Business Plan Definition & How to Write

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KEY TAKEAWAYS

• A business plan is a written document that outlines your company’s key activities. It also outlines your objectives and how you plan to achieve your goals. 
• Business plans are often used by startup businesses. They can help get the business off the ground and attract potential investors. 
• A plan can also be used by an existing business to set long-term goals.

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What Is a Business Plan?

A business plan is an essential document. It helps to provide an in-depth description and a clear overview of how you see your business developing and growing. It can be seen as your business’s mission statement, or its road map to success.

There is no hard and fast rule that says you have to write a business plan. However, there is a huge amount of value that can be taken from making one. There are also some entities that may not accept a proposal without a business plan. This includes banks and venture capital firms. 

A business plan can be used to explain your business strategy and your key goals. It can be used to clearly outline your path on how you expect to get from where your business is now, to where you want it to be in the future. 

A good business plan should be able to answer these four critical questions:

• How will you make your business profitable? 

• How do you plan to expand and increase your assets?

• What are your plans for growth?

• Where do you see your business in one, three and five years from now?

What Is a Business Plan Useful For?

At its most basic level, a business plan is used so that you can map out your business and the steps you need to take to realize your idea. 

A business plan can be used for far more things than a simple step by step guide. They can also be used to attract investors, talented employees and even potential business partners. Most banks and lenders will also require a detailed business plan in order to greenlight any loans. So having an in-depth plan is a vital way to support and fund your business.

Business plans are a very useful way for potential investors to evaluate the feasibility of a business before helping fund it. 

Even though this is often the case, some people think a business plan is only useful as a way to secure funding. It can be seen as a pitch full of fantasies, unrealistically high profit margins and crazy financial projections. 

However, a business plan is as much to do with convincing yourself of your business as it is with other people.

No matter what type of business you intend to make, a thorough, well-thought-out business plan is key. It can help you identify and lock down your business strategy and tackle potential problems. It’s also useful to plan out what you’ll need financially and check the viability of your idea.

It’s essentially a way of showcasing your business in a way that shows that you’ve put a lot of consideration into it. It can show that you have identified a gap in the market that you believe you can fill.

How to Write a Business Plan

There is no one-size-fits-all way to write a business plan. No two business plans will be the same, even if they are within the same industry. However, there is a recognized and often used business plan format. This utilizes the same elements for writing traditional business plans. 

Here are the 10 steps that we feel are the most important to follow: 

1. Executive Summary

The executive summary should always be at the beginning of your business plan.

Its purpose is to concisely and clearly summarize everything contained within your business plan. It’s essentially putting the conclusion at the start. 

This is done to give the reader a clear idea of what the business plan will entail. It is therefore perhaps the most important section of your plan. If the summary doesn’t hook the reader, then the chances are that they won’t continue reading. 

The executive summary should be detailed, interesting, and should be no longer than a page in length. It should be succinct, snappy, and leave the reader wanting to read on. 

2. Company Description

The next section of your plan should be the company description. 

As per the name, this is where you give a detailed description of your company.

You should answer questions such as:

• Who are you?
• What are your goals?
• What makes your business unique? 

It’s important to remember that during the early stages of a business, a potential investor will be investing in the owner as much as the idea. They will want to invest in someone who clearly shows a passion for what they’re doing, and with the business knowledge to back it up. 

This section can also help you to develop your business’s identity. Having a strong identity helps ground you and your business and goes a long way towards building your brand. 

3. Market Analysis

The process of analyzing your market is key. 

One of the most common reasons that a new business fails to succeed is because the owner neglected to analyze their market. 

A business without customers is useless. Therefore your product needs to match your audience because your audience will make or break you. That’s why it’s vital that you research, then lay out the expected consumer demand for what your business is selling. 

Your market analysis will also outline your potential competitors. As well as how your business factors within the industry. You can lay out their strengths and weaknesses, and then describe how you will fit into this market. As well as describe how easy or difficult it may be to take a share of the market. 

4. Management and Organization

If you are starting a medium or large-sized business, then the chances are that you will not be the only person working for the business. 

This section is where you will introduce the team that you have around you or the team that you plan to assemble. It’s good to have a strong team of entrepreneurs that have experience in the market. As this can give great confidence to potential investors. 

You can include their skill sets and the roles and responsibilities of each team member. It’s also good practice to communicate how you believe each member involved will contribute to the success of your business. 

You may be starting out as a solo entrepreneur and won’t have a team behind you. If that is the case, then you can use this section to lay out how you plan on managing each of the roles that your business requires. Whether that’s utilizing freelancers or taking on all aspects yourself. 

You may also want to show if you have plans on eventually bringing in staff once you are settled and have the capabilities to expand. 

5. Products and Services

This section is the ideal place to go into more depth and detail about your products and services. It is important to note that this shouldn’t be the first time that you are mentioning your product, but this is merely the opportunity to expand. 

If your business has a wide array of products or services, then you don’t need to go into great detail about all of them. It is acceptable to give a general overview, then pick out two or three products that you believe will be your best sellers. 

If your business is only focusing on a small number of products, then you can provide as much detail on each as you feel is necessary. While making sure to convey their worth and value. 

Remember to highlight what makes your products or services unique. Examples may include them being environmentally friendly or handmade. Or perhaps providing something your competitors aren’t. 

6. Customer Segmentation

Customer segmentation is the process of highlighting the exact audience you’ll be targeting. Known as your ‘target market’, this is a cornerstone of your business plan. 

