What Is a Business Plan?

• Understanding business plans
• Elements of a business plan
• Types of business plans
• Financial projections
• Other considerations for a business plan

When you come up with a new business idea, the next step is creating a business plan. A business plan lists how you envision your company's objectives and how you plan to achieve them. A business plan is a document that conveys the details of your vision to the person reading it. It can also function as a guide when you start and grow your business. It sets the company’s goals and the roadmap of getting there.

Business plans are equally valuable for the smallest startups and large companies. They are used internally for guidance and externally to showcase the company’s visions. Business plans are useful to convince investors of a company when it is a little more than an idea or a plan. It is also useful to attract partners and other like-minded human resources to the company.

Business plans can be long and detailed or short and crisp and have certain sections such as the executive summary, products/services, marketing plan, financial plan, and budget details and provides  comprehensive picture of the company's vision, goals, and objectives. A great business plan may be all you need to convince stakeholders about how you will convert your business idea into a successful reality. To know more about creating a great business plan, read on.

Understanding business plans

When you have a great idea and want to approach a bank or financial institution for capital, you need to have a business plan. A business plan is a document that clearly and logically sets out the company's vision and specifies how it can execute the vision. This includes a detailed description of the product or service that is going to be offered and the marketing and financing plans. The business plan should be impressive and convincing enough to impress potential investors. You could still benefit from a business plan if you are an established business. Putting your ideas and ambitions for the company into words helps ensure that all the people in leadership roles are working towards the same goal.

When all the company plans are put down in a document, they need to be thought through. This prevents impulsive business moves that could take the company away from its primary goal or plan. A business plan also requires that every new activity or project's design, marketing, and financial details be detailed. So, a new project and its financial impact will have to be thought through before execution, thereby preventing costly mistakes. Having a business plan in place is like a self-governance blueprint that they can keep going back to see how far they have come in achieving their original goals.

Elements of a business plan

The length of a business plan usually varies between 15 to 25 pages and should be able to impress people with a very short attention span. They are as follows:

Executive summary: The first section of the business plan contains the mission statement, the company's leadership profiles, and an informative overview of the location, employees, and operations.

Products and services: The product and services that the company is selling or proposes to offer are described here. The section contains information about the usage, pricing, lifespan, features, and benefits of the product/service. The production and manufacturing processes are described if it is a manufacturing company. It also lists information about R&D, the company’s patents, and proprietary technology (if any).

Market analysis: The target market and demand expectations are described here. The market is assessed, and details about the company’s competitors and how the company expects to handle the competition are described. The company’s proposed strategies to get a foothold in the market and increase its market share is outlined.

Marketing strategy: The marketing and distribution strategies of the company are outlined in this section of the business plan. It should state the type of media and the campaign plans that have been planned.

Financial planning: The company's financial planning, investment requirements, targets, and estimates are described here. This section will feature the most important financial information, statements, and reports in an established company.

Budget: A budget that envisions the expected income and expenses is an essential component of a good business plan.

A good business plan with all the details listed above cannot be taken from a generic template. It requires research, market study, and a lot of thought. The more effort one puts into a business plan, the better equipped the business is for success.

Types of business plans

A general business plan covers all the significant aspects of a company. They are meant to outline a startup’s plan for growth or an established company’s plans to meet its goals and expand. But certain business plans are drawn up for specific company types; traditional and startup.

A traditional business plan is very common and goes into all the aspects of the company in detail. It takes more work and can be longer than the startup business plan.

Startup business plans or lean startup business plans are shorter and highlight the key elements of the business. They should grab attention and spark curiosity so that the reader asks for more details.

Financial projections

One of the essential sections of a business plan is financial projections. For a new or established business, the financial projections are of great interest to potential stakeholders. The financial projections or proformas usually include a budget, the current and projected financing needs, a market analysis, and the planned marketing strategy.

Other considerations for a business plan

Creating a business plan is an exercise that gives business owners a clearer picture of their goals and helps them chart out the strategies to get there. It necessitates that they plan and list the resources required and perform a market analysis for the report. It is an excellent way to determine how much money they would need to finance the business. A business plan also convinces potential investors to back the company with their money.

In an established business, the business plan should evolve and grow. The company may have started with a plan. But changing environments and new opportunities mean that a business must evolve to accommodate market changes and grab new opportunities. So, periodic reviews and updates of a company’s business plan by the business owners are essential. In other words, your business plan should evolve with your business so that it helps your business grow.

When you think of your company’s business plan as your projection of a business idea or the essence of a company in a document, it becomes easier to create. A successful business plan conveys the practical aspects of a company and generates interest and enthusiasm in the reader.

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