As an entrepreneur, you’re probably familiar with the idea of a business plan. It’s also just as likely that you don’t have one.
Too many small business owners neglect to create this essential document. Maybe you think making one is too complicated. Or, you believe you can get by without one.
These assumptions couldn’t be further from the truth. A business plan is a necessity for every company and will help you achieve success.
With the new year coming up, now is the perfect time to create this document. If you’re not sure where to start, here is a complete guide for making your business plan in 2020.
What Is a Business Plan?
You might get the gist, but what exactly is a business plan?
At its core, a business plan outlines your company’s goals. It includes everything from how your organization operates to how it will achieve these goals.
How Long Is a Business Plan?
This answer will vary from company to company. The length of your document depends on factors such as what you’re trying to achieve, how complex your company’s structure is, etc.
On the one hand, you want to keep your business plan as short as possible. The brevity will ensure your audience reads it all and gets all the details they need. A good rule of thumb is to keep it under forty pages. Make it any longer, and no one will read it.
On the other hand, you don’t want to leave out any critical information. To keep it concise, be economical with your words. Every sentence should be useful and relevant. Leave out the fluff and cut to the chase.
Why Should You Have a Business Plan?
There are many reasons you should have a business plan. Some of the most compelling include:
Undertaking a new venture is rife with risks that you might not be ready to take.
A business plan will allow you to test the feasibility of your ideas. It’s a kind of safety net that helps you determine what will and won’t work. This way, you won’t start anything without knowing the possible risks.
Attracting Potential Investors:
No matter what stage your business is at, you might find yourself needing investors.
To get the necessary capital and resources, you’ll need a compelling business plan. This document will show investors you are serious about your company. If they see you don’t have a clearly defined strategy, they’ll look to put their money elsewhere.
Holding Yourself Accountable:
Of course, as an entrepreneur, you want your company to succeed. You put in the work to reach your goals and get the results you’re seeking.
Your intrinsic motivation is powerful, but a business plan can make you even more focused. It explicitly lays out what you want to achieve and serves as a constant reminder of your goals.
Having your strategy written down also keeps you on track. You can use it as a roadmap to make decisions along the way. You can also look back at it to see if you are reaching your goals as you planned. If not, you can adjust your strategy accordingly.
Who Can Benefit from a Business Plan?
Any company can benefit from a business plan.
Most frequently, you’ll see new entrepreneurs creating this kind of document. They find it useful as it gives them a solid foundation for their freshly established company.
Even if you run a company that’s been around for years, it’s not too late to create a business plan. The process helps you regroup, reorganize, and give your company the structure it might’ve been previously lacking.
Components of a Business Plan:
One company’s business plan won’t look like another’s. However, each usually has the following key components:
1. Executive Summary
Most executive summaries aren’t longer than a page or two. However, it is arguably the most crucial part of your document.
Think of the executive summary as the “elevator pitch” of your business plan. It will tell busy readers everything they need to know about your company. It can even help them determine if the rest of your document is worth reading.
Your executive summary should include these essential pieces of information:
- Mission statement. Define your business and the goals you have for it.
- General information. Who founded your company and when? How many locations and employees do you have?
- Important milestones. Don’t be afraid to brag a little in your executive summary. Make a note of any critical highlights.
- Products and services. What do you sell? Who are you primarily targeting?
- Financial details. This information is crucial if you’re looking for funding, so be sure to describe clearly your monetary goals. If you’ve worked with lenders, banks, or investors in the past, you should include this information.
- Plans for the future. You want to show that your company is in it for the long haul. Where do you see yourself in five years or so?
While you want to hit these crucial points, you also want to be sure to keep your executive summary short and sweet. You have plenty of room in later sections to go into further detail.
2. Company Overview
The company overview might sound similar to the executive summary. However, you are going into a little more detail of your company’s structure.
Start with a few sentences about what you do:
- In what industry do you operate?
- Who is your company, a family-run business, a franchise, etc.?
- What are your principle values as a company?
Then, describe how your company fits into your industry. What consumer needs are you meeting?
Finally, you should get into the legalities. Does your business feature an LLC, C-Corp, or S-Corp structure? What is the ownership structure in your company?
As with the executive summary, you want to keep your company overview brief.
3. Market Analysis
Your market analysis is where you elaborate on how you fit into the marketplace.
Describe your industry. Touch on its growth trends and its defining characteristics. Also, be sure to highlight key players in your industry.
