What Is A Business Plan?
A business plan is a written document that outlines the goals of the business and a roadmap of how to achieve them. It is the written description of your business’s future.
A business plan is a blueprint of step by step process that would be followed to convert a business idea into a successful business venture.
While many first-time entrepreneurs consider a business plan to be similar to what a preamble is to a constitution, but there’s a big difference. A business plan isn’t just an introduction to what the business is about. It is a written document explaining what the business will be after a certain period of time.
Simply stated, a business plan is a guide that conveys your business goals (both long-term and short-term), the business strategies you’ll use to achieve them, the problems and competition that you’ll face, and the ways to solve and overcome them, the people you’ll involve in your business, the organizational structure, the marketing, and the positioning strategies, and the number of funds you’ll require for the same.
Importance Of A Business Plan
You need a business plan if you run a business. There are no exceptions to the type or age of the business and unlike what many people say, business plans are not limited to startups. Even if you’re running a 20-year-old business, it’s not late to write a business plan and dedicate your resources to your ultimate business goal.
That being said, a business plan is almost a necessity for startups as it helps entrepreneurs break the uncertainty into meaningful pieces and projections. It helps them to present their vision in a language investors and the world understand – which includes sales forecasts, marketing strategies, competitive strategies, milestones, expense budget, partners and employees, and the short-term and long-term goals.
The business plan is an important guide that forces you into disciplined thinking. It gives you a direction to move to and explains to the world what you are here for. Here are the four reasons why a business plan is important for your startup:
- Direction & Future Vision
A business plan defines what the business intends to be over time. It includes a detailed description of the customer, the market, and the competition, and gives direction to all the current and future strategies and steps.
Almost all of the prospective investors and banks require the entrepreneurs to prepare a business plan for their startups. The stats, facts, and figures in the business plan make it easy for them to decide whether the team and their business have the potential to earn a profit in the long run or not.
With a vision set for the future, it becomes easy to manage ideas and people to achieve what’s desired.
- Partnerships & Alliances
A business plan helps in smooth execution of the planned business model as it helps to get in the desired partners by explaining their clear roles and the future vision to them.
OBJECTIVE OF BUSINESS PLAN
•To give direction to the vision formulated by the entrepreneur.
•To objectively evaluate the prospectus of business.
•To monitor the progress after implementing a business plan
•To persuade others to join the business.
•To seek loans from financial institutions.
•To visualize the concept in terms of market availability, organizational, operational, and financial feasibility.
•To guide entrepreneurs in the actual implementation of the plan.
•To identify the actual strengths and weaknesses of the plan.
•To identify challenges in terms of opportunities and threats from the external markets.
•To clarify ideas and identify gaps in management information about their business, competitors, and market.
•To identify the resources that would be required to implement the plan.
•To document ownership arrangements, future prospectus, and projected growth of the business venture.
Components Of A Business Plan
The business plan should be clear and concise. A person outside of your industry should be able to understand it. It should contain all the key information about your startup from what your product is about to how much money you require to build it. Here are the 11 key elements that should be included in every business plan:
Executive Summary – This is a brief overview of the entire business plan. This section of the business plan decides whether the stakeholders or investors will continue reading the plan or not. It includes a brief overview of the business idea, the offering, business goals, target market, competition, USP, the team, and the financial outlook for the business.
Company Description & Synopsis – This section of the business plan explains the company’s mission, philosophy, goals, industry, legal structure, and USP briefly but is more elaborate than the executive summary. The details are followed by the problem the company is solving for the customers and the solution which makes it stand out from the competition.
Market Overview – This section explains the current market scenario of the industry – the size of the market, market trends, success stories, what is working and what isn’t, and what is being favored and expected by the customers in the market. This section gives the readers a reason to believe why the company chose the market stated. Usually, everything in this section is supplemented with a bundle of facts, stats, and figures to prove that the entrepreneurs have done their research before choosing this as an apt market for their offering.
Customer Analysis – The customer analysis sections include the persona of the (prospective) customer, which includes his/her demographics, geographics, psychographics, needs, wants, desires, buying habits, etc.
Product/Service Overview – This is a section dedicated to the offering the company is (or will be) providing to the customers. It answers all the what, why, where, and when questions related to the product and reiterate the previous stance of why it is the perfect solution for the problem stated.
Business Model – The business model is the conceptual structure that explains how the company works or will work. This section will answer the question of how it will provide the offering in the market and why is the offering viable. If the company were Uber, this section would include how it would partner with cab drivers and how would its business structure be viable for both the taxi drivers and its customers.
Revenue Model – The revenue model explains how the company is planning to earn money using the business structure explained in the business model section. It explains the intricacies of the expenses and revenue sources of the company.
Competitive Analysis – This section is dedicated to explaining who are the competitors, what are their USPs, and what are the strategies used by the business to tackle them.
Marketing Plan – The marketing plan acts as an inference of all the details explained earlier. This section provides the details on how the company plans to use the information mentioned above in formulating and executing its marketing strategies. The marketing plan is an important section of the business plan as it explains how the company is planning to reach out to the customers and stand out from the competitors. That being said, the marketing plan isn’t limited to the promotion of the offering. It includes a holistic strategy to market the offering right from production to post-sales.
Management Team – This section gives the information of all the members on board, their qualifications, experience, and their posts in the company.
Funding & Financials – Funding and financials form the conclusion, but it is the most important section of the business plan for startups as it states the cost of the execution of the business plan. It includes all the short-term and long-term financial requirements and funding goals and how the investors can help the company achieve them.