a detailed description of your product or service. This is also where you highlight your value proposition or what sets your company apart from the competition. You should also include a description of the business owner and management team and any key employees. You should also provide information on the following points:

  • Company history, mission statement, vision statement and corporate values

  • Legal structure and problems as well as regulatory and insurance law issues

  • Business objectives including detailed project information if you are looking for funding for a specific project

  • Market research for your customers, industry, competition and trends

  • A summary

2. Sales and Marketing

In this section of your business plan, you should include information about how you plan to generate revenue. This includes details about your pricing strategy, as well as assumptions and rationale for sales projections.

3. Operation

This is where you provide information about your company’s location and assets (if any). This is a good place to go through your production process (if applicable) as well as supplier agreement details. Identify any risks to your business and how you intend to mitigate them. Finally, add information about your company’s human resources and organizational structure.

4. Finances

In this section, you’ll include your cash flow statement, usually as a spreadsheet. Include all financial statements and if you are starting a new business, don’t forget a list of start-up costs.

What is a summary?

An executive summary provides a brief, high-level summary of your business plan. It makes it easy for potential lenders or investors to gain insight into your business in a short amount of time. It’s often helpful to write your executive summary last when you have all the information you want to detail in your business plan.

What makes a good business plan?

What makes a good business plan is really a matter of personal opinion, as different people will look for different information in your business plan depending on the context of your interaction. However, there are some key elements that go into any great business plan.

Make it detailed

Your business plan should include many important details, from the steps you’ll take to achieve a goal to the specifics of your finances. Including lots of detail shows that you have thought through your business plan and have the research to back up your claims. It also makes it easy for potential investors or lenders to check your numbers and verify all the information.

Be realistic

It can be easy to be overly ambitious with your business plan, but remember you should be able to justify any projections or assumptions in your plan.

Be honest

As tempting as it is to manipulate the numbers to put your business in a better position, it could backfire in more ways than one. Creating a transparent business plan is one of the best ways for entrepreneurs to earn the trust of bankers and investors.

How long should a business plan be?

How long your business plan should be is individual to every entrepreneur, and quality is more important than quantity. Some people can say anything in a few pages, using bullet points and diagrams to outline all the relevant details. Other entrepreneurs will take much longer to detail all relevant information. Just focus on including as much relevant information as possible that applies to your specific business.

So you’ve written a business plan – now what?

After writing your business plan, you might be wondering what the next steps should be. Well, making an appointment with your commercial bank to secure financing is one option. Submit your project with your application for funding. The bank will then use the information in your business plan to determine whether or not it is worth lending to you.

Another option is to use your business plan to target investors or other outside sources of funding for your business. Pitch contests, 1:1 meetings, and even applying for small business grants all require a solid business plan that you can use to argue that your idea is worth investing in.

Having a business plan in place will help investors and lenders feel confident about their investment in your business. Regular updates to your business plan ensure you are presenting the most accurate information and aligned with your mission.

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