Then, figure out who you’re trying to target. What are the demographics of your target audience? Narrowing down your customers will give you a better chance of creating a dependable, loyal audience.
Finally, don’t forget to look at your competitors. While you should determine if they might be an obstacle to your goals, also analyze their behavior. What are they doing that’s working, and what are their downfalls? You can use this information to hone your strategy.
4. Define Your Company’s Organization
Giving your company organization will clarify confusion about who plays what roles and show there is a clearly defined hierarchy.
Start with your organizational structure. Who manages what aspects of your company? Who answers to whom?
Then, move to the ownership structure. This section goes more in-depth on the legal structure you defined in the company overview. Who owns what and how much?
Next, provide a background of your team. Giving your audience an idea of who is part of your company will prove that you’re worthy of investment.
This section is also where you want to include information about expanding your team. The report will make it clear who else you need to make your company successful.
5. Present Your Products or Services
In this section, you should sell yourself. What are you providing to customers? What needs are you filling, and what makes you stand out from the competition?
Are your products or services ready to go? If they are still in the development stage, provide information about their progress.
Also, include information about operational factors such as intellectual property claims and where you get your resources. Do you depend on third-party vendors? How do you conduct business with them?
6. Describe Your Marketing and Sales Plan
You need to prove that you can attract customers. How are you going to put yourself in front of your audience? Will you focus on traditional marketing methods, online strategies, or a combination of both?
Then, describe how you will finalize sales. How will you convince customers to purchase your product or service? Consider your company’s sales funnel and how you can optimize it.
7. Lay Out Your Financial Plan
The financial plan is where you want to dive into your business’s finances. How has your company performed in the past? What’s your current financial state, and where do you want to be in the future?
If you’ve been in business for a while, it’s crucial to include past data. This data will show investors that you have a track record and metrics on how you’ve improved your performance. Some documents you might want to include income statements, balance sheets, and documentation of debt obligations.
Companies, both old and new, must include financial projections. Your audience needs to see that you have the potential to grow and make a profit. Projected income statements and cash flow forecasts are two examples of relevant documents.
8. Add an Appendix
Graphs, pictures, contractual forms, and other documents can enhance your business plan.
However, they should be just that—enhancements. Excessive use of these elements might take away from what you’re trying to say.
That’s why you should include them in an appendix at the end. This way, users can reference read through your business plan without distractions. They can reference your supporting documents as necessary if they want to learn more.
General Guidelines for Writing Your Business Plan
When you sit down to write your business plan, keep the following general guidelines in mind.
Avoid Complex Language:
As we mentioned earlier, you want to keep your document short and concise to effectively engage your audience.
Another way to make sure you get through to your readers? Use the appropriate language.
Many entrepreneurs make the mistake of using embellished language. They might think it will help their audience to see them as more sophisticated.
In most cases, it does just the opposite. Readers don’t want to slug through a wordy, complex document. They want to read through your plan and understand your main points quickly.
You also don’t want your document filled with company jargon. If they aren’t familiar with your industry, this will leave them confused and even frustrated.
In short, keep it simple and straightforward. Cut out language that muddles what you’re trying to say.
Have a Master Copy and Tweak It for Your Audience
A slightly different document may be appropriate for each of your audiences. The different audiences are why you want to have a master copy and adjust it accordingly.
For instance, a business plan for employees should focus more on your company’s structure. Investors, on the other hand, will care more about financial information.
Tools for Making Your Business Plan:
You can use just about any program to make your business plan. There is software specifically meant for this purpose, but a simple Word document works just as well.
Keep in mind that business plans are not static documents. You will regularly change them as your company and goals evolve. The adaptive nature is why it might be beneficial to use a Cloud service or online document tool. You can make changes as needed and make the most up-to-date version readily available to your audience.
If you’re thinking about making physical copies of your business plan, be wary. Because these documents change so much, you should only print it if necessary.
Write the Executive Summary Last:
Some entrepreneurs struggle with the executive summary. The difficulty could be an indicator that you haven’t put enough thought into your business plan yet.
If you find yourself in this boat, save this section for last. Write the rest of your business plan first as this will make you think deeply about your company’s design and goals. When you’ve finished writing, you should be able to create a concise, accurate summary.
Take Your Time:
Some entrepreneurs hire a consultant to help them write their business plan.
However, writing this document yourself is entirely doable. It requires a lot of time and thought, but who better to do it than you? You know your company better than anyone else.
When you do set out to write your business plan, take your time and be thorough. After all, you’re creating a document that will show others (and yourself) the value of your business.