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What Is a Business Plan?
Understanding business plans, how to write a business plan, common elements of a business plan, how often should a business plan be updated, the bottom line, business plan: what it is, what's included, and how to write one.
Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.
A business plan is a document that details a company's goals and how it intends to achieve them. Business plans can be of benefit to both startups and well-established companies. For startups, a business plan can be essential for winning over potential lenders and investors. Established businesses can find one useful for staying on track and not losing sight of their goals. This article explains what an effective business plan needs to include and how to write one.
- A business plan is a document describing a company's business activities and how it plans to achieve its goals.
- Startup companies use business plans to get off the ground and attract outside investors.
- For established companies, a business plan can help keep the executive team focused on and working toward the company's short- and long-term objectives.
- There is no single format that a business plan must follow, but there are certain key elements that most companies will want to include.
Investopedia / Ryan Oakley
Any new business should have a business plan in place prior to beginning operations. In fact, banks and venture capital firms often want to see a business plan before they'll consider making a loan or providing capital to new businesses.
Even if a business isn't looking to raise additional money, a business plan can help it focus on its goals. A 2017 Harvard Business Review article reported that, "Entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical nonplanning entrepreneurs."
Ideally, a business plan should be reviewed and updated periodically to reflect any goals that have been achieved or that may have changed. An established business that has decided to move in a new direction might create an entirely new business plan for itself.
There are numerous benefits to creating (and sticking to) a well-conceived business plan. These include being able to think through ideas before investing too much money in them and highlighting any potential obstacles to success. A company might also share its business plan with trusted outsiders to get their objective feedback. In addition, a business plan can help keep a company's executive team on the same page about strategic action items and priorities.
Business plans, even among competitors in the same industry, are rarely identical. However, they often have some of the same basic elements, as we describe below.
While it's a good idea to provide as much detail as necessary, it's also important that a business plan be concise enough to hold a reader's attention to the end.
While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.
Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.
The length of a business plan can vary greatly from business to business. Regardless, it's best to fit the basic information into a 15- to 25-page document. Other crucial elements that take up a lot of space—such as applications for patents—can be referenced in the main document and attached as appendices.
These are some of the most common elements in many business plans:
- Executive summary: This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
- Products and services: Here, the company should describe the products and services it offers or plans to introduce. That might include details on pricing, product lifespan, and unique benefits to the consumer. Other factors that could go into this section include production and manufacturing processes, any relevant patents the company may have, as well as proprietary technology . Information about research and development (R&D) can also be included here.
- Market analysis: A company needs to have a good handle on the current state of its industry and the existing competition. This section should explain where the company fits in, what types of customers it plans to target, and how easy or difficult it may be to take market share from incumbents.
- Marketing strategy: This section can describe how the company plans to attract and keep customers, including any anticipated advertising and marketing campaigns. It should also describe the distribution channel or channels it will use to get its products or services to consumers.
- Financial plans and projections: Established businesses can include financial statements, balance sheets, and other relevant financial information. New businesses can provide financial targets and estimates for the first few years. Your plan might also include any funding requests you're making.
The best business plans aren't generic ones created from easily accessed templates. A company should aim to entice readers with a plan that demonstrates its uniqueness and potential for success.
2 Types of Business Plans
Business plans can take many forms, but they are sometimes divided into two basic categories: traditional and lean startup. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.
- Traditional business plans : These plans tend to be much longer than lean startup plans and contain considerably more detail. As a result they require more work on the part of the business, but they can also be more persuasive (and reassuring) to potential investors.
- Lean startup business plans : These use an abbreviated structure that highlights key elements. These business plans are short—as short as one page—and provide only the most basic detail. If a company wants to use this kind of plan, it should be prepared to provide more detail if an investor or a lender requests it.
Why Do Business Plans Fail?
A business plan is not a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections to begin with. Markets and the overall economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All of this calls for building some flexibility into your plan, so you can pivot to a new course if needed.
How frequently a business plan needs to be revised will depend on the nature of the business. A well-established business might want to review its plan once a year and make changes if necessary. A new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.
What Does a Lean Startup Business Plan Include?
The lean startup business plan is an option when a company prefers to give a quick explanation of its business. For example, a brand-new company may feel that it doesn't have a lot of information to provide yet.
Sections can include: a value proposition ; the company's major activities and advantages; resources such as staff, intellectual property, and capital; a list of partnerships; customer segments; and revenue sources.
A business plan can be useful to companies of all kinds. But as a company grows and the world around it changes, so too should its business plan. So don't think of your business plan as carved in granite but as a living document designed to evolve with your business.
Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."
U.S. Small Business Administration. " Write Your Business Plan ."
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For startups, a well-written business planning document is important to source capital from banks and venture capitalists. A business plan also provides a clear direction for business growth. But how else does planning affect businesses? What does a good business plan contain? Let's look at the answers.Simply put, business planning…
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For startups, a well-written business planning document is important to source capital from banks and venture capitalists. A business plan also provides a clear direction for business growth . But how else does planning affect businesses? What does a good business plan contain? Let's look at the answers.
Business planning definition
Simply put, business planning is the process of developing a roadmap aimed at achieving a business goal. It involves key stakeholders coming together to brainstorm ideas and strategies and collating them into a formal, written document known as a business plan.
A business plan is an official document that outlines a business's core activities, objectives, and roadmap to achieving its goals. For example, if you are starting a new bakery, a business plan would include information about your products, marketing strategies, and financial situation. .
A good business plan helps a business focus on its short-term and long-term goals, and outlines the specific steps needed to achieve them. In summary, business planning is a key process that businesses undertake to achieve their goals and success.
Importance of a business plan
A good business plan is critical for any business, providing a roadmap for achieving success and ensuring that all stakeholders are aligned and working towards the same goals. It helps businesses make more informed decisions, secure funding, and track their progress over time. Here are some points summarising the importance of a business plan:
- A business plan helps a company track its growth and stay in line with its stated business objectives. If something is going off track, the managers can review the business plan and steer things back in the right direction.
- A good business plan notifies investors how the business is operated and if it is worth investing in. It attracts investors and sells them the idea of your business.
- A business plan provides a unified working structure among employees and business owners. It keeps employees and business owners on the same page about strategic actions needed to be taken.
- A well-crafted business plan can help startups attract investment or get loans without a proven financial record. It provides investors and lenders with an understanding of the company's goals, strategies, and financial projections.
Elements of a good business plan
A business plan should include key elements that help to provide a complete overview of the business and its plans for success. Here are some important elements that should be included in a typical business plan:
- Executive Summary
- Business Description
- Market Analysis
- Products and Services
- Marketing and Sales Strategy
- Management and Organization
- Financial Projections
- Funding Requirements
1. Executive summary
This business planning element provides a brief description of the business. It gives information on the business leadership , its employees, operations, and location. It also provides the business mission statement, goals, and vision.
2. Company description
This section provides a detailed description of the business, including its mission, vision, and goals. It should also include information about the industry and target market.
3. Market analysis
Good business planning requires a well-written market analysis showing demand and supply. A SWOT analysis provides detailed information on business strengths and weaknesses along with details on the business competitor and market opportunities available.
A SWOT analysis is a strategic planning tool used by business owners to identify a business's strengths, weaknesses, opportunities, and threats in the market. Conducting a SWOT analysis will guide you on what you do well, identify your weak points, maximize your opportunities, and avoid threats.
