About 20% of all new businesses fail within their first two years of being open. One of the main factors that play into a company having to close its doors is poor planning.
If you don't include all the key business plan components in your starting blueprint, it will be difficult for you to be strategic. Having a business plan will also allow you to break apart your ideas and evaluate them.
There are different business plan formats that you can use depending on your needs. Some of these formats include different information than others. Continue reading to learn more about what your options are.
What Is a Business Plan?
A business plan is a detailed document that highlights company goals. In most cases, it includes a rundown of goods and services and explains how a business owner plans on making money.
You'll have to present your plan to lenders, investors, board members, and potential business partners. Doing so will show them that you're serious about the success of your company.
Why Have One?
There are reasons to have a business plan other than impressing a few bigwigs. Having a complete breakdown of your background information can help you plan strategically.
You'll also be able to evaluate the ideas that you have for your company and use that info to analyze your competition.
Evaluating Your Ideas
When your business is still a fresh concept in your head, you're going to have a lot of ideas rushing in. Processing your thoughts to choose what ideas you want to implement isn't easy.
Writing them out in your business plan will allow you to put them all out there on the table so you can evaluate them and focus your energy on the ones that you know are going to work.
Starting a business isn't easy. You'll need to manage your time, resources, and finances to prevent yourself from closing your doors before they have the chance to open.
Writing out a business plan can help you with just that. It's easier to think strategically when you have all the numbers and facts in front of you.
You want your potential hires to get a good idea of what your company vision is. If they don't know what you do by the end of their job interview, that won't speak well for the onboarding process.
Employees also want to get some satisfaction out of their work. That's an impossible endeavor if they have no direction.
Presenting potential hires with your business plan will put everything into perspective for them. It will also make it easier for you to talk about your company during interviews with candidates.
For you to write a thorough business plan, you'll need to do quite a bit of research. Through this, you'll learn more about who your target audience is and how your products and services can help them.
You've most likely heard the saying "know thy enemy." To overcome your competition, you'll need to learn all about them.
By doing research for your business plan, you'll analyze your competitors' marketing tactics and find out what's worked for them and what hasn't. This will prevent you from making similar mistakes.
Are you planning to reach out to other companies to collaborate? Partnering with a well-known corporation can be a great way to get your name out there while your company is still fresh.
Big-name companies aren't going to be thrilled with the idea of working with you if you don't have a detailed business plan, however. It would make the partnership a huge risk.
There are business plan competitions out there that will give you the chance to win grants and other prizes.
If you think your business plan has what it takes, you can find competitions in your area by performing a quick Google search.
Business Plan Formats
There are three different types of business plans for you to choose from. Traditional business plans cover all the bells and whistles, while lean formatted ones only include basic information.
If you're planning to run a nonprofit organization, there's an extra section you'll need to include.
When writing a traditional business plan, you'll need to set aside a few days. Highlighting your company's goals and financial prospects can be a lengthy process.
To give you a good idea of what to expect, most traditional business plans are comprised of a dozen pages or more. As stated above, if you're going to be reaching out to a lender for financial help, they will ask for a copy of this plan.
A lean business plan is a bare-bones version of a traditional one. It only includes the most important takeaways.
The main use for a lean business plan is onboarding. Employers give new candidates a copy to get them up to speed with the company.
Some business owners also use lean plans to analyze and make small modifications to current marketing ideas.
Nonprofit businesses must include everything that goes into a traditional business plan with an extra section rolled in.
You have to let investors and donors know what sort of impact your organization is going to make on your community.
What to Include in a Business Plan
For the sake of this article, we're going to cover everything that goes into a traditional business plan. This includes your executive summary, business description, market analysis, products and services, marketing plans, competitive analysis, operations, finances, and a closing statement.
Some companies also throw in an appendix filled with any additional information they want investors to know.
The first section of your business plan is going to be the executive summary. It will begin with an overview of the business plan itself.
Your executive summary will also be where you place your mission statement. This section tells lenders and business partners why you're launching your organization. If your company has a physical address, you can jot it down in the executive summary as well.
Even though this will be the first section of your business plan, it's wise to write it last. This will allow you to map it out while everything is still fresh in your mind.
The second part of your plan will be your business description. It should include a detailed rundown of your company's long-term and short-term objectives. You'll talk a little about your products and services and the target market you plan to reach out to.
If your team has a robust background in your industry, that's something you'll want to discuss at length in this section. You should also include your company's legal structure, and a brief description of what your business operations will look like.
In your market analysis section, you'll delve a little more into your target audience. Talk about the geological location of your potential customers.
Come up with a list of pain points that your company will strive to solve. Decide on what your customer's needs are and use your business plan to talk about how you can meet them.
Include the age, hobbies, and gender of your potential customers, and tell investors what type of social media you can find them on. Think about how you plan to use all this information to market your Online Business Ideas.
Products and Services
This is the section where you'll talk in length about your products and services. Write out a list of your product features and turn them into benefits.
Do your research to find similar products to yours and discuss what makes your goods different. If your product has an expiration date, investors will want to know.
Talk about how you plan to use customer feedback and technology to improve your products over time. The last thing you want is for someone to steal your idea. To this end, put your copyright information in your business plan as well.
This section will include specifics on how you plan to market your products. Talk about any marketing tactics that you plan to use.
What are your pricing plans? Are you running a subscription service that a customer pays for each month, or will you be charging them a flat fee?
Discuss how you plan to generate sales and tell investors why customers will buy from you instead of your well-established competitors. What can you offer them that someone else can't?
How are you going to get your goods and services out in front of your target audience? Will you be attending tradeshows or offering free samples?
A competitive analysis works a lot like a market analysis. The difference is that you'll be researching your possible competition. For example, if you plan to make chocolate, you'll need to learn all there is to know about Hershey.
List off your competitors' strengths and weaknesses and think about how your company compares.
Logistics and Operations
This is the section where you discuss how you plan to make your goals a reality. Tell investors where you'll get the supplies you need to run your company.
Think about how you plan to tackle the busy season. If you don't know how you'll take care of your customers during a demand spike, you'll fumble when it happens.
You should also go over your facilities. Talk about where you and your team will be working. Are you even going to have a physical space or are you going to operate your business from home?
Make a list of equipment that you'll need to keep your business going, and let investors know if you plan on fulfilling orders yourself or using a third party.
This section should include a basic idea of your inventory space. How much product can you hold before your warehouse is full to bursting?
You're not going to be able to get a business loan from the bank if you're not sure how you're going to generate revenue.
The bank is going to want income reports, financial projections, a cash flow estimate, and a breakdown of your starting expenses.
Your closing statement should include a summary of the key points of your business plan. Tell investors how you're going to expand so they know how they will benefit from working with you.
Reiterate the market demand for your goods and services. If you have any current sales figures, this is where you'll present those.
The appendix is the final section of your business plan. You can add any additional information that you would like to share with investors and stockholders.
If you have supporting documents like charts, product schematics, resumes, and degrees, this is where you'll put them. If you already have managers and leadership team members, talk about them and show off their credentials in the appendix.
Some lenders and stockholders will ask to see copies of your legal documents. Your appendix is the best place to include them.
Key Business Plan Components to Keep in Mind
Most startups fail because they don't have the right blueprints. Before opening your doors, you need to know all there is to know about your industry, target audience, and competition.
These are all key business plan components that you'll write up to present to investors. On top of helping you secure funding, your business plan will also allow you to evaluate your business ideas and come up with a strategy to carry them out.
For more tips that will help you get your company off the ground, explore the rest of our blog.