Launching a business can be an exciting and lucrative venture, but not without a little planning in advance. Enter: a business plan. Putting pen to paper and coming up with a detailed plan that covers a few key elements such as how you’ll fund your business, your marketing strategy, budget and upfront costs, to name a few, will help you and potential investors get a better understanding of what profitability could look like and how to get there.
Types of business plans
Your business plan will look different depending on what kind of business you plan to start and what the best practices may be for your industry. There’s no right or wrong way to approach it, but your plan will likely fall into one of two buckets: lean or traditional.
Lean business plans tend to be more brief and only touch on key points like your value proposition, key resources and partnerships, cost structure and revenue streams. This kind of plan can serve you well in the short-term, but you can expect to have to revisit and revise it frequently, and your investors may request a more detailed plan.
A traditional business plan, which is more commonly used, covers a wider range of information and includes more specific details like your mission statement, in-depth financial figures, market analysis, financial projections and more.
Here are a few key elements of each plan, according to the Small Business Administration.
| Traditional | Lean |
|---|---|
| Executive summary | Key partnerships |
| Company description | Key activities |
| Market analysis | Key resources |
| Organization and management | Value proposition |
| Service or product line | Customer relationships |
| Marketing and sales | Customer segments |
| Funding request | Channels |
| Financial projections | Cost structure |
| Appendix | Revenue streams |
Benefits of writing a business plan
A business plan can help you better understand what your long-term roadmap should look like in order to run a profitable business and secure funding. Investors and potential partners use information from your plan like your financial projections and long-term goals to better understand if your business would be a worthwhile investment for them or if they’d like to get involved.
However, a business plan isn’t only for external parties, it’s also a helpful tool for you to use and refer to regularly as you get your business off the ground. Referring to your plan can help you judge whether you’re hitting the objectives you’ve set for your business, and where you might need to change your strategy in order to hit those goals and be more efficient.
1. Write an executive summary
One of the key elements of a business plan is an executive summary. An executive summary serves as the introduction for your plan. It should include essential information about your business in less than two pages. It’s a way for investors to get a more general overview of your business plan, without going into the nitty-gritty details-similar to the way your cover letter spotlights key points of your resum’e you would want a hiring manager to know.
When writing your executive summary, you should make sure to include your business’ key objectives, target market, the products or services that you offer, your marketing and sales strategies, information about your competitors, how your business is funded and how that will evolve over time, the structure and organization of your business, and how many employees you have and will need in the future.
This summary may need to be altered depending on your business, but you should aim to keep it brief, while including the most important details you would want potential investors or partners to know if they only read your summary instead of your business plan.
2. Create a company description
Next, you’ll need a company description. This can also be brief and should tell whoever is reading your business plan what your company does and how it has set itself apart from others in the same space. Think of this as your company’s elevator pitch. Here are a few common elements that business owners tend to include in their descriptions: company name, location, mission statement, products or services, objectives and vision.
3. Give a summary of market research
Market research has probably been at the top of your mind since your business idea first popped into your mind, but it should also be included in your business plan. Market research tells potential investors and partners who your main competitors are and what they may be doing correctly or incorrectly, whether or not there’s a real need for your goods or services, who your potential customers might be and how to fairly price those goods and services. You can conduct market research through surveys, questionnaires and in-depth interviews.
4. Outline your product and/or service
Identifying your product or service is another important part of your business plan. In this section, you’ll want to highlight what you’re selling or providing for customers and why it’s valuable and different from competitors who may be providing a similar product or service. You should also use this space to go over how much you’re selling these goods for, how those goods are currently produced and sold, any intellectual property you own such as trademarks or patents, and any obstacles you’re facing as they pertain to those products.
5. Summarize a marketing strategy
Your marketing strategy should also be included in your business plan. This section will highlight how your business will reach potential customers and turn them into loyal, repeat customers. When discussing this in your business plan, you might want to include what your company’s value proposition is, what your messaging and branding might look or sound like, and the mediums you plan to use to communicate this information to your target audience. This might include regular PR or social media campaigns, live events, or securing regular media appearances.
6. Explain funding request
Your business plan should also include a section that discusses funding, particularly if you are presenting this business plan to a potential investor. This section should include information about the current financial state of your business, how much capital you anticipate you’ll need to scale your business over a certain period of time, what you’ll use those funds for, what repayment could look like, and any specific asks you have of the investors as it relates to this funding.
Investors like to know where your business is starting from and what the return might be on their investment. So it’s important to be as thorough and accurate as possible when stating those numbers, while also highlighting how this investment will be beneficial for them as well.
The bottom line
Business plans play an essential role in growing and scaling any business. With key information about your target market, competitors, growth strategy, current, future finances and more, a good business plan can serve as a reference to keep yourself on track and raise capital from potential investors and or partners.