An example of a good business plan market analysis is presented in a SWOT analysis carried out by a local shirt production company called 69 Shirts (a fictional company).
Table 1. SWOT analysis example
4. Products and services offered
This element provides a description of the products and services offered by a business. It includes production information, information on patents (if available), research and development, product or services pricing, and consumer benefits.
Blooming Boutique is a retail female clothing brand located in Delaware, US. 1 By following different generations' fashion trends, and monitoring target customers' fashion preferences, the brand intends to produce female fashion wear that is appealing to customers. They also use styles, colours, and different fashion fits to draw attention to the consumer while satisfying their sartorial needs.
5. Marketing and sales strategy
This element provides information on how the business intends to distribute its products and services, for example, what marketing strategies and channels they will use. Fundamentally, it shows how a business intends to build and keep its audience.
Again, let's take the example of 69 Shirts. Here's a possible marketing strategy:
- Using social media marketing and influencer marketing - the business aims to reach the audience by telling the story behind the products and how they can help the customers. The company also focuses on price, product distinction, product promotion, and customers’ feelings.
- Running a guerrilla marketing campaign in train stations and on public transport - this is done with the aim of letting people know as much as possible about the products and how beneficial and memorable it will be for them to own the product.
6. Management and organisation
This section should describe the management team and the organization's structure, including the roles and responsibilities of each team member.
7. Financial plans
Here, the business projections and estimates are included for startups, and for an established business, balance sheets, financial statements , and important financial information should be added. It should also include a break-even analysis , which shows the level of sales needed to cover all expenses. Well-prepared financial calculations can attract investors, banks, and venture capitalists.
If the business needs funding, this section should outline the funding requirements, including how much funding is needed, what the funds will be used for, and how the business plans to repay the funding.
This section should include any additional information that is relevant to the business plan, such as market research reports, product specifications, and legal documents.
Plan length varies, as does the type of plan, but a document usually ranges from 15 to 20 pages.
Business planning process
A business plan is just one step of the business planning process. The steps of the business planning process below will help you understand it:
- Define the business goals: The first step in business planning is to define the goals that the business wants to achieve. These goals should be specific, measurable, achievable, relevant, and time-bound.
- Conduct market research : The next step is to conduct market research to understand the target market, competition, and industry trends. This research can help the business identify opportunities and threats, and refine its strategy accordingly.
- Identify resources: The third step is to identify the resources that the business needs to achieve its goals. These resources could include finances, personnel, equipment, and facilities.
- Develop strategies: Based on market research and resource assessment, the business can develop strategies to achieve its goals. These strategies should be aligned with the business's strengths and opportunities, and address any weaknesses or threats.
- Create a business plan: The strategies can then be translated into a formal business plan, which outlines the business's core activities, objectives, and roadmap to achieving its goals. The business plan should include detailed information about the products or services, market analysis, marketing and sales strategy, as well as financial projections.
- Implement the plan: Once the business plan is complete, the next step is to implement it. This involves executing the strategies and tactics outlined in the plan, and monitoring progress towards the business goals.
- Evaluate and adjust: The final step is to evaluate the progress towards the business goals and adjust the plan as needed. This ensures that the business remains on track to achieve its goals and adapts to changes in the market or business environment.
Advantages and disadvantages of a business plan
While creating a business plan is a critical step in launching and running a successful business, it's important for managers and business owners to remember that there can be drawbacks. Advantages and disadvantages of a business plan are as follows:
Business planning - Key takeaways
Business planning is a process of developing a roadmap aimed at achieving a business goal.
A business plan is written documen t showing a business's core activities, objectives, and business roadmap to achieving its objectives.
The importance of a business plan can be seen in the organized growth of a business. It allows business owners to track business growth and stay in line with the business objectives.
Some crucial elements needed in business planning are executive summary, business description, market analysis, products and services, marketing and sales strategy, management and organization, financial projections, funding requirements.
Business planning process usually involves the following steps: define business goals, conduct market research , identify resources, develop strategies, create a business plan, implement the plan, evaluate and adjust.
- Blooming boutique, bloomingboutique.com, 2022.
- Jared Lindzon, The importance of a business plan, waveapps.com, 2022.
- Susan Ward, What is business planning, thebalancesmb.com, 2020.
- Staff, Business plan basic elements, bizally.com.au, 2022.
- Rich Longo, Why you need a business plan, sbdc.duq.edu, 2019.
- Staff, Effective business plan, lancasters.uk.net, 2022.
Frequently Asked Questions about Business Planning
--> what is a business plan.
A business plan is an official documen t showing a business's core activities, objectives, and business roadmap to achieving its objectives.
--> How to make a good business plan?
To make a good business plan, it's important to research the market and industry trends, set specific and measurable goals, develop a clear strategy, and create a well-organized and detailed plan that includes financial projections, marketing strategies, and plans for potential challenges. It's also crucial to review and adjust the plan regularly to ensure it remains relevant and effective.
--> How is a business plan structured?
A business plan usually has the following structure:
--> Why is a business plan important?
A business plan is crucial for several reasons. Firstly, it enables companies to secure funding from investors by providing a clear roadmap of the business's goals and strategies. Secondly, it provides a framework for companies to work towards their objectives, monitor progress, and adjust course as needed. Lastly, it helps companies anticipate and address potential challenges that may arise in the course of business operations.
--> What are the three main purposes of a business plan?
The three main purposes of a business plan are:
- To serve as a roadmap for achieving the business's goals,
- To attract funding and investment from investors or financial institutions, and
- To provide a framework for managing and monitoring the business's performance over time.
Final Business Planning Quiz
Business planning quiz - teste dein wissen.
What is business planning?
Business planning is a process of developing a roadmap aimed towards achieving a business goal.
The document used by stakeholders to collate ideas into a formally written document that summarizes the business current state, the state of the business market, and steps to improve the business performance is called ……
A business plan
What is a business plan?
A business plan is an officially written document showing a business core activities, objectives, and the business roadmap to achieving its established objectives.
Give two importance of a good business plan
A. The importance of a good business plan can be seen in the organised growth of a business. It allows business owners to track business growth and stay in line with the business objectives.
B. A business plan also gives investors an idea of how the business is operated and if it is worth investing in. A good business plan attracts investors and sells them the idea of your business.
What is the first element of a business plan?
What information does the executive summary provide?
This executive summary provides a brief description of the business. It gives information on the business leadership, its employees, operations and location. It also provides the business mission statement, goals and business vision.
A business budget usually includes ….,.
A business budget includes cost from paying staff, production processes, marketing, expanding, logistics, development, researching and all other business related expenses.
What does a SWOT analysis show about a business ?
A SWOT analysis shows a business strength, weaknesses, opportunities and threats to the business.
A good business plan helps a business focus on its short term and long term goals, and it also helps business owners focus on the specified steps put in place to help the business succeed. True or False?
A business plan is the same for all types of business.
Financial plans are not a part of business plan.
SWOT analysis is a way to carry out a market analysis.
Market analysis and marketing strategy can be used interchangeably.
A good business plan can help startups attract investment or get loans without a proven financial record.
What is the difference between market analysis and marketing strategy?
Market strategy provides information on how a business plans to distribute its products or services while market analysis gives details on business strengths, weaknesses along with market threats and opportunities.
