What we're talking about
A business plan is an evolving blueprint for your company. It basically summarizes the story of what your business does, the opportunity that's there, how it functions practically and a road map for growth, including any key financial projections. Though not every business needs one, they're super useful – particularly if you're looking to assess the viability of your idea. They come in all shapes and sizes: from a single-pager or a 12-slide presentation to a comprehensive 50-page document. And, if you're hoping to raise cash from external investors, a business plan is a requisite.
Why it's important
It's always good to know where you're going and if your strategy makes sense. A business plan should test your assumptions and ensure that your goals are feasible and have a chance of success. The research, calculations and projections you make will guide your course of action and give you something to measure success by.
Though plenty of business owners see a formal plan as slightly outdated – and many do get by fine without one – getting the nitty-gritty details down somewhere needn't take long and can have huge benefits down the line. The 2021 State of Small Business Survey from planning software brand LivePlan found that when it comes to companies that have confidence in the health of their brand, 58% have or are working on a business plan. And, as mentioned, external stakeholders (think investors, lenders and even prospective employees) will want to see a formal plan that lays it all out clearly. Financial projections are especially key here since, if someone's giving you money, they need to know how you'll spend it and when they might see returns.
Things to note
There are several key elements. Any business plan worth its salt will include four key elements: an executive summary, a rundown of the opportunity, details on how you'll execute your business idea and a financial forecast. You can flesh this out as much or as little as you see fit, adding other sections like the company structure, legal structure, business history, supply-chain information, the milestones of platform development, IP rights, what-if scenarios and funding prospects. Here's a detailed summary of the various elements from finance website Investopedia. In the early stages, the financial forecast can be one of the most difficult elements to capture accurately: you could internally build a low, medium and high model based on variation and any key assumptions.
Pick a plan to suit you. There are various formats to choose from, with each having its merits and trade-offs. Decide early on whether to go into comprehensive detail, or something more minimal – AKA a lean plan. This does away with formatting expectations and detailed explanations in favor of simple statements on how your business will work – here's an example from LivePlan. Writing one shouldn't take you more than a day, and it can give you a quick and simple indication of your business' viability. Your ability to adhere to a mapped-out plan will evolve just as the stage of your business does, meaning the level of detail may develop from lean to comprehensive over time.
Know your audience. The format you choose will depend a lot on who you're putting the plan in front of. Internal-only plans won't need to be quite as polished, but they should still follow the basic principles of good presentation, simple language and conciseness. If you're writing a plan for external parties, think about the proof they'll be looking for – and the questions they'll want answered.
Appreciate that it's a work in progress. A business plan is a WIP, built on plenty of hypotheses and estimations – particularly if you're just starting out. It's never set in stone, and it should be adjusted and updated as your business changes. That being said, you should be as honest and realistic as you can at the time of writing. Being overly ambitious or absent-minded about facts and figures will come back to haunt you. There are downsides to every industry and idea; it's better to demonstrate that you're aware of them and have a plan, instead of being on the back foot when someone else brings them up.
How to create a plan that works for your business
1. Decide on the right format. Why are you writing a business plan? Is it for internal or external use? Are there any areas you want to iron out before you launch? Maybe you're not certain that there's space for you in your market or that your financial projections add up. Depending on your priorities and audience, decide on length, detail and style. Then dig out a template or checklist – we've listed some below – highlighting the sections you'll need to include.
2. Do your research. Now you know the areas you're going to tackle, accumulate the background info you need. You might want to write up each heading and bullet-point the text and evidence required, landing on a level of detail suitable for your industry and budget. Key areas for research and data are the market and competitor analysis sections, as well as your financial forecast. The US Small Business Administration has some helpful resources if you're looking to do it on the cheap.
3. Get your proof. The research process should include validation where you can. There are ways of securing this early on; for example, conducting small-scale tests is a helpful and productive part of planning. You might create a basic landing page where interested visitors can sign up for emails or take part in customer research; launch a crowdfund; or speak to or survey communities in your sector.
4. Start writing. Get planning. It'll save time and effort to use an appropriate online template. Don't forget to add visual aids in the form of diagrams, imagery and charts where you can. In terms of tone, keep it compelling but realistic, fact-based and succinct.
5. Include the essentials. Get to work on your opportunity, execution and financial sections. Opportunity should include product or service description, and market and customer analysis. Execution should include a marketing and pricing plan, details on day-to-day operations and any key milestones you hope to hit. Finally, your financial summary should detail how you'll generate revenue, profit and loss forecasts, cash flow projections and startup costs.
6. Get other relevant information down. Decide what other areas you'd like to include. You should also be thinking about any supporting information that might not be included in the plan itself, but that you can call upon as and when needed. That might include documents like contracts, contact details, comprehensive studies, future team structure and initial marketing materials.
7. Write your executive summary. Essentially, this is your entire business plan condensed into a short, enticing intro – so it makes sense to tackle it once you've thought through your ideas and committed them to paper. Investors may well read just this page, so it needs to be strong – with a wide-angle analysis of why your business will be successful.
Specific things to include are your mission statement and goals, bios of your founding team and those top-line financial projections. This is akin to your elevator pitch, variations of which you'll use to win your first customers and raise investment. Make sure to cover the problems you're solving and why you're the best business and team to do so.
8. Review and re-evaluate. Ask colleagues or a mentor to check over your business plan, suggest where information feels lacking or is superfluous and help you tighten up the phrasing. Remember, you need to regularly revisit your plan as things change. Be prepared to tailor it if you're using it to support an investment or partnership pitch.
• You can grow your company without a business plan, but you'll be surprised how much the process of writing and regularly updating one will teach you.
• Back up what you can with proof. The more validation of your business idea you can include, the better – particularly when it comes to dealing with investors.
• It's worth reviewing your plan at least once a year – but no more than quarterly. A business plan isn't the same as your operating metrics, but it's useful to see what's gone to plan vs what you had to adapt.
Example. Business resource site Bplans has a collection of more than 500 sample business plans for your perusal.
A version of this article was published in the Courier Workshop newsletter. For more deep dives into essential business concepts, sign up here.