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What is a business plan? Definition, Purpose, and Types
In the world of business, a well-thought-out plan is often the key to success. This plan, known as a business plan, is a comprehensive document that outlines a company’s goals, strategies , and financial projections. Whether you’re starting a new business or looking to expand an existing one, a business plan is an essential tool.
As a business plan writer and consultant , I’ve crafted over 15,000 plans for a diverse range of businesses. In this article, I’ll be sharing my wealth of experience about what a business plan is, its purpose, and the step-by-step process of creating one. By the end, you’ll have a thorough understanding of how to develop a robust business plan that can drive your business to success.
What is a business plan?
Purposes of a business plan, what are the essential components of a business plan, executive summary, business description or overview, product and price, competitive analysis, target market, marketing plan, financial plan, funding requirements, types of business plan, lean startup business plans, traditional business plans, how often should a business plan be reviewed and revised, what are the key elements of a lean startup business plan.
- What are some of the reasons why business plans don't succeed?
A business plan is a roadmap for your business. It outlines your goals, strategies, and how you plan to achieve them. It’s a living document that you can update as your business grows and changes.
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These are the following purpose of business plan:
- Attract investors and lenders: If you’re seeking funding for your business , a business plan is a must-have. Investors and lenders want to see that you have a clear plan for how you’ll use their money to grow your business and generate revenue.
- Get organized and stay on track: Writing a business plan forces you to think through all aspects of your business, from your target market to your marketing strategy. This can help you identify any potential challenges and opportunities early on, so you can develop a plan to address them.
- Make better decisions: A business plan can help you make better decisions about your business by providing you with a framework to evaluate different options. For example, if you’re considering launching a new product, your business plan can help you assess the potential market demand, costs, and profitability.
The executive summary is the most important part of your business plan, even though it’s the last one you’ll write. It’s the first section that potential investors or lenders will read, and it may be the only one they read. The executive summary sets the stage for the rest of the document by introducing your company’s mission or vision statement, value proposition, and long-term goals.
The business description section of your business plan should introduce your business to the reader in a compelling and concise way. It should include your business name, years in operation, key offerings, positioning statement, and core values (if applicable). You may also want to include a short history of your company.
In this section, the company should describe its products or services , including pricing, product lifespan, and unique benefits to the consumer. Other relevant information could include production and manufacturing processes, patents, and proprietary technology.
Every industry has competitors, even if your business is the first of its kind or has the majority of the market share. In the competitive analysis section of your business plan, you’ll objectively assess the industry landscape to understand your business’s competitive position. A SWOT analysis is a structured way to organize this section.
Your target market section explains the core customers of your business and why they are your ideal customers. It should include demographic, psychographic, behavioral, and geographic information about your target market.
Marketing plan describes how the company will attract and retain customers, including any planned advertising and marketing campaigns . It also describes how the company will distribute its products or services to consumers.
After outlining your goals, validating your business opportunity, and assessing the industry landscape, the team section of your business plan identifies who will be responsible for achieving your goals. Even if you don’t have your full team in place yet, investors will be impressed by your clear understanding of the roles that need to be filled.
In the financial plan section,established businesses should provide financial statements , balance sheets , and other financial data. New businesses should provide financial targets and estimates for the first few years, and may also request funding.
Since one goal of a business plan is to secure funding from investors , you should include the amount of funding you need, why you need it, and how long you need it for.
- Tip: Use bullet points and numbered lists to make your plan easy to read and scannable.
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Business plans can come in many different formats, but they are often divided into two main types: traditional and lean startup. The U.S. Small Business Administration (SBA) says that the traditional business plan is the more common of the two.
Lean startup business plans are short (as short as one page) and focus on the most important elements. They are easy to create, but companies may need to provide more information if requested by investors or lenders.
Traditional business plans are longer and more detailed than lean startup business plans, which makes them more time-consuming to create but more persuasive to potential investors. Lean startup business plans are shorter and less detailed, but companies should be prepared to provide more information if requested.
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A business plan should be reviewed and revised at least annually, or more often if the business is experiencing significant changes. This is because the business landscape is constantly changing, and your business plan needs to reflect those changes in order to remain relevant and effective.
Here are some specific situations in which you should review and revise your business plan:
- You have launched a new product or service line.
- You have entered a new market.
- You have experienced significant changes in your customer base or competitive landscape.
- You have made changes to your management team or organizational structure.
- You have raised new funding.
A lean startup business plan is a short and simple way for a company to explain its business, especially if it is new and does not have a lot of information yet. It can include sections on the company’s value proposition, major activities and advantages, resources, partnerships, customer segments, and revenue sources.
What are some of the reasons why business plans don't succeed?
- Unrealistic assumptions: Business plans are often based on assumptions about the market, the competition, and the company’s own capabilities. If these assumptions are unrealistic, the plan is doomed to fail.
- Lack of focus: A good business plan should be focused on a specific goal and how the company will achieve it. If the plan is too broad or tries to do too much, it is unlikely to be successful.
- Poor execution: Even the best business plan is useless if it is not executed properly. This means having the right team in place, the necessary resources, and the ability to adapt to changing circumstances.
- Unforeseen challenges: Every business faces challenges that could not be predicted or planned for. These challenges can be anything from a natural disaster to a new competitor to a change in government regulations.
What are the benefits of having a business plan?
- It helps you to clarify your business goals and strategies.
- It can help you to attract investors and lenders.