Business planning is a process of ________ aimed towards achieving a business goal.
developing a roadmap
A business plan is an ________ showing a business core activities, objectives, and the business roadmap to achieving its established objectives
officially written document
A good business plan only helps the business focus on its short term goals.
A good business plan can help a company to:
Stay in line with the business objectives
Executive Summary is the description of the products and services offered by a business.
Good business planning requires a well written market analysis showing demand and supply.
SWOT analysis stands for ________ .
strength, weaknesses, opportunities and threats in the market
________ includes cost from paying staff, production processes, marketing, expanding, logistics, development, researching and all other business related expenses.
A business budget
A company generating a revenue of £150,000 from a business with a total cost of £80,000 per year. How much profit does it earn?
£150,000 - £80,000 = £70,000.
Variable cost = Output x Variable cost per unit output
What is not a business variable cost?
production materials expenses
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A business plan is used to help manage an organisation by stating ambitions, how they will be achieved, and exactly when. The plan will also help summarise what the business is about, why it exists, and where it will get to.
Your business plan will serve as a key point of reference for investors, partners, employees and management to gauge progress against objectives.
Provide a road map
A detailed plan will help you as the owner and founder to manage your business effectively. Writing down and illustrating both your ideas and tactics will establish a path and course of action, akin to a road map. This will give you something concrete by which to monitor and assess the progress you make.
It may seem like an odd suggestion but you should look to work with your accountant on this task even at an early stage. Why? Well, a quality professional advisor will have helped many early stage businesses. Given how close a good accountant is to the operations and strategic direction of a company, they’ll be able to draw upon their experience of what’s worked and what hasn’t with other clients.
This means they’ll be well placed to help you test your assumptions. Remember you want your business concept to be as well thought through as possible. Having a fresh set of eyes reviewing your ideas from a different perspective could make all the difference as to the viability of your business model . An accountant will know what success looks like along with what’s required and when to achieve it.
In charting a potential course of action you may find your business is faced with multiple different potential paths. It would therefore be wise to plot the most likely scenarios and strategies for these different circumstances. If, for example, your business is heavily reliant upon exporting then you may need to consider potential global and political events. How would that impact on currencies in your chosen markets in the near future?
What does a 10% currency appreciation or depreciation mean for sales, revenues, profits and cashflow? Working through this with your accountant will ensure you can ascertain the impact of such events from a financial perspective. You’ll then be able to craft solutions accordingly to deal with such events.
Developing a clear plan and strategy will focus your mind. What resources will you need and when to achieve each of your goals? This provides you with clarity as to how much needs to be invested at each stage of the business lifecycle . You'll then know when you're going to need cash injections based on likely cashflow.
Understand what to focus on
As an entrepreneur, where should your efforts and concentrations be centred on? It’s a common issue. The early days of starting out can be very chaotic. There’s so much to set up, think about, implement and develop. It’s an emotional roller coaster of mass excitement and sharp shots of anxiety. Amid all this and with an ever mounting in-tray of to do’s, you can fast lose track of what’s important.
When writing a business plan you’re defining exactly what your organisation is today and then intends to become tomorrow. This coherence concerning the purpose of your business and direction in which you’re heading is invaluable. Doing this means you’ll understand what needs to be implemented to move forward.
As an example, your plan should describe your ideal customer and include their needs and wants. Then you’d expand on this as to how your products or services address their requirements. How are you going to market to these potential customers? How will you get your name out there? What approach will you adopt to make sales and generate revenue?
These are vital matters to address early on. Growth primarily comes through new customers and achieving repeat custom. This then determines your progress towards profitability. By mapping this all out on paper you’re giving yourself yardsticks to work towards. This means all tasks that you as the entrepreneur should focus on should be geared towards achieving your next goal. In a nutshell that’s where your focus should be.
Projections and the need for an accountant
The likelihood is to support your growth will require an injection of funding. That's unless you have an extremely cash generative business model. More often than not you probably won’t have enough customers and thus free cash flow to finance the next opportunity. You'll have a working capital requirement and thus need investment beyond the reach of your business.
You’ll likely have to approach potential sources of finance and they’ll want to assess the your income statements/profit and loss statements, and business plan. If you’re still at concept stage, or haven’t begun making sales, then their decision will rest solely on the strength of you and your business plan.
The statements help prospective lenders and investors understand the history of the organisation to date. The business plan provides them with a view of your future direction. They’ll look for many things in your plan. Ultimately their interest will focus on whether the expansion or development of your business will generate sufficient cash to both operate effectively while also fulfilling debt obligations.
This means you’re going to need to detail both profit and cashflow projections. Good forecasting and planning is seen as a way of understanding income and expenditure. This is particularly useful as a means to prevent payment issues over things like suppliers and staff wages. Many businesses close when such issues arise.
The likelihood is unless you’ve done this before, and know what you’re doing, then you’re going to need the help of an accountant. They’ll work with you to model the probable amount of cash in the business over time. This will then act as evidence to potential investors and financiers. They'll see if sufficient money will be generated by the activities of the business, to both fund future growth, while meeting financial commitments.
Manage your business effectively
The usefulness of a cashflow forecast doesn’t end there though. Managing your cash position , as you may have already gathered, is fundamental to the long term future of your business. There’s a common quote that “most businesses fail because they run out of money”. This means they’re no longer able to pay their debts when they’re due.
You should reference your cashflow projections in your business plan regularly. When you invest in your business, there will be significant out flows of money before any cash comes in. The timing of your investments thus needs to be considered against your projections and statements. Consider trading patterns, seasonal variations and the likely impact on cash flows.
If, for example, you sell through a credit extension then you’re going to receive payment in the future. That means after the goods or services have changed hands. The likelihood then is you’ll have to make payments in relation to the usual operations of your business before that income comes in from your customer.
So you can then see how poor cash management creates real issues. Make sure you work with your accountant, in the creation of your business plan and monitoring performance in relation to it. The documentation of well thought through ideas, combined with a shrewd strategy, and carefully planned projections will markedly improve your chances of long term survival and growth.
This post was created on 03/11/2016 and updated on 24/02/2022.
Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.
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Table of contents, what is business planning.
Business planning is a crucial process that involves creating a roadmap for an organization to achieve its long-term objectives. It is the foundation of every successful business and provides a framework for decision-making, resource allocation, and measuring progress towards goals.
Business planning involves identifying the current state of the organization, determining where it wants to go, and developing a strategy to get there.
It includes analyzing the market, identifying target customers, determining a competitive advantage, setting financial goals, and establishing operational plans.
The business plan serves as a reference point for all stakeholders , including investors, employees, and partners, and helps to ensure that everyone is aligned and working towards the same objectives.
Importance of Business Planning
Business planning plays a critical role in the success of any organization, as it helps to establish a clear direction and purpose for the business. It allows the organization to identify its goals and objectives, develop strategies and tactics to achieve them, and establish a framework of necessary resources and operational procedures to ensure success.
Additionally, a well-crafted business plan can serve as a reference point for decision-making, ensuring that all actions taken by the organization are aligned with its long-term objectives.
It can also facilitate communication and collaboration among team members, ensuring that everyone is working towards a common goal.
Furthermore, a business plan is often required when seeking funding or investment from external sources, as it demonstrates the organization's potential for growth and profitability. Overall, business planning is essential for any organization looking to succeed and thrive in a competitive market.
