What is a business plan? Here’s what you need to know.
Most entrepreneurs start with a good idea — and maybe, with the core concept of what a business plan is — not a degree in Business Administration.
This is why many new business owners aren’t always clear on what steps they need to take to start and grow a small business. One thing is for sure, the first step is to define your goals and have a clear vision of where you see your business in the future — in other words, you need a business plan.
If you’ve ever asked yourself, “what is a business plan?” you’re not alone. Unless you have an MBA, it’s likely that no one has ever mentioned the concept to you, and even if they have, the terms and concepts were likely broad.
To help you get started, here’s your guide to creating a business plan and how to utilize it for entrepreneurial success.
But First, What Is a Business Plan?
Broadly speaking, a business plan is an outline of your business objectives and the roadmap to achieve them.
More specifically, it’s a formal plan for your company’s conception and design, marketing strategy, financial strategy, and timeline moving forward. Those who create business plans are twice as likely to succeed. Without a plan, your entry into any market will lack a cohesive structure, making it harder to achieve.
That said, all business plans are not created equal. Plans for a retail business will look vastly different than a plan designed for, say, a recruiting agency. So it’s important to identify the key elements that are important for your particular industry.
SEE ALSO: How to Write a Business Plan on a Cocktail Napkin
How to Structure Your Business Plan?
If you Google “what is a business plan,” you’ll come across several business plan templates, but the fact is that there isn’t one single recipe for a successful business plan. Taking that into account, here is a synopsis of some of the critical sections to include in your business plan.
Business Summary and Description:
This is an introduction to your business plan. Think of it as your perfect pitch. It includes the Executive Summary, information about your products, services, business arrangement, and identity.
Market Strategies and Marketing Plan:
This section should explain how the market is organized and how you will reach customers and achieve a competitive advantage. Your marketing plan should describe your ideal customer base and provide a blueprint for reaching and selling to them.
Operational Structure & Management:
This should be a more detailed description of your business’ structure. Will you have employees? And if so, how many will you have? What experience do they need? Who will they report to?
Financial Plan:
For many, this is the most challenging aspect of putting together a business plan. This section should include what kind of margins you expect to make, how long it will take you to reach a break-even point, and the quarterly goals you’ll set for yourself.
A financial plan should also include aspects such as where you expect funding to come from and what kind of economic growth you expect in the first few years. Being able to answer these questions, or at the very least map out a timeline in which to answer them, often is what separates a successful small business from one that never gets off the ground.
SEE ALSO: The Ins and Outs of Small Business Financial Planning
Why Do You Need a Business Plan?
In addition to being able to answer, “What is a business plan?” you also need to know why you need a business plan. Think of a construction project. When a crew gets started on the actual building process, there has already been considerable time spent on the design of the building, the blueprints, and other considerations that affect the ongoing structural integrity of the building. Think of your business plan as your design for the building — In this case, your small business.
Set targets for your business’ growth that you can monitor over time. This gives you an idea of your progress so that you can verify that you’re on track, or cut costs/make changes if you aren’t.
Having a concrete business plan is also important if you are looking for investors, because trust us, they are going to want to see it. When you pitch your ideas to sources of potential new funding, they’re going to want to see a cohesive direction and identity from your company. If you don’t have an idea of how much your business is worth and a direction in which to grow, investors won’t give you a second thought before they reject your elevator pitch.
When Should You Write Your Business Plan?
As soon as the first notion of a business idea makes its way into your head, your business plan has started to come together, even if you haven’t written it down. An internal business plan is one set for yourself, on which to build a successful business. But if you don’t write your plan down, you risk losing sight of your goals, and giving up on your vision before it even has a chance of coming to life.
Consider your personal goals as an entrepreneur and build a business plan that reflects these. As your plans come to fruition, add more and more detail. Business plans come in many iterations. You’re going to have your initial brainstorm, one that is simple and straightforward, and then from there, you build upon it until it includes all the necessary elements mentioned above.
Once your business plan is off the ground, that’s when external factors come into play. Over time, your business goals will change. Business plans are, in effect, living documents. As your goals and strategies change, so will your business plan. If you’ve started a business without a business plan, form one from the point where you are, and set targets for your company.
As a business owner, you’re bound to be asked about your business plan. If your response is, “What is a business plan?” then you should bookmark this article to help you on the road to success.
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