- It can serve as a roadmap for your business as it grows and changes.
- It can help you to make better business decisions.
How to write a business plan?
There are many different ways to write a business plan, but most follow the same basic structure. Here is a step-by-step guide:
- Executive summary.
- Company description.
- Management and organization description.
- Financial projections.
How to write a business plan step by step?
Start with an executive summary, then describe your business, analyze the market, outline your products or services, detail your marketing and sales strategies, introduce your team, and provide financial projections.
Why do I need a business plan for my startup?
A business plan helps define your startup’s direction, attract investors, secure funding, and make informed decisions crucial for success.
What are the key components of a business plan?
Key components include an executive summary, business description, market analysis, products or services, marketing and sales strategy, management and team, financial projections, and funding requirements.
Can a business plan help secure funding for my business?
Yes, a well-crafted business plan demonstrates your business’s viability, the use of investment, and potential returns, making it a valuable tool for attracting investors and lenders.
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COMMENTS
Business Plan: A business plan is a written document that describes in detail how a business, usually a new one, is going to achieve its goals. A business plan lays out a written plan from a ...
It's the roadmap for your business. The outline of your goals, objectives, and the steps you'll take to get there. It describes the structure of your organization, how it operates, as well as the financial expectations and actual performance. A business plan can help you explore ideas, successfully start a business, manage operations, and ...
This plan, known as a business plan, is a comprehensive document that outlines a company's goals, strategies, and financial projections. Whether you're starting a new business or looking to expand an existing one, a business plan is an essential tool. As a business plan writer and consultant, I've crafted over 15,000 plans for a diverse ...
If capital is a priority, this business plan might focus more on financial projections than marketing or company culture. 2. Feasibility Business Plan. This type of business plan focuses on a single essential aspect of the business — the product or service. It may be part of a startup business plan or a standalone plan for an existing ...
A Harvard Business Review study found that the ideal time to write a business plan is between 6 and 12 months after deciding to start a business. But the reality can be more nuanced - it depends on the stage a business is in, or the type of business plan being written. Ideal times to write a business plan include: When you have an idea for a ...
Describe Your Services or Products. The business plan should have a section that explains the services or products that you're offering. This is the part where you can also describe how they fit ...
Write the Executive Summary. This section is the same as in the traditional business plan — simply offer an overview of what's in the business plan, the prospect or core offering, and the short- and long-term goals of the company. Add a Company Overview. Document the larger company mission and vision.
Whether you want to launch a side gig, a solo operation or a small business, you need a simple business plan template to guide you. Forbes Advisor offers you a comprehensive and easy-to-follow ...
Learn about the best business plan software. 1. Write an executive summary. This is your elevator pitch. It should include a mission statement, a brief description of the products or services your ...
A business plan acts as a unifying document that aligns the team with the company's goals and strategies. It ensures that everyone is on the same page, working towards common objectives. This alignment fosters collaboration and efficiency, driving the business towards its targets. 3. Validating the Business Concept.
A business plan is a written document that defines your business goals and the tactics to achieve those goals. A business plan typically explores the competitive landscape of an industry, analyzes a market and different customer segments within it, describes the products and services, lists business strategies for success, and outlines ...
It is a written document describing your business idea and how you plan to turn it into reality. It talks about your new business goals, strategy, team, financial planning, and more. Writing a business plan is the first step to starting a new business. Existing businesses also need to update their business plans with recent data, a new business ...
To reiterate the need for a business plan, here's a simple list of reasons why your startup needs a business plan. The startup market is like an ocean wave. Your business is the ship.
A business plan is a written document that outlines your company's key activities. It also outlines your objectives and how you plan to achieve your goals. Business plans are often used by startup businesses. They can help get the business off the ground and attract potential investors.
1. Executive summary. This short section introduces the business plan as a whole to the people who will be reading it, including investors, lenders, or other members of your team. Start with a sentence or two about your business, development goals, and why it will succeed. If you are seeking funding, summarise the basics of the financial plan. 2.
A business plan is simply a statement of business goals, containing some plans and details about how exactly to achieve them. It describes the future plans for your business and is a kind of roadmap showing how exactly you are going to develop your company. That's it, in some really simple words. Actually, everything that describes your ...
Find a template with a title page and table of contents to keep your business plan looking professional and organized. 3. Fill in each section. Work through your business plan by filling in one section at a time. This way, you can keep your thoughts more organized.
A business plan is a strategic document which details the strategic objectives for a growing business or startup, and how it plans to achieve them. In a nutshell, a business plan is a written expression of a business idea and will describe your business model, your product or service, how it will be priced, who will be your target market, and ...
It is a foundational document that I think of as the constitution of your business. It tells you everything you need to know about your idea, your goals, your strategy, and the financial picture of a business. Here at Masterplans, we strongly believe that entrepreneurs need to understand that a business plan is not a one-time use product, like ...
Every business plan has key sections such as management and marketing. It should also have an executive summary, which is a synopsis of each of the plan sections in a one- to two-page overview ...
Simple business plan process. Preparation and intention: developing a growth mindset. Persona and focus area: attracting your perfect customers. Positioning: creating a unique value proposition (USP) Product strategy: creating high value products and services. Pricing strategy: pricing your products and services.
Amy Gallo. People make business plans for all sorts of reasons — to attract funding, evaluate future growth, build partnerships, or guide development. Unfortunately, the vast majority of these ...