Business Planning Process
Step 1: defining your business purpose and goals.
Begin by clarifying your business's purpose, mission, and long-term goals. These elements should align with the organization's core values and guide every aspect of the planning process.
Step 2: Conducting Market Research and Analysis
Thorough market research and analysis are crucial to understanding the industry landscape, identifying target customers, and gauging the competition. This information will inform your business strategy and help you find your niche in the market.
Step 3: Creating a Business Model and Strategy
Based on the insights from your market research, develop a business model that outlines how your organization will create, deliver, and capture value. This will inform the overall business strategy, including identifying target markets, value propositions, and competitive advantages.
Step 4: Developing a Marketing Plan
A marketing plan details how your organization will promote its products or services to target customers. This includes defining marketing objectives, tactics, channels, budgets, and performance metrics to measure success.
Step 5: Establishing Operational and Financial Plans
The operational plan outlines the day-to-day activities, resources, and processes required to run your business. The financial plan projects revenue, expenses, and cash flow, providing a basis for assessing the organization's financial health and long-term viability.
Step 6: Reviewing and Revising the Business Plan
Regularly review and update your business plan to ensure it remains relevant and reflects the organization's current situation and goals. This iterative process enables proactive adjustments to strategies and tactics in response to changing market conditions and business realities.
Components of a Business Plan
The executive summary provides a high-level overview of your business plan, touching on the company's mission, objectives, strategies, and key financial projections.
It is critical to make this section concise and engaging, as it is often the first section that potential investors or partners will read.
The company description offers a detailed overview of your organization, including its history, mission, values, and legal structure. It also outlines the company's goals and objectives and explains how the business addresses a market need or problem.
Products or Services
Describe the products or services your company offers, emphasizing their unique features, benefits, and competitive advantages. Detail the development process, lifecycle, and intellectual property rights, if applicable.
The market analysis section delves into the industry, target market, and competition. It should demonstrate a thorough understanding of market trends, growth potential, customer demographics, and competitive landscape.
Marketing and Sales Strategy
Outline your organization's approach to promoting and selling its products or services. This includes marketing channels, sales tactics, pricing strategies, and customer relationship management .
Management and Organization
This section provides an overview of your company's management team, including their backgrounds, roles, and responsibilities. It also outlines the organizational structure and any advisory or support services employed by the company.
The operational plan describes the day-to-day operations of your business, including facilities, equipment, technology, and personnel requirements. It also covers supply chain management, production processes, and quality control measures.
The financial plan is a crucial component of your business plan, providing a comprehensive view of your organization's financial health and projections.
This section should include income statements , balance sheets , cash flow statements , and break-even analysis for at least three to five years. Be sure to provide clear assumptions and justifications for your projections.
Appendices and Supporting Documents
The appendices and supporting documents section contains any additional materials that support or complement the information provided in the main body of the business plan. This may include resumes of key team members, patents , licenses, contracts, or market research data.
Benefits of Business Planning
Helps secure funding and investment.
A well-crafted business plan demonstrates to potential investors and lenders that your organization is well-organized, has a clear vision, and is financially viable. It increases your chances of securing the funding needed for growth and expansion.
Provides a Roadmap for Growth and Success
A business plan serves as a roadmap that guides your organization's growth and development. It helps you set realistic goals, identify opportunities, and anticipate challenges, enabling you to make informed decisions and allocate resources effectively.
Enables Effective Decision-Making
Having a comprehensive business plan enables you and your management team to make well-informed decisions, based on a clear understanding of the organization's goals, strategies, and financial situation.
Facilitates Communication and Collaboration
A business plan serves as a communication tool that fosters collaboration and alignment among team members, ensuring that everyone is working towards the same objectives and understands the organization's strategic direction.
Business planning should not be a one-time activity; instead, it should be an ongoing process that is continually reviewed and updated to reflect changing market conditions, business realities, and organizational goals.
This dynamic approach to planning ensures that your organization remains agile, responsive, and primed for success.
As the business landscape continues to evolve, organizations must embrace new technologies, methodologies, and tools to stay competitive.
The future of business planning will involve leveraging data-driven insights, artificial intelligence, and predictive analytics to create more accurate and adaptive plans that can quickly respond to a rapidly changing environment.
By staying ahead of the curve, businesses can not only survive but thrive in the coming years.
Business Planning FAQs
What is business planning, and why is it important.
Business planning is the process of setting goals, outlining strategies, and creating a roadmap for your company's future. It's important because it helps you identify opportunities and risks, allocate resources effectively, and stay on track to achieve your goals.
What are the key components of a business plan?
A business plan typically includes an executive summary, company description, market analysis, organization and management structure, product or service line, marketing and sales strategies, and financial projections.
How often should I update my business plan?
It is a good idea to review and update your business plan annually, or whenever there's a significant change in your industry or market conditions.
What are the benefits of business planning?
Effective business planning can help you anticipate challenges, identify opportunities for growth, improve decision-making, secure financing, and stay ahead of competitors.
Do I need a business plan if I am not seeking funding?
Yes, even if you're not seeking funding, a business plan can be a valuable tool for setting goals, developing strategies, and keeping your team aligned and focused on achieving your objectives.
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.
To learn more about True, visit his personal website , view his author profile on Amazon , or check out his speaker profile on the CFA Institute website .
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Table of Contents
Every year, thousands of new businesses see the light of the day. One look at the World Bank's Entrepreneurship Survey and database shows the mind-boggling rate of new business registrations. However, sadly, only a tiny percentage of them have a chance of survival.
According to the Bureau of Labor Statistics, about 20% of small businesses fail in their first year, about 50% in their fifth year.
Research from the University of Tennessee found that 44% of businesses fail within the first three years. Among those that operate within specific sectors, like information (which includes most tech firms), 63% shut shop within three years.
Several other statistics expose the abysmal rates of business failure. But why are so many businesses bound to fail? Most studies mention "lack of business planning" as one of the reasons.
This isn’t surprising at all.
Running a business without a plan is like riding a motorcycle up a craggy cliff blindfolded. Yet, way too many firms ( a whopping 67%) don't have a formal business plan in place.
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It doesn't matter if you're a startup with a great idea or a business with an excellent product. You can only go so far without a roadmap — a business plan. Only, a business plan is so much more than just a roadmap. A solid plan allows a business to weather market challenges and pivot quickly in the face of crisis, like the one global businesses are struggling with right now, in the post-pandemic world.
But before you can go ahead and develop a great business plan, you need to know the basics. In this article, we'll discuss the fundamentals of business planning to help you plan effectively for 2021.
Now before we begin with the details of business planning, let us understand what it is.
What Is a Business Plan?
No two businesses have an identical business plan, even if they operate within the same industry. So one business plan can look entirely different from another one. Still, for the sake of simplicity, a business plan can be defined as a guide for a company to operate and achieve its goals.
More specifically, it's a document in writing that outlines the goals, objectives, and purpose of a business while laying out the blueprint for its day-to-day operations and key functions such as marketing, finance, and expansion.
A good business plan can be a game-changer for startups that are looking to raise funds to grow and scale. It convinces prospective investors that the venture will be profitable and provides a realistic outlook on how much profit is on the cards and by when it will be attained.
However, it's not only new businesses that greatly benefit from a business plan. Well-established companies and large conglomerates also need to tweak their business plans to adapt to new business environments and unpredictable market changes.
