When you pitch a business concept to a potential investor, lender, or partner, they’ll almost always ask to see your business plan. They make this request because they want to see that your idea is more than just an idea. If you want to be taken seriously, you need to put thought into what it will take for your idea to actually be a successful business. You need a plan.
A business plan is a document where you outline your concept and strategy for success. It provides an overview of your potential company – what it will do, how it will generate revenue, what expenses it will incur, and who will be involved in running it. A good business plan is so detailed that it has a clear strategy for the first 3-5 years of operation.
Why you should write a business plan
Even if your business doesn’t need funding, it’s still a good idea to create a business plan. Here are a few reasons why:
Get a clear idea of your business concept – Writing a business plan gives you the opportunity to work out your idea on paper. You can weigh the advantages you’ll have against the challenges you might encounter and try to determine if your idea is worth pursuing.
Understand the market – Before you launch a business, you should first consider what the demand for your offering will be. You should also research what similar businesses exist and how you’ll stack up against them.
Project your revenue and expenses – The deeper you get into planning your business, the clearer of an idea you’ll have of how much money you can expect to earn. You should eventually get to the point where you estimate your expected revenue and expenses so you can figure out if your concept will be profitable.
A plan to follow once the business launches – You’re not done with your business plan once your idea comes to fruition. Instead, you should use the document like it’s an instruction manual for running your business for the first 3-5 years. Stick to the plan you put on paper if you want to be successful.
What to include in a business plan
If you’re creating a business plan for a third-party, they’re probably going to have certain expectations. Here is a list of what is included in a standard business plan:
Executive Summary – Provide an introduction to your business plan. Give a general overview of your business idea and what you hope to accomplish once you get started. This should be the first section of the document.
Company description – Describe your business and how it will operate. Talk about what sets you apart from similar businesses and why you’ll be successful.
Market analysis – Here is where you start to go into more detail. Describe your target market, list your potential competitors, and make your case for why you believe the industry you want to go into is lucrative. This section should include solid data and information that shows you’ve done your research.
Organization & management – Introduce the people involved in your venture. Provide background on the owners, partners, current investors, and the structure of the organization. You want to show that your management team has the skills and experience to run this type of business.
Service or product offering – Provide details on what you’ll offer your customers and how it will benefit them. You should also include data on your expected production costs and profit margins. This is another section where numbers do the talking.
Marketing plan and sales strategy – How do you hope to convince prospects your business is right for them. Describe your marketing and sales strategy and how you plan on growing the business over time
Financial projections – The people who read your business plan will probably finalize their opinion after getting through this section. Provide all the data you can that makes the case for why your business will be profitable. Use charts and graphs to make it easy to understand. You need this section to “wow” whoever sees it.
Anything else the recipient requests – Whoever requests to see your business plan may have some special requests. Be prepared to customize the document so it can meet the expectations of those who ask for it.
The more time and energy you invest in creating a business plan, the greater the likelihood you’ll achieve the goals you set for yourself and your business. It can help you perfect your idea, secure funding, and guide you through the early years of your business.