Failure to plan means planning to fail, which is why your business plan is one of the most important documents to produce when starting a new business. Of the 400,000 companies started in the United States each year, only around 70% will still be in business two years later.
Chamber of Commerce.org, an online resource for budding businesses, states that one of the main differences between success and failure for new businesses is planning. It stands to reason then that entrepreneurs who make a business plan have a number of advantages.
Writing a business plan provides you the opportunity to think deeply about your business and the strategic steps you will take to achieve your goals. The plan can crystalize 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 by Ohio University’s Online Master of Business Administration program are designed to give you an in-depth understanding of business management. This understanding can place you among the 70% of new businesses that succeed.
What Is a Business Plan?
A business plan is a tool that describes 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 reader — potential lenders, investors, and suppliers, for example — the goals of your business and how you plan to achieve them.
A business plan is a living 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 to staying in business. 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 venture, 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
Two main types of business plan are typical: traditional and lean startup. Traditional business plans are detailed documents that can be dozens of pages long.
The other business plan defined here — 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. However, it must still include key elements of your business, such as the value you will deliver to customers, who your customers are, the infrastructure you will use, and how you will pay for it all.
The type of 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 an easily adaptable plan that can be tailored to a specific purpose.
Elements of a Business Plan
Readers of a traditional business plan expect to see certain categories, which we will explore below. 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. Most traditional business plans use a combination of the following nine categories.
The 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, include financial information and your growth plans. Investors and other stakeholders should understand what your company is and how it plans to be successful.
In this section, go into detail about the problem your business solves and who’ll be benefiting 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, so it is clear what market your business will target.
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.
Organization and Team
Explain in detail the legal structure of your business, whether that’s an LLC (limited liability company), partnership, corporation, or sole proprietorship. 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.
Services or Products
Describe your product or service. Include how it benefits your customers’ needs. Go into detail about any ongoing research and development. If you’re filing for patents or copyrights, include that as well.
Sales and Marketing
There are many ways to market products, so this section will continue to evolve. Include all the marketing strategies you plan to use, such as social media or direct mail campaigns. Also explain how a sale 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 your return on investment for marketing campaigns so you can judge where your dollars are best spent.
Request for Funding
In the request for funding section, tell prospective investors how much money you need projected out for the next five years. Also tell them 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.
This section projects the finances of your business for the next five years and should include forecasted income, balance sheets, cash flow, and capital expenditure budgets. 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.
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 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
A deeper understanding of business management provides valuable insights into how to develop a successful enterprise. Learn about the importance of defining your business plan and how an online MBA from Ohio University can help you create a business blueprint for success.