Before getting into learning more about business planning, let us learn the advantages of having one.
The Advantages of Having a Business Plan
Since a detailed business plan offers a birds-eye view of the entire framework of an establishment, it has several benefits that make it an important part of any organization. Here are few ways a business plan can offer significant competitive edge.
- Sets objectives and benchmarks: Proper planning helps a business set realistic objectives and assign stipulated time for those goals to be met. This results in long-term profitability. It also lets a company set benchmarks and Key Performance Indicators (KPIs) necessary to reach its goals.
- Maximizes resource allocation: A good business plan helps to effectively organize and allocate the company’s resources. It provides an understanding of the result of actions, such as, opening new offices, recruiting fresh staff, change in production, and so on. It also helps the business estimate the financial impact of such actions.
- Enhances viability: A plan greatly contributes towards turning concepts into reality. Though business plans vary from company to company, the blueprints of successful companies often serve as an excellent guide for nascent-stage start-ups and new entrepreneurs. It also helps existing firms to market, advertise, and promote new products and services into the market.
- Aids in decision making: Running a business involves a lot of decision making: where to pitch, where to locate, what to sell, what to charge — the list goes on. A well thought-out business plan provides an organization the ability to anticipate the curveballs that the future could throw at them. It allows them to come up with answers and solutions to these issues well in advance.
- Fix past mistakes: When businesses create plans keeping in mind the flaws and failures of the past and what worked for them and what didn’t, it can help them save time, money, and resources. Such plans that reflects the lessons learnt from the past offers businesses an opportunity to avoid future pitfalls.
- Attracts investors: A business plan gives investors an in-depth idea about the objectives, structure, and validity of a firm. It helps to secure their confidence and encourages them to invest.
Now let's look at the various types involved in business planning.
The Types of Business Plans
Business plans are formulated according to the needs of a business. It can be a simple one-page document or an elaborate 40-page affair, or anything in between. While there’s no rule set in stone as to what exactly a business plan can or can’t contain, there are a few common types of business plan that nearly all businesses in existence use.
Here’s an overview of a few fundamental types of business plans.
- Start-up plan: As the name suggests, this is a documentation of the plans, structure, and objections of a new business establishments. It describes the products and services that are to be produced by the firm, the staff management, and market analysis of their production. Often, a detailed finance spreadsheet is also attached to this document for investors to determine the viability of the new business set-up.
- Feasibility plan: A feasibility plan evaluates the prospective customers of the products or services that are to be produced by a company. It also estimates the possibility of a profit or a loss of a venture. It helps to forecast how well a product will sell at the market, the duration it will require to yield results, and the profit margin that it will secure on investments.
- Expansion Plan: This kind of plan is primarily framed when a company decided to expand in terms of production or structure. It lays down the fundamental steps and guidelines with regards to internal or external growth. It helps the firm to analyze the activities like resource allocation for increased production, financial investments, employment of extra staff, and much more.
- Operations Plan: An operational plan is also called an annual plan. This details the day-to-day activities and strategies that a business needs to follow in order to materialize its targets. It outlines the roles and responsibilities of the managing body, the various departments, and the company’s employees for the holistic success of the firm.
- Strategic Plan: This document caters to the internal strategies of the company and is a part of the foundational grounds of the establishments. It can be accurately drafted with the help of a SWOT analysis through which the strengths, weaknesses, opportunities, and threats can be categorized and evaluated so that to develop means for optimizing profits.
The Key Elements of a Business Plan
There is some preliminary work that’s required before you actually sit down to write a plan for your business. Knowing what goes into a business plan is one of them.
Here are the key elements of a good business plan:
- Executive Summary: An executive summary gives a clear picture of the strategies and goals of your business right at the outset. Though its value is often understated, it can be extremely helpful in creating the readers’ first impression of your business. As such, it could define the opinions of customers and investors from the get-go.
- Business Description: A thorough business description removes room for any ambiguity from your processes. An excellent business description will explain the size and structure of the firm as well as its position in the market. It also describes the kind of products and services that the company offers. It even states as to whether the company is old and established or new and aspiring. Most importantly, it highlights the USP of the products or services as compared to your competitors in the market.
- Market Analysis: A systematic market analysis helps to determine the current position of a business and analyzes its scope for future expansions. This can help in evaluating investments, promotions, marketing, and distribution of products. In-depth market understanding also helps a business combat competition and make plans for long-term success.
- Operations and Management: Much like a statement of purpose, this allows an enterprise to explain its uniqueness to its readers and customers. It showcases the ways in which the firm can deliver greater and superior products at cheaper rates and in relatively less time.
- Financial Plan: This is the most important element of a business plan and is primarily addressed to investors and sponsors. It requires a firm to reveal its financial policies and market analysis. At times, a 5-year financial report is also required to be included to show past performances and profits. The financial plan draws out the current business strategies, future projections, and the total estimated worth of the firm.
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Common Challenges of Writing a Business Plan
The importance of business planning cannot be emphasized enough, but it can be challenging to write a business plan. Here are a few issues to consider before you start your business planning:
- Create a business plan to determine your company's direction, obtain financing, and attract investors.
- Identifying financial, demographic, and achievable goals is a common challenge when writing a business plan.
- Some entrepreneurs struggle to write a business plan that is concise, interesting, and informative enough to demonstrate the viability of their business idea.
- You can streamline your business planning process by conducting research, speaking with experts and peers, and working with a business consultant.
Become an Expert Business Planner
Whether you’re running your own business or in-charge of ensuring strategic performance and growth for your employer or clients, knowing the ins and outs of business planning can set you up for success.
Be it the launch of a new and exciting product or an expansion of operations, business planning is the necessity of all large and small companies. Which is why the need for professionals with superior business planning skills will never die out. In fact, their demand is on the rise with global firms putting emphasis on business analysis and planning to cope with cut-throat competition and market uncertainties.
While some are natural-born planners, most people have to work to develop this important skill. Plus, business planning requires you to understand the fundamentals of business management and be familiar with business analysis techniques . It also requires you to have a working knowledge of data visualization, project management, and monitoring tools commonly used by businesses today.
Simpliearn’s Post Graduate Program in Business Analysis will help you develop and hone the required skills to become an extraordinary business planner. This comprehensive training program combined with the latest tools and methods can pave the way for you and equip you with the skills and the know-how to tackle any real-world challenges that may arise. Completing this industry-recognized course also earns you a valued certification as tangible proof of your talent.
What Is Meant by Business Planning?
Business planning is developing a company's mission or goals and defining the strategies you will use to achieve those goals or tasks. The process can be extensive, encompassing all aspects of the operation, or it can be concrete, focusing on specific functions within the overall corporate structure.
What Are the 4 Types of Business Plans?
The following are the four types of business plans:
This type of planning typically describes the company's day-to-day operations. Single-use plans are developed for events and activities that occur only once (such as a single marketing campaign). Ongoing plans include problem-solving policies, rules for specific regulations, and procedures for a step-by-step process for achieving particular goals.
Strategic plans are all about why things must occur. A high-level overview of the entire business is included in strategic planning. It is the organization's foundation and will dictate long-term decisions.
Tactical plans are about what will happen. Strategic planning is aided by tactical planning. It outlines the tactics the organization intends to employ to achieve the goals outlined in the strategic plan.
