What is a Business Plan?
A business plan is a document that describes a new business, its products or services, how it will earn money, leadership and staffing, financing, operations model, and other details that are essential to both operation and success. Entrepreneurs create them as part of the start up process while existing businesses often write them when changing direction or strategy. Most business plans cover the company’s first three to five years.
While a business plan is required by anyone seeking funding, whether from financial institutions or investors, it is recommended for all start-ups because it serves as the business roadmap. The business-plan-writing-process can also help an entrepreneur uncover concept weaknesses, market misperceptions, or other specifics that might cause a shift in how the business is positioned or built.
Business Plan Purpose
The goal of a business plan is to provide the company’s founder or leadership with as much information as possible about what’s needed to reach its goals. It helps the owner determine, among other things:
- The amount of funding needed to start the business
- The equipment or facilities needed for operation
- Optimum location
- Whether it needs employees and if so, what they will do
- Existing competition
- The company’s competitive advantage and how to leverage it
A well-researched and thorough business plan guides and informs nearly everything the new organization does.
Business Plan Elements
The document’s formality depends on whether it will be shared with outsiders or used only internally with founders and employees. When it will be seen by potential funders, investors, collaborators, or partners, it needs to be professionally presented using the conventional format. (Online searches will reveal sample templates to use.)
Regardless of the use, standard plan elements include:
- Executive summary
- Business description
- Product or service description
- Mission statement
- Market analysis
- SWOT analysis (strengths, weaknesses, opportunities, strengths)
- Marketing plan
- Financial projections
- Cash flow analysis
Business Plan Dos and Don’ts
Because so many new businesses fail, it makes sense to temper optimism and be conservative with income and growth projections. Many owners test the product or concept before a full launch. In addition, because organizations grow and markets change, business owners should re-visit their business plan regularly and make any necessary adjustments, taking note of lessons learned. While a business plan is a guide, it is a fluid one that can change as experiences give the company’s leadership new knowledge and direction.