What Is a Business Plan?
If you’ve ever jotted down a business idea on a napkin with a few tasks you need to accomplish, you’ve written a business plan—or at least the very basic components of one. At its heart, a business plan is just a plan for how your business is going to work, and how you’re going to make it succeed.
A note on format: business plans should only become printed documents on select occasions, like when you need to share information with outsiders or team members.
you’re regularly evaluating your business health, so the printed version is like a snapshot of what the plan was on the day that it was printed.
BUSINESS PLAN SECTIONS
If you do need a formal business plan document, then that includes elements like:
- An executive summary
- A company overview
- Some information about your products and/or services
- Your marketing plan
- A list of major company milestones
- Some information about each member of the management team and their role in the company
- Details of your company’s financial plan
EXECUTIVE SUMMARY
Just like the old adage that you never get a second chance to make a first impression, the executive summary is your business’s calling card. It needs to be succinct and hit the key highlights of the plan. Many potential investors will never make it beyond the executive summary, so it needs to be compelling and intriguing.
The executive summary should provide a quick overview of the problem your business solves, your solution to the problem, the business’s target market, key financial highlights, and a summary of who does what on the management team.
While it’s difficult to convey everything you might want to convey in the executive summary, keeping it short is critical.
EXECUTIVE SUMMARY
1.1 Problem
A summary of the problem you are solving and an identifiable need in the market you are filling.
1.2 Solution
A description of the product or service you will provide to solve the problem.
1.3 Target Market
A defined customer base who will most likely purchase the product or service. For info on how to define your target market, check out our guide on the subject.
1.4 Competition
The current alternatives or substitutes in the market that you and your business will be competing against.
1.5 Financial Summary
Key highlights of your financial plan that covers costs, sales, and profitability.
1.6 Funding Requirements
A brief outline of the amount of money you will need to start your business. Include this if you plan on pitching to investors.
1.7 Milestones and Traction
A roadmap of where you currently are and specific milestones you plan to hit.
The opportunity
One often useful section of a formal plan describes the market, including market analysis, data, projections, descriptions, and competition. You have to warm up your investor, colleagues or partners, on the opportunity you think you found in a specific market for your business to succeed. At this stage you have to highlight the market gap you think might be worth exploring and exploiting.
TARGET MARKET
As critical as it is that your company is solving a real-world problem that people or other businesses have, it’s equally important to detail who you are selling to. Understanding your target market is key to building marketing campaigns and sales processes that work. And, beyond marketing, your target market will define how your company grows.
Describe the most important changes happening in your target market right now. Are the needs, demographics, or preferences of potential customers changing in a notable way? Ideally, explain how those trends will favor your products or services over those of your competitors. A growing market is encouraging since it suggests a stronger demand for your solution in the years to come. That said, you can still be successful in a weak or contracting market.
What other options do your customers have to address their needs, and what makes your solution better for them?
OPPORTUNITY
2.1 Problem Worth Solving
A thorough description of the problem or pain point you intend to solve for your customer base.
2.2 Our Solution
A thorough description of your proposed product or service that alleviates the problem of your customer base.
2.3 Validation of Problem and Solution
Any data or relative information that supports your solution. If you’ve already run tests that verify your idea, this is the place to include your results.
2.4 Roadmap/Future Plans
A list of steps taken so far, along with an outline of steps you plan to take in establishing or growing your business.
MARKET ANALYSIS
3.1 Market Segmentation
Potential groups of customers separated by specific characteristics.
3.2 Target market segment strategy
Your ideal customer who would most likely benefit from your business.
3.2.1 Market needs
A description of how your target market is not effectively served and how your business fulfillls a need.
3.2.2 Market trends
How consumers in your target market tend to act including purchasing habits, financial trends, and any other relevant factors.
3.2.3 Market growth
The perceived potential increase or decrease in the size of your target market.
3.3 Key customers
Your ideal customer archetype who will be the main advocate for your business.
3.4 Future markets
A snapshot of the potential market based on the last few sections and how your business strategy works within it.
3.5 Competition
A list of potential competitors. Identifying the competition isn’t always obvious and it may take some digging on your part.
3.5.1 Competitors and alternatives
A list of potential indirect competitors that provide products or services that are alternatives to your business.
3.5.2 Competitive advantage
The strategic advantage(s) that makes your target market more likely to choose you over the competition.
The execution
The products and services section of your business plan delves into the core of what you are trying to achieve. In this section, you will detail the problem you are solving, how you are solving it, the competitive landscape, and your business’s competitive edge.
Depending on the type of company you are starting, this section may also detail the technologies you are using, intellectual property that you own, and other key factors about the products that you are building now and plan on building in the future.
OPERATIONS
Depending on the specifics of your business, include plans related to locations and facilities, technology, and regulatory issues.
Plans are nothing without solid implementation. The milestones and metrics chapter of your business plan lays out concrete tasks that you plan to accomplish, complete with due dates, and the names of the people to be held responsible.
This chapter should also detail the key metrics that you plan to use to track the growth of your business. This could include the number of sales leads generated, the number of page views to your web site, or any other critical metric that helps determine the health of your business.
For external plans, the company overview is a brief summary of the company’s legal structure, ownership, history, and location.
EXECUTION
4.1 Marketing plan
An outline of your marketing and advertising strategy including costs, advertising channels, and goals.
4.2 Sales plan
An estimate of the number of sales you anticipate based on market conditions, capacity, pricing strategy, and other factors.
4.3 Location and facilities
Details of your physical business location (if necessary) including location and costs of operation.
4.4 Technology
An explanation of any new technology that defines your business.
4.5 Equipment and tools
Any required production equipment or tools and the cost associated with purchasing or renting them.
4.6 Milestones
A detailed roadmap of specific goals and objectives you plan to achieve that will help you manage and steer your business.
4.7 Key metrics
Performance measurements that help you gauge the overall performance and health of your business.
TEAM
The management team chapter of a business plan is critical for entrepreneurs seeking investment but can be omitted for virtually any other type of plan.
The management team section should include relevant team bios that explain why your management personnel is made up of the right people for the roles. After all, good ideas are a dime a dozen—it’s a talented entrepreneur who can take those ideas and turn them into thriving businesses.
Business plans should help identify not only the strengths of a business, but areas that need improvement and gaps that need to be filled. Identifying gaps in the management team shows knowledge and foresight, not a lack of ability to build the business.
Financial plan
The financial plan is a critical component of nearly all business plans. Running a successful business means paying close attention to how much money you are bringing in, and how much money you are spending. A good financial plan goes a long way to help determine when to hire new employees or buy a new piece of equipment. A typical financial plan includes:
- Sales forecast
- Personnel plan
- Profit and loss statement
- Cash flow statement
- Balance sheet