When something unexpected occurs or something needs to be changed, contingency plans are created. In situations where a change is required, contingency planning can be beneficial.
What Are the 7 Steps of a Business Plan?
The following are the seven steps required for a business plan:
If your company is to run a viable business plan and attract investors, your information must be of the highest quality.
Have a Goal
The goal must be unambiguous. You will waste your time if you don't know why you're writing a business plan. Knowing also implies having a target audience for when the plan is expected to get completed.
Create a Company Profile
Some refer to it as a company profile, while others refer to it as a snapshot. It's designed to be mentally quick and digestible because it needs to stick in the reader's mind quickly since more information is provided later in the plan.
Describe the Company in Detail
Explain the company's current situation, both good and bad. Details should also include patents, licenses, copyrights, and unique strengths that no one else has.
Create a marketing plan ahead of time.
A strategic marketing plan is required because it outlines how your product or service will be communicated, delivered, and sold to customers.
Be Willing to Change Your Plan for the Sake of Your Audience
Another standard error is that people only write one business plan. Startups have several versions, just as candidates have numerous resumes for various potential employers.
Incorporate Your Motivation
Your motivation must be a compelling reason for people to believe your company will succeed in all circumstances. A mission should drive a business, not just selling, to make money. That mission is defined by your motivation as specified in your business plan.
What Are the Basic Steps in Business Planning?
These are the basic steps in business planning:
Summary and Objectives
Briefly describe your company, its objectives, and your plan to keep it running.
Services and Products
Add specifics to your detailed description of the product or service you intend to offer. Where, why, and how much you plan to sell your product or service and any special offers.
Conduct research on your industry and the ideal customers to whom you want to sell. Identify the issues you want to solve for your customers.
Operations are the process of running your business, including the people, skills, and experience required to make it successful.
How are you going to reach your target audience? How you intend to sell to them may include positioning, pricing, promotion, and distribution.
Consider funding costs, operating expenses, and projected income. Include your financial objectives and a breakdown of what it takes to make your company profitable. With proper business planning through the help of support, system, and mentorship, it is easy to start a business.
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The Business Planning Process: 6 Steps To Creating a New Plan
In this article, we will define and explain the basic business planning process to help your business move in the right direction.
What is Business Planning?
Business planning is the process whereby an organization’s leaders figure out the best roadmap for growth and document their plan for success.
The business planning process includes diagnosing the company’s internal strengths and weaknesses, improving its efficiency, working out how it will compete against rival firms in the future, and setting milestones for progress so they can be measured.
The process includes writing a new business plan. What is a business plan? It is a written document that provides an outline and resources needed to achieve success. Whether you are writing your plan from scratch, from a simple business plan template , or working with an experienced business plan consultant or writer, business planning for startups, small businesses, and existing companies is the same.
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The Better Business Planning Process
The business plan process includes 6 steps as follows:
- Do Your Research
- Calculate Your Financial Forecast
- Draft Your Plan
- Revise & Proofread
- Nail the Business Plan Presentation
We’ve provided more detail for each of these key business plan steps below.
1. Do Your Research
Conduct detailed research into the industry, target market, existing customer base, competitors, and costs of the business begins the process. Consider each new step a new project that requires project planning and execution. You may ask yourself the following questions:
- What are your business goals?
- What is the current state of your business?
- What are the current industry trends?
- What is your competition doing?
There are a variety of resources needed, ranging from databases and articles to direct interviews with other entrepreneurs, potential customers, or industry experts. The information gathered during this process should be documented and organized carefully, including the source as there is a need to cite sources within your business plan.
You may also want to complete a SWOT Analysis for your own business to identify your strengths, weaknesses, opportunities, and potential risks as this will help you develop your strategies to highlight your competitive advantage.
Now, you will use the research to determine the best strategy for your business. You may choose to develop new strategies or refine existing strategies that have demonstrated success in the industry. Pulling the best practices of the industry provides a foundation, but then you should expand on the different activities that focus on your competitive advantage.
This step of the planning process may include formulating a vision for the company’s future, which can be done by conducting intensive customer interviews and understanding their motivations for purchasing goods and services of interest. Dig deeper into decisions on an appropriate marketing plan, operational processes to execute your plan, and human resources required for the first five years of the company’s life.
3. Calculate Your Financial Forecast
All of the activities you choose for your strategy come at some cost and, hopefully, lead to some revenues. Sketch out the financial situation by looking at whether you can expect revenues to cover all costs and leave room for profit in the long run.
Begin to insert your financial assumptions and startup costs into a financial model which can produce a first-year cash flow statement for you, giving you the best sense of the cash you will need on hand to fund your early operations.
A full set of financial statements provides the details about the company’s operations and performance, including its expenses and profits by accounting period (quarterly or year-to-date). Financial statements also provide a snapshot of the company’s current financial position, including its assets and liabilities.
This is one of the most valued aspects of any business plan as it provides a straightforward summary of what a company does with its money, or how it grows from initial investment to become profitable.
4. Draft Your Plan
With financials more or less settled and a strategy decided, it is time to draft through the narrative of each component of your business plan . With the background work you have completed, the drafting itself should be a relatively painless process.
If you have trouble writing convincing prose, this is a time to seek the help of an experienced business plan writer who can put together the plan from this point.
5. Revise & Proofread
Revisit the entire plan to look for any ideas or wording that may be confusing, redundant, or irrelevant to the points you are making within the plan. You may want to work with other management team members in your business who are familiar with the company’s operations or marketing plan in order to fine-tune the plan.
Finally, proofread thoroughly for spelling, grammar, and formatting, enlisting the help of others to act as additional sets of eyes. You may begin to experience burnout from working on the plan for so long and have a need to set it aside for a bit to look at it again with fresh eyes.
6. Nail the Business Plan Presentation
The presentation of the business plan should succinctly highlight the key points outlined above and include additional material that would be helpful to potential investors such as financial information, resumes of key employees, or samples of marketing materials. It can also be beneficial to provide a report on past sales or financial performance and what the business has done to bring it back into positive territory.
Business Planning Process Conclusion
Every entrepreneur dreams of the day their business becomes wildly successful.
But what does that really mean? How do you know whether your idea is worth pursuing?
And how do you stay motivated when things are not going as planned? The answers to these questions can be found in your business plan. This document helps entrepreneurs make better decisions and avoid common pitfalls along the way.
Business plans are dynamic documents that can be revised and presented to different audiences throughout the course of a company’s life. For example, a business may have one plan for its initial investment proposal, another which focuses more on milestones and objectives for the first several years in existence, and yet one more which is used specifically when raising funds.
Business plans are a critical first step for any company looking to attract investors or receive grant money, as they allow a new organization to better convey its potential and business goals to those able to provide financial resources.
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Other Helpful Business Plan Articles & Templates
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News and articles, the purpose of a business plan summarised in 5 steps, table of contents.
- Thommie Burger
- July 24, 2023
When starting a new business, it can be hard to know where to begin. What should you do first? Where do you get started? How do you know if your idea will work? For most people, creating a new business is one of the riskiest things they will ever do. You have probably heard all the statistics about how much startup businesses fail. Many entrepreneurs still take that leap of faith and go for it anyway. Writing a business plan is one of the earliest and perhaps most essential steps in starting any new venture. But what is the Purpose of a Business Plan?
The Purpose of a Business Plan: Your Guiding Light in Starting a New Venture!
