Business Plan

What Is a Business Plan?
A business plan is a written document that describes in detail how a business—

usually a startup—defines its objectives and how it is to go about achieving its
goals. A business plan lays out a written roadmap for the firm from marketing,
financial, and operational standpoints.
Business plans are important documents used to attract investment before a company
has established a proven track record. They are also a good way for companies to
keep themselves on target going forward.
Although they're especially useful for new businesses, every company should have a
business plan. Ideally, the plan is reviewed and updated periodically to see if
goals have been met or have changed and evolved. Sometimes, a new business plan is
created for an established business that has decided to move in a new direction.
KEY TAKEAWAYS
A business plan is a written document describing a company's core business
activities, objectives, and how it plans to achieve its goals.
Startup companies use business plans to get off the ground and attract outside
investors.
Businesses may come up with a lengthier traditional business plan or a shorter lean
startup business plan.
Good business plans should include an executive summary, products and services,
marketing strategy and analysis, financial planning, and a budget.
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Want Funding? You Need a Business Plan
Understanding Business Plans
A business plan is a fundamental document that any startup business needs to have
in place prior to beginning operations. Banks and venture capital firms indeed
often make writing a viable business plan a prerequisite before considering
providing capital to new businesses.
Operating without a business plan is not usually a good idea. In fact, very few
companies are able to last very long without one. There are definitely more
benefits to creating and sticking to a good business plan—including being able to
think through ideas without putting too much money into them and, ultimately,
losing in the end.
A good business plan should outline all the projected costs and possible pitfalls
of each decision a company makes. Business plans, even among competitors in the
same industry, are rarely identical. But they all tend to have the same basic
elements, including an executive summary of the business and a detailed description
of the business, its services, and its products. It also states how the business
intends to achieve its goals.
The plan should include at least an overview of the industry of which the business
will be a part, and how it will distinguish itself from its potential competitors.
While it's a good idea to give as much detail as possible, it's also important to
be sure the plan is concise so the reader will want to get to the end.
Elements of a Business Plan
The length of the business plan varies greatly from business-to-business. All of
the information should fit into a 15- to 20-page document. If there are crucial
elements of the business plan that take up a lot of space—such as applications for
patents—they should be referenced in the main plan and included as appendices.
As mentioned above, no two business plans are the same. But they all have the same
elements. Below are some of the common and key parts of a business plan.
Executive summary: This section outlines the company and includes the mission
statement along with any information about the company's leadership, employees,
operations, and location.
Products and services: Here, the company can outline the products and services it
will offer, and may also include pricing, product lifespan, and benefits to the
consumer. Other factors that may go into this section include production and
manufacturing processes, any patents the company may have, as well as proprietary
technology. Any information about research and development (R&D) can also be
included here.
Market analysis: A firm needs a good handle of the industry as well as its target
market. It will outline who the competition is and how it factors in the industry,
along with its strengths and weaknesses. It will also describe the expected
consumer demand for what the businesses is selling and how easy or difficult it may
be to grab market share from incumbents.
Marketing strategy: This area describes how the company will attract and keep its
customer base and how it intends to reach the consumer. This means a clear
distribution channel must be outlined. It will also spell out advertising and
marketing campaign plans and through what types of media those campaigns will exist
on.
Financial planning: In order to attract the party reading the business plan, the
company should include its financial planning and future projections. Financial
statements, balance sheets, and other financial information may be included for
already-established businesses. New businesses will instead include targets and
estimates for the first few years of the business and any potential investors.
Budget: Any good company needs to have a budget in place. This includes costs
related to staffing, development, manufacturing, marketing, and any other expenses
related to the business.
Types of Business Plans
Business plans help companies identify their objectives and remain on track. They
can help companies start and manage themselves, and to help grow after they're up
and running. They also act as a means to get people to work with and invest in the
business.
Although there are no right or wrong business plans, they can fall into two
different categories—traditional or lean startup. According to the Small Business
Administration, the traditional business plan is the most common. They are
standard, with much more detail in each section. These tend to be much longer and
require a lot more work.
Lean startup business plans, on the other hand, use a standard structure even
though they aren't as common in the business world. These business plans are short—
as short as one page—and have very little detail. If a company uses this kind of
plan, they should expect to provide more detail if an investor or lender requests
it.
Special Considerations
Financial Projections
A complete business plan must include a set of financial projections for the
business. These forward-looking projected financial statements are often called
pro-forma financial statements or simply the "pro-formas." These statements include
the overall budget, current and projected financing needs, a market analysis, and
the company's marketing strategy.
Other Considerations for a Business Plan

The idea behind putting together a business plan is to enable owners to have a more
defined picture of potential costs and drawbacks to certain business decisions and
to help them modify their structures accordingly before implementing these ideas.
It also allows owners to project what type of financing is required to get their
businesses up and running.
If there are any especially interesting aspects of the business, they should be
highlighted and used to attract financing. For example, Tesla Motors.'s electric
car business essentially began only as a business plan.
A business plan is not meant to be a static document. As the business grows and
evolves, so too should the business plan. An annual review of the plan allows an
entrepreneur to update it when taking markets into consideration. It also provides
an opportunity to look back and see what has been achieved and what has not. Think
of it as a living document that grows and evolves with your business.

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What Is a Business Plan?

A business plan is a written document that describes in detail how a business—

Other Considerations for a Business Plan

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