Before we get into the key steps to create a business plan, let’s learn a bit more about it and the process of making a business plan.
Business plans have long been a critical document for new businesses. What are the best practices and data that can help you create a winning document, that will help your business get the funding you need and ensure your venture lasts?
You should have a plan in order to get yourself organized and, to ensure that you have some type of viable commercial potential.
If your purpose is to raise funding, and your startup isn’t going to go anywhere without, then make sure you take time out to create it and relate in today’s fundraising environment.
Creating a business plan shouldn’t be complicated. I’ll show you how to quickly and easily make a free business plan that will get the results you want. Don’t worry, you don’t have to have a business or accounting degree to put together a great business plan. This guide will show you how to get your plan done step-by-step without any of the complexity or frustration.
The big problem with business plans is that entrepreneurs often get lost in an endless process of writing, researching, and rehashing a plan for a year or more and starting their business afterwards. However, new trends and the data show us that it is much more important to get started and test your business first, and then later in the journey complete a business plan.
Whether you’re building a business plan to raise money and grow your business or just need to figure out if your idea will work, every business plan needs to cover 7 essential topics aka business plan format. Here’s a quick overview of each topic.
- Executive summary
- Company description. Why you and your company?
- Description of your product or service. What are you selling?
- Target market. Who is your audience?
- Sales and marketing plan. How are you going to get clients?
- Financial analysis. How are you going to make money?
Now let’s start breaking down each of the topics for the plan required to build a business.
1. Executive summary
The executive summary of your business plan introduces your company, explains what you do, and lays out what you’re looking for from your readers. Structurally, it is the first chapter of your startup business plan.
Ideally, the executive summary can act as a stand-alone document that covers the highlights of your detailed plan. In fact, it’s very common for investors to ask for only the executive summary when they are evaluating your business. If they like what they see in the executive summary, they’ll often follow up with a request for a complete plan, a pitch presentation, and more in-depth financials.
Because your executive summary is such a critical component of your business plan, you’ll want to make sure that it’s as clear and concise as possible. Cover the key highlights of your business, but don’t into too much detail. Ideally, your executive summary will be one to two pages at most, designed to be a quick read that sparks interest and makes your investors feel eager to hear more.
And while it’s the first thing that people will read, it is a good thing to leave it for last because once you know every little detail of your business inside out you will be better prepared to write the executive summary.
The opportunity chapter of your business plan includes information about the problem that you’re solving, your solution, who you plan to sell to, and how your product or service fits into the existing competitive landscape.
You’ll also use this section of your business plan to demonstrate what sets your solution apart from others, and how you plan to expand your offerings in the future.
People who read your business plan will already know a little bit about your business because they read your executive summary. But this chapter is still hugely important because it’s where you expand on your initial overview, providing more details and answering additional questions that you won’t cover in the executive summary.
3. Company description-overview
A proper analysis of the strengths, weaknesses, threats, and opportunities facing your enterprise are to be mentioned. Investors would also like to know about your organizational structure and the experience and competency of the people at the decision-making levels.
The company overview will most likely be the shortest section of your business plan.
For a plan that you will share with people outside of your company, this section should include:
- Mission statement
- Company history
- A review of your company’s legal structure and ownership
a. Mission statement
Don’t fall into the trap of spending a day or more on your mission statement. An hour or two should be the ideal amount you spend.
Avoid putting together a long, generic statement about how your company is serving its customers, employees, and so on. Your company mission should be short—one or two sentences at most—and it should encompass what you are trying to do. Frankly, your mission statement and your overall value proposition might even be the same thing.
b. Company history
Even if your business is brand new, you should include a brief history of the company. How did this idea come to you? When and how did you decide the type of business you wanted to create? What are your long term goals? These are just some of the questions you should answer.
c. A review of your company’s legal structure and ownership
Last but not least we have the company overview as the final part of the business plan outline. Your company overview should also include a summary of your company’s current business structure. Are you an LLC? A C-corp? An S-corp? A sole proprietor? In a partnership? All of this must sound confusing but you can find out more at US Small Business Administration (or SBA) or you can ask an expert. Starting a business is one thing but the legal stuff that follows is another and there is no shame in asking for help.
4. Description of your product or service. What is your company selling?
Describe the product/service which you are going to provide and what makes it unique. Give a strong reason which would make people prefer your product/service over those provided by your competitors. Details like product life cycle also could be mentioned in this part. If your product/service is based on an entirely new concept, then you should explain the problem or need that it addresses. If the concept is interesting, stress on what extra benefits your product or service will bring to the table.
5. Target market. Who is your company’s audience?
The selection of your target market is very critical to the success of your business. Proper market research has to be done to ascertain this. Details like projected market share, targeted customers and main competitors in the industry are discussed here. Present size, growth potential and trends in your target market are studied in detail.
6. Sales and marketing plan. How are you going to get clients?
The marketing and sales plan section of your business plan details how you plan to reach your target market segments (also called target marketing), how you plan on selling to those target markets, what your pricing plan is, and what types of activities you need to make your business a success.
Before you even think about writing your marketing plan, you must have your target market well-defined because without truly understanding who you are marketing to, a marketing plan will have little value.
7. Financial analysis. How are you going to make money?
We all know that ultimately, every business is about making money. So proper revenue projections, break-even analysis, and cash flow analysis have to be done and documented. This is often what entrepreneurs find most daunting, but it doesn’t have to be as intimidating as it seems.
Let’s dig deeper into that:
Important points regarding all the issues discussed in the business plan should be mentioned briefly in the executive summary. A typical financial plan will have monthly sales and revenue forecast for the first 12 months, and then annual projections for the remaining three to five years. Business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast. That said, if you need additional help, there are plenty of tools and resources out there to help you build a solid financial plan.
A business plan still plays a critical role in launching a profitable and sustainable venture today. New trends and the data show us that the best time to complete a robust plan may now come later in the journey than it used to. It is much more important to get started, test, and secure funding first.
When it comes to business plan creation, there are now more templates and streamlined formats that are being adjusted to meet today’s needs to accommodate faster-moving, leaner startups. Just don‘t let this part of the process slow you down.
You can download a free business plan template in order to get an idea of how a startup business works and follow along, using these instructions as a guide.
However, before you start creating your business plan, it is best that you start creating a “Business model canvas” first. The business model is the foundation of a company, while the business plan is the structure.
For more information on Business model Canvas, click HERE.