It’s not just about coming up with fantastic ideas and brainstorming; it’s about creating a realistic document detailing how to implement those ideas into a profitable business venture with a good chance of long-term success.
The Purpose of a Business Plan ― What is a Business Plan?
A business plan is a written document that outlines all aspects of your business in great detail. A business plan is essentially a roadmap for success. A good business plan will include the following:
- An Overview of the Business ― This is where you provide the readers with an overview of what the business is, what it does, who it is for, and the general nature of the company.
- Company Description ― This section gives readers an in-depth description of your business. You should discuss the products or services you plan to sell, how much you expect to charge for them, your target market, and your overall business strategy.
- Company Management ― In this section, you briefly overview your management team’s key members and discuss each individual’s strengths and weaknesses. You should also include a short biography for each key management team member.
- Marketing Strategy ― In this section, you discuss how you plan to promote your business and generate new customers. You should discuss the methods you plan to generate new business and each technique’s expected cost. You should also consult your business’s positioning in the marketplace.
The Purpose of a Business Plan ― Why You Should Write a Business Plan?
A good business plan is an essential part of any new venture. It allows you to explore every aspect of your business idea and helps you anticipate potential problems before they happen. When writing your plan, you should adopt the same mindset an investor would have when reviewing your proposal. You should critically examine every aspect of your project and determine its viability. The purpose of a Business Plan can be summarised in the following five steps:
The Purpose of a Business Plan ― Step 1: Research Your Target Market
When writing a business plan, you should research your target market extensively. To be successful, any new business must first understand its customers. You need to know your target market and why they would buy from you. You must also be able to identify the needs of your target market and how your business satisfies those needs.
One of the best research methods is to interview your potential customers. Get in touch with people who fit your target demographic and ask them questions about their buying habits and what they look for when purchasing products and services like those you plan to sell.
You should also read online reviews and talk with current and potential business partners similar to the types of businesses you want to start. By conducting this research, you’ll understand your target market and what they are looking for in a product or service like the one you plan to offer.
The Purpose of a Business Plan ― Step 2: Determine Your Company’s Unique Value
Next, you should determine your company’s unique value. You must identify what makes your company different from all the others. What do you do that makes you stand out among your competitors? What value do you offer that others do not? You must fully understand what it is that makes your company different. This must be inherent in your business. You cannot rely on something superficial like a catchy slogan or a flashy logo. It must be genuinely inherent to the core of your business.
For example, if you plan on opening a coffee shop, your value might be in providing your customers with a high-quality coffee experience. You might also offer coffee-related products for purchase, such as coffee gift baskets or coffee-making appliances.
The Purpose of a Business Plan ― Step 3: Estimate the Costs of Running Your Business
After determining your company’s unique value, you must now estimate the costs of running your business. This includes overhead expenses like utility bills, payroll, and rent, more indirect costs like marketing and advertising, and research and development for new products or services. You must be completely honest with yourself and understand that any new business venture will incur some startup costs.
There is no way around it. There are some ways, however, that you can minimise these costs. One of the best ways to do this is to find a cheap place to rent and furnish it cheaply. You can also minimise your advertising costs using social media, cheap or free online advertising, and word-of-mouth marketing.
The Purpose of a Business Plan ― Step 4: Create a Marketing Strategy
Next, you should create a marketing strategy. This is the plan you will use to sell your product or service. This marketing strategy must be consistent with the image you want your company to portray. It must also directly relate to the value you offer your customers. No marketing strategy works for everyone, so you must find the marketing strategy that best suits your target market. You must also put in the time and effort to ensure your marketing strategy is successful.
You will not see an immediate return on your investment, so you must be willing to put in the time and effort it takes to make your marketing strategy successful over the long term. No amount of strategising or marketing will help your business succeed if you are unwilling to work and see the results over time.
The Purpose of a Business Plan ― Step 5: Conclusion
Finally, you must write a conclusion to your business plan. You should discuss what you learned from your research, how your unique value relates to your customer’s needs, and how your company’s costs affect your ability to turn a profit. You must also discuss the marketing strategy you plan to implement and how it will help you achieve the success you want for your business.
To write a good business plan, you must be sincere and understand that any new business venture will incur a particular risk. There is no way around it. There are some ways, however, that you can minimise this risk. One of the best ways to do this is to create a business plan and follow it as closely as possible. A business plan is your roadmap to success. It allows you to explore every aspect of your new business idea and helps you anticipate potential problems before they happen.
Something Extra! Why is a Business Plan Important to Your Startup’s Future Success?
Starting a business from scratch can be an intimidating process. With so many moving parts and details to manage, it’s easy for first-time entrepreneurs to get tripped up along the way. To help your new venture avoid roadblocks, it’s essential to have an organised plan. A business plan is a document that outlines the goals of your company, its market strategy, and financial projections. It also serves as a document you can refer to at any time to check your progress or track your growth. As you begin this new journey, here are some reasons why having a business plan is vital to your startup’s future success.
Why Business Planning is Important ― Set Course for Future Growth and Development
A business plan outlines the company’s future goals and helps you keep the company on track while growing. It outlines the company’s goals, target market, strategies to achieve those goals, and financial forecast. This information allows you to set a course for future growth and development. This document will help you stay focused in times of change. This is especially important for startups that may experience growing pains.
Why Business Planning is Important ― Create a Roadmap for Marketing Strategies
Determining which marketing strategies will help you achieve your long-term goals would be best. You may want to consider which avenues will be most beneficial for your company and which will reach your target audience. Sitting down and outlining these marketing strategies will help you stay on track and achieve your goals.
It will also make it easier to identify when to pivot or change your strategies as the business changes. When it comes to marketing strategies, it’s essential to keep in mind that these may change as the business grows. You may consider having several processes in place to change course as needed.
Why Business Planning is Important ― Help You Determine Product Mix and Offerings
Another important aspect of your business plan is outlining the product or service mix that you plan to offer. This will help you determine which products or services will be provided as part of your business. Depending on your industry and your target market, you may want to consider having various product offerings. These could include anything from physical products to services.
If you are considering offering various products and services, outline what each will entail. This will make it easier to determine prices and help you stay organised moving forward.
Why Business Planning is Important ― Serves as a Marketing Tool
One of the best things about having a business plan is that it can be a marketing tool. A business plan will make it easier to approach potential investors or lenders. It will also make pitching your business to customers and investors easier. One of the best ways to use your business plan as a marketing tool is to have it printed and bound. This will make it easier to read and reference when needed.
A printed business plan will also help you stand out among other entrepreneurs. It will make it easier to impress potential investors and lenders. Having a printed business plan also makes it easier to keep track of your progress as you move along in the process.
Why Business Planning is Important ― Establish your Company’s Financial footing.
A business plan is also essential because it will help establish your company’s financial footing. This will help you determine how much money you will need to start and operate the business in the early days. This will also help you determine how much money you need to break even. It’s important to note that the financial forecast you put in your business plan will not always be 100% accurate.
Things often take longer than anticipated or cost more than expected. A business plan helps you determine the general ballpark of these figures.
Why Business Planning is Important ― Conclusion
In short, a business plan is essential to any new business. It will help you outline your goals, determine the best strategies, and forecast your company’s financial situation. A business plan will help you stay organised and keep your company on track as it grows.