Most business plans will create an ‘ideal customer’. This is a rough description of what your typical customer may be. You can describe their age, sex and level of education among other details. 

This shows that you have researched and understand your target market. 

7. Marketing Plan

Once you’ve laid out who your target market is, then you need to show how you plan on reaching them. 

This section of your plan is used to convey your proposed marketing strategy. It describes how the business will attract and retain a customer base and shows the outline of a clear distribution channel. 

This section will also spell out your marketing strategy and advertising campaign plans. As well as highlighting which media will be used to target the audience. 

8. Logistics and Operational Plan

The logistics and operations section should be packed with detail. This is because this section will show whether or not your idea can become a reality. 

Your logistics and operational plan should showcase who your suppliers will be. As well as detail the overall production process. So if you’re creating a product, you’ll want to include who will be supplying the ingredients and what the process of creation will be. 

This is also the section where you should show what your facilities are, or whether you need a physical location. You can also show what equipment you’ll be needing, your shipping process, and how you plan on housing your inventory. 

It is good practice to show that you have thought of a number of contingency plans in your operating plan. This will show that you can cover any number of potential problems or setbacks that may occur over the course of operations. 

9. Financial Plan

Your financial plan is one of the most vital parts of any business plan.

Even if all other sections of your business plan are perfect – if your financial projections don’t add up then no investor will take it seriously. 

This is where you will include your financial statements. Such as a balance sheet and a cash flow statement. You can also include an income statement and other financial information. New business owners will need to include targets and estimates for the first number of years of the business. 

Running out of funds is one of the most common reasons that a new or existing business will fail. This is mainly down to poor cash flow management.

Therefore, it’s vital that you show a clear and detailed understanding of your financial situation. It’s also important to be realistic about your business’s future, and not add unlikely projections. While you may not have to provide exact figures, you should be able to create a range of numbers, with a best and worst-case scenario laid out. 

If you are writing your business plan for a potential investor, then this is the section where you should outline your funding request. This request should involve a section where you outline how and when you will generate enough profit to start repaying the loan. As well as any cost savings that you can incorporate. 

10. The Appendices

If needed, the final stage of your business plan should be compiling a well-organized appendix. This should include any documents needed for the reader to conduct any due diligence. 

Your appendices can include things such as: 

• Patents and intellectual properties
• Deeds, local permits and legal documents
• Business registries and professional licenses 
• Industry associations and memberships 
• Key customer contracts and purchase orders

5 Best Business Plan Templates

The business world is a tough place to get a foothold in. It’s full of enterprising, ambitious businesses looking to corner their target market.

In such a competitive world, you have to make sure your business is finely tuned and ready to be scrutinized. Therefore, it needs to be thoroughly researched, finely detailed plans that are full of enthusiasm and skill. 

When it comes to writing a business plan, it can all seem quite daunting. That’s why there are so many templates for traditional business plans out there to help you along the way. 

We’ll take a look at the 5 best business plan consultant templates available so you can start your business with confidence and on the right foot. 

1. FreshBooks

FreshBooks offers a free template that is packed full of details and information. 

They take you through each section of the plan and what it should involve and what it should look like. 

As far as attention to detail goes, FreshBooks has you covered. Each section comes with a detailed description of what you can include in an easy-to-read and easy to understand way. 

Their website also included a huge amount of information and advice about business plans. They go through why they are important, how to make yours stand out and include some expert business tips. 

2. HubSpot

HubSpot offers a free one-page plan that is perfect for a business of any size. 

This one-page plan gives you a framework for how to build your business and your brand. It includes fields such as company description, required funding and a timeline of when you want to achieve certain goals.

The only issue is that as it is only a one-page plan, there isn’t room to go into full detail. This may work for someone who has a rough business idea, but it may be lacking for someone with a lot of pertinent details. 

3. BPlan

BPlan offers a great free business plan template that concentrates on the financial side of things. 

The majority of small business owners that go out of business within the first three years tend to go under due to financial reasons. So by putting a huge amount of effort and details into your finances early on is a smart move. 

After filling out BPlans template, you will certainly have a much better understanding of your business’s financial plans. This will then help you take the right steps to maintain or improve it. 

4. PandaDoc

PandaDoc is a hugely popular software company that offers SaaS software. They tend to be known for their eSigning tools but they also offer a number of templates. 

Their business plan writing services are quite basic in its design. But it is packed full of tips, information and easy-to-understand content. 

What’s great about PandaDocs templates is that they have a number of custom business plans. These are specifically geared towards certain businesses. For example, they have everything from a Bakery Template to their Salon Template. 

5. Plum

Plum has gone down the route of showing their idea of a perfect business plan that you can follow along with. So instead of just supplying you with a template, they’ve given you their business plan for you to emulate. 

It’s a fantastic representation of a visually appealing business plan that blends design with content. 

You can see how they tell the story of their business model in a well-put-together, successful business plan.

Summary

There are a number of reasons as to why you should write a business plan. But one of the main reasons is so that you can start your business on a strong foundation.

Many small businesses fail within their first five years. This could be due to mismanaged finances or targeting the wrong market. It may be a lack of research, or even entering an industry that you don’t have an in-depth knowledge of.

But while these are all legitimate reasons, almost all of these can be solved by starting out with a solid business plan. 

As they say, if you fail to prepare – prepare to fail.