First of all, what is a business plan and why do you need one? A business plan covers information about business goals as well as the methods and resources which will be used to achieve them.
You might have to write the plan for potential investors, but even if you write it for strategic planning, a business plan will provide you a better overview of your actions and the process of developing a business plan can even help the company grow by 30%.
This article will give you practical information on how to compile a business plan and useful resources for you to use.
Before you begin writing, keep in mind that a business plan must be realistic and reasonable. It shouldn’t be too short and vague nor overlook important aspects. It’s important to write in a style that your audience can easily understand.
At the same time it should not be too detailed either, as too much detail will distract you from concentrating on the whole picture. However, if you feel you need to include the technical details for a clearer picture, add a minimal level to the plan and place the rest in the appendix, so that readers can still access the level of detail they need.
Include a cover photo and a contents table to make the plan look professional. Infographics, employee profiles and organisation charts should be placed in the appendix section at the very end of the document.
Keep the language simple, so that the people reading your document understand its every concept and avoid jargon and specific acronyms. Make sure the plan is grammatically correct and get at least two people to look it through.
Five sections to include in your business plan
There are different approaches to a business plan, but these are the core elements you should cover:
- Executive summary
This is the first section of your business plan which is an overview of your whole business, including the key points of the plan, a short outline of steps you are going to take to make it grow. Your potential investors will read this first, so it’s crucial to create a good first impression with your description and make it enticing so they continue to read the rest of the plan with enthusiasm.
We recommend you write the executive summary last after all other parts of the business plan are completed. That way, it will be easier to see the whole picture and illustrate it accordingly.
- Business idea
An essential part for presenting the mission and vision of your business. Other questions you answer in this chapter are what products or services you are offering and what customer problems or needs your business will solve.
You can also give your value proposition here and address the pain points of your customers and how your value proposition can serve as both a gain creator or pain reliever for them. This should answer the question of why your customers would be willing to pay for your product or service.
Information about your target market and competition as well as how your business is different should also be listed here.
In the Execution section, you need to answer the question of how you are going to make your business function. The topics here include:
Operations – this topic covers not only general information such as your business’ daily procedures with working days and hours, but also describes possible premises, equipment and technology put to use in your business, sourcing of products, retail distribution and more.
Milestones and Metrics need to be included here so the audience knows how you will measure the success of your business and the milestones you are expecting to achieve. Be sure to include your business goals and the steps that you will take in order to fulfil them. Give clear and realistic time frames for each step you are planning to take – this will serve as a schedule for your business and help investors see you have reasonable plans to make your business succeed.
The Marketing and Sales plan can also be included in this section. Here you describe how you are going to reach out to your target market to sell your products or services.
Make sure you know who your customer personas are before you start mapping out your marketing strategy. If you need guidance on what personas are and/or how to create them, use this great article from HubSpot. Also, keep in mind that the marketing chapter should also provide information on pricing, PR, advertising, digital marketing, including social media and, possibly, content marketing.
- Company and management overview
Here you should describe the key staff already working for your business or people you plan to hire. It is crucial to show investors that you have or can recruit the right team which will help you achieve your business goals. Include short paragraphs about the key people in your team, indicating the relevant skills and experience they have to make the business grow.
If some essential roles in your company are missing right now, it is not a problem and you should not be hiding this fact. List this gap and elaborate on how you are going to fill it by finding the right people, e.g., it could be by hiring freelancers in the short term and opening a position in the longer term. This will help demonstrate that you know how to make your business work despite current organisational challenges.
Whether the company overview section should be included, depends on the use of the business plan. For internal use, you do not have to write it at all. For potential investors, it is a good practice to describe such aspects as mission statement, intellectual property, legal structure and ownership and business location.
The financial chapter is crucial and covers your sales forecasts, personnel, profit and loss statement, cash flow and more. Here is a brief overview of what this section should contain:
- Sales forecasts – a forecast of how much you think you are going to sell over the next few years. Existing companies can base their forecast using data from the last year(s) and new companies should present a reasonable estimation of their sales. A monthly sales and revenue forecast is usually described for 12 months and annual projections for the remaining 3-5 years might follow.
- Personnel plan – here you will cover the monthly salaries for your employees as well as costs beyond them like insurance or payroll taxes.
- With the profit and loss statement, which usually has a spreadsheet format, you calculate all your expenses and revenue in one place and see if you are making a profit or a loss. You can download a template in Office 365 to see what it looks like.
- The cash flow statement will indicate how much cash you currently have on hand and monthly patterns when you are high or low in your cash balance. For this, you will also have to perform some calculations in a spreadsheet by subtracting paid out cash from the received cash.
- Your Balance sheet demonstrates how viable your business currently is and consists of what you own that can be turned into cash (assets), your financial business obligations (liabilities) and the money brought in by owners and investors (equity). Your assets equals the sum of your liabilities and equity. These three parts are dependent on each other and can help you calculate your current ratio and foresee the periods you may run low on cash.
Tools and resources
You do not necessarily have to create a business plan from scratch yourself. There are free business plan templates for different kinds of enterprises available on the Internet and you could use one of them.
There are many other different tools, varying from design to payment and marketing that you may find useful for your business. Read more about our tool selection here.
This is the basic information you should be aiming to include in your business plan. Which parts of the business plan were the most exciting and which ones were especially challenging for you? Let us know your thoughts!