There is a tried-and-true saying: Failure to plan means planning to fail. This is one reason why your business plan is one of the most important documents to produce when starting a new business. Needing a business plan is a relatively common issue. According to the U.S. Small Business Administration (SBA), only 67.6% of new businesses will survive at least two years. In other words, 1 in 3 new business ventures won’t last 24 months.
The online business and investment site Investopedia states that one of the main differences between success and failure for new businesses is ineffective planning prior to starting operations. It stands to reason then that entrepreneurs who make a business plan have a number of advantages.
Writing an entrepreneur business plan can help you think deeply about your business and the strategic steps you will take to achieve your goals. The plan can crystallize your idea and affirm the amount and type of funding needed to start and grow your venture. While there are many resources to help you define your business plan, a sound strategy is to pursue relevant college coursework.
Courses such as those offered in a Master of Business Administration (MBA) program can give you an in-depth understanding of business management. This understanding can serve to place you among the new businesses that succeed.
What Is a Business Plan?
Some primary components make up what a business plan is. These can increase your likelihood of success.
- A business plan should describe every aspect of your business, from the product or service you offer to your finances, management, and marketing plans. It’s designed to tell your stakeholders — potential lenders, investors, and suppliers, for example — the goals of your business and how you plan to achieve them.
- A business plan should be a changeable, continuously growing document. You won’t simply create it, then put it aside and never look at it again. It should be revised and amended as the business grows and changes. You can think of your business plan as a blueprint for success. It’s not only useful when starting your business, but also while running it. Monitoring and assessing whether your business is meeting goals and objectives is a key strategy for staying in business.
- You should implement a timeline to continually review and adapt your business plan. Ongoing business planning is also attractive to those interested in supporting or joining your ventures, like bankers, investors, and executives. These parties want to ascertain the soundness of investing in your venture. Having a business plan that’s regularly updated, rather than allowed to stagnate, makes it more likely for parties to receive a return on their investment.
Smart, regular business planning shows that you know how to analyze and evaluate the progress of your business and reprioritize and reallocate resources, if necessary, to hit your targets.
Types of Business Plans
No two entrepreneur business plans are alike. However, there are several different types of business plans that entrepreneurs may use as templates. It’s important to form a basic understanding of these types prior to using them.
Internal Plan
An internal plan is intended for the people associated with your business. In a startup, these could be the people who will fill specific positions once it gets going. The tone of these plans can be more casual in nature.
External Plan
An external plan is intended for individuals outside your business. This plan, which is typically more formal in nature, provides detailed information on the business and its finances. It also typically includes a funding request.
Traditional Plan
Traditional plans are detailed documents that can be dozens of pages long. These plans typically provide a comprehensive company overview. They can be used in situations for securing funding, building out business strategies, and preparing for unforeseen circumstances.
Lean Startup Plan
A lean startup plan is a quick summary of your business. This type of plan can be as short as a single page and requires less time to create. It typically focuses on key business elements, such as the value you will deliver to customers, who your customers are, the infrastructure you will use, and how you will finance it.
The type of entrepreneur business plan you choose to develop will depend on your audience, whether you want to raise funds, or want a simple plan to remind you of your goals. Many businesses have different versions or easily adaptable plans that can be tailored to a specific purpose.
Why Is a Business Plan Important?
Business plans are important for sharing the vision of your business with stakeholders and other relevant bodies. It can demonstrate that you haven’t just considered the results of starting a business, but you’ve also created a detailed plan to get your business from idea to execution.
An effectively written business plan can be used as a persuasive tool to help others understand and meet your business goals. This could include convincing potential investors to finance your business. It can also help you form additional strategic partnerships after you’ve been established.
Elements of a Business Plan
Readers expect to see certain categories and elements of business plans. Not every section is required, but many have the information that banks, investors, and venture capitalists look for when deciding whether to risk their money on your new enterprise.
1. Executive Summary
An entrepreneur business plan’s executive summary highlights the key points about your business, including product or service, mission statement, leadership team, location, and other important information. Because it gives an overview of your entire plan, many people find it easiest to write this section last. If you plan to ask for funding from a bank or private investor, you should include financial information and your growth plans. Investors and other stakeholders should understand what your company is and how it plans to be successful.
2. Company Description
In this section, you should go into detail about the need your business fills and who will benefit from the solution. This is where your strengths should be listed, such as expertise in the field, a great location, or a revolutionary product. Remember to be specific and clearly define the market your business will target.
3. Market Analysis
This section requires a significant amount of research. It must show a detailed understanding of the trends and outlook of your industry. Additionally, you should include information about your target market and competitors. Think about what other businesses in the industry are doing well, and how you can find a profitable place in the market.
4. Organization and Team
Explain in detail the legal structure of your business, whether it’s an LLC (limited liability company), partnership, corporation, or sole proprietorship. You should also include an organizational chart, so readers can clearly see who oversees each area of the organization. You may wish to include a short biography of each team member to emphasize how their skills and experience will contribute to the success of the venture.
5. Services or Products
In this section, describe your product or service in more detail than in the “company description” section. You should also explain how it benefits or solves your customers’ needs. Go into detail about any ongoing research and development. If you’re filing for patents or copyrights, include that as well.
6. Sales and Marketing
There are many ways to market products, and this section will continue to evolve with them. Include all the marketing strategies you plan to use, such as social media or direct mail campaigns. You should also explain how sales will be transacted, such as through a sales network, online, in a brick-and-mortar store, or on the phone. It’s also a good idea to provide information about how you plan to track the performance of your marketing campaigns, so you can judge where your dollars are best spent.
7. Request for Funding
In the request for funding section, you should explain to prospective investors your financial needs, projecting out for the next five years. Explain exactly how that funding will be used. Remember to state the terms of the funding you’re looking for, and include a description of financial projections, such as selling the business or paying off debt.
8. Financial Projections
Following the request for funding, this section projects the finances of your business for the next five years. It should include forecasted income, balance sheets, cash flow, and capital expenditure budgets. You should be conservative and realistic when making projections, because you need to be able to support your numbers. Use graphs, charts, and spreadsheets so readers can easily understand the presented material.
9. Appendix
Your appendix contains all supporting documentation that you need for your business, like product descriptions, licenses, permits, and credit histories. Depending on who is reading your entrepreneur business plan, further information may be required. It may include the resumes of team members, photos or illustrations of your products, legal documentation, patents, and other documentation.
Plan for Success
Business plans are integral for success – they can help secure funding, project financial growth, and flesh out operational details. Creating an organized and effective business plan requires a deep understanding of business management and expertise in the relevant industries.
An advanced education can help you gain the skills and insight to be a successful entrepreneur. With nine concentrations, including Business Venturing and Entrepreneurship, Ohio University’s Online Master of Business Administration program can arm you with the knowledge to start your own business.
Learn more about defining your business plan and creating a blueprint for success with Ohio University.
Recommended Readings
The Benefits of an MBA in Business Venturing and Entrepreneurship
How an MBA Helps Entrepreneurship
10 Steps to Starting a Business
Sources:
Chamber of Commerce, Small Business Statistics
Forbes, “Business Plan Template: A Step-by-Step Guide for Entrepreneurs”
Forbes, “The Different Types of Business Plans”
Houston Chronicle, “Why Is It Important to Have a Business Plan?”
Inc., “How to Write the Perfect Business Plan: A Comprehensive Guide”
Investopedia, “The 4 Most Common Reasons a Small Business Fails”
U.S. Small Business Administration, “Frequently Asked Questions”
U.S. Small Business Administration, “Write Your Business Plan”