When starting a business, it can seem like there is a never-ending list of things you need to take care of. It is easy to get overwhelmed by the volume of tasks and invest time in market research because it doesn’t seem as crucial as other activities.
Something Extra! Market Research and Why it is Important to Have a Business Plan.
Market research isn’t as exciting as brainstorming ideas or developing fresh marketing strategies. However, this process is something that every entrepreneur needs. It is not enough to have brilliant ideas; they must be executed wisely to make a profitable venture. Market research provides critical insights about your target customers and the market in general. It gives you the information to make intelligent decisions about your business venture.
Why it is Important to Have a Business Plan ― What is Market Research?
Market research collects and analyses data about your target audience, the market landscape, and competitors. It aims to answer critical questions about your business idea, such as the demand for your product or service and potential roadblocks you may face. It is an essential part of the business planning process.
This data can then be used to make critical strategic decisions about your business model, marketing strategies, and more. Market research can be conducted through a variety of methods. The type of research you work on will depend on your business and industry, your goals, and the questions you want to be answered. There are several ways to conduct market research. They include conducting interviews, polls, focus groups, and surveys, performing secondary research, and using analytics and other data.
Why it is Important to Have a Business Plan ― Why is market research important for entrepreneurs?
Marketing strategies and business models are built on customer insights and market trends. This type of information cannot be made up or guessed at. It has to be researched and assessed with facts. This data helps you to understand your customers’ needs and expectations. It also lets you see how your business might fit into the marketplace and find out if there are any significant obstacles ahead of you.
Knowing these things helps you create a profitable business that will provide excellent customer value and have a strong chance at success. Without this information, you might be making a product or service that few people want or trying to sell your products in an unlikely effective way.
Why it is Important to Have a Business Plan ― Why is it hard for entrepreneurs to research the market?
Marketing and business trends change over time. This means that the data from a few years ago might not be relevant to your situation now. Therefore, it has to be up-to-date. However, many entrepreneurs tend to skip the market research step. They might be under the false assumption that it is unnecessary when they have a great business idea or that it will take a lot of time and effort.
In reality, market research should be done at the very beginning of the business planning process. It is an investment in the future success of your venture. A researcher cannot conduct research for you. You have to understand and follow their instructions carefully to receive accurate data. You have to be able to put aside biases and misconceptions to find the information that is most useful for your business.
Why is it Important to Have a Business Plan ― How to make market research easier?
If you have never conducted market research, the process may make you feel a little daunted. Don’t worry; you don’t need to be an expert to understand your customers. You need to follow a few simple steps. Before you begin collecting research, you need to decide what you want to know and why. What are your business goals?
What are the general trends in your industry? Which customers are you hoping to reach? How do they like to be communicated with? Once you have a clear idea of what you want to learn and why you can collect the data. There are various data collection methods, ranging from quick online surveys to in-depth interviews. You can choose the way that best applies to your situation.
Why it is Important to Have a Business Plan ― Problem identification through market research
While market research is about gaining insights that will lead to better business decisions, it can also be used to identify problems within your industry. For example, you can research your competitors if you are in the restaurant business. You can find out what meals they serve when they are busiest and how many customers they have on average. This can give you insight into what your customers want and how they like to be served. It can help you to avoid making costly mistakes.
For example, if your competitors are busy during lunch, you might consider offering a meal that takes less time to prepare. This can help you avoid long wait times and losing customers in a rush. Market research can also help you to understand how customers view your brand. Do they think highly of it? What do they like or dislike about it?
Why it is Important to Have a Business Plan ― Customer Insights from market research
Understanding your customers lets you know how to reach them best. You can see their preferences, how they like to be communicated with, and what pains they experience. This knowledge can help you to create a successful business model.
For example, if you are providing a financial service, you might find that most of your customers are older people who don’t have time to manage their finances. This can help you to focus your campaigns on that specific audience. It will help you to save time and money by avoiding marketing to people who are unlikely to use your services. Understanding your customers also allows you to avoid making mistakes. You can avoid offending people or creating products and services that no one wants.
Why it is Important to Have a Business Plan ― Discover your customers’ unmet needs.
Successful entrepreneurs continuously look for ways to improve their products and services. They recognise particular unmet needs among their customers and aim to solve them. Market research can help you to identify these needs. Let’s say that you work for a software company. You have a product that helps people organise their finances.
However, after researching, you discover that many of your customers would also like help saving for retirement. This unmet need is something that you can solve by including retirement planning tools in your original product. This will help you to retain customers and gain new ones.
Why it is Important to Have a Business Plan ― Business model identification through market research
Every business model has to be profitable. This means that you have to earn more than you spend, which lets you keep the company afloat. This is important because if you are constantly losing money, it is unlikely that you will be able to save your company open for long. Market research helps you to identify how your business model will work.
It can help you understand your operation cost and how you will earn money. This information helps you to make intelligent decisions and avoid costly mistakes. For example, if you want to start a bakery and sell muffins, you have a few options. You could sell muffins in person, make and sell them online, or offer a mixture of both. Each of these options has different costs. This data can help you to identify the best business model for your situation. It can help you to avoid costly mistakes, like trying to sell your muffins online when you don’t have the resources to do it properly.
There are many benefits to engaging in market research from the very beginning of the planning process. It allows you to understand customer needs, avoid common pitfalls, and create a successful business model. However, it is often a task that entrepreneurs prevent because they don’t know where to start or feel they don’t have the resources to do it properly. Remember that market research doesn’t have to be complicated or expensive. If you follow these guidelines and prioritise market research, you can avoid costly mistakes, better reach your intended audience, and create a profitable business model.
Established in 2006, we have successfully written hundreds of bankable and world-class Business Plans for clients across 25 countries. As South Africa’s Leading Business Plan Company , we are confident that we would be able to assist you too. Kindly note that we also offer “Investor Pitch Decks”, “Excel-based Financial Models”, and “Proposal/Tender Writing Services” in addition to our Custom Business Plan Writing Service . Please visit our Services page for more information.
We look forward to being of service to you. Please feel free to contact our Founder, Dr Thommie Burger, on +27 79 300 8984 should you have any questions. He is also available via email and LinkedIn .
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What Is the Business Planning Process?
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The Role of Finance in Formulating Business Strategies
How to understand a business plan, the best practices in strategic implementation.
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The business planning process is designed to answer two questions: Where are we now? Where do we want to go? The result of this process is a business plan that serves as a guide for management to run the company. Describing the most critical tasks that must be completed and the time frame for completion, a business plan allows companies to allocate resources to accomplish goals.
Where Are We Now?
Companies begin the planning process by taking a critical look at the business' current state. The management team evaluates what the company is doing well and where it is falling short. Objectives could be revenue targets or ascertaining the company’s reputation for reliability in the marketplace. The planning process provides a blueprint for improvement in all areas.
What's the Competition Doing?
Keeping track of competitors is an ongoing process in business, but in the planning cycle this information is used to evaluate the strengths and weaknesses of each competitor. This analysis shows management how to position the company’s products or services to compete more effectively. It may be that the best way to contend with a competitor is by offering better customer service rather than lower prices.
What's the Opportunity?
Success in business is the result of providing products and services that meet customers’ needs in a significantly better way than competitors. Before launching a product or entering a new market, management must determine a strong customer need to solve a problem. Solving the customer's problem must be important and urgent. Because no company has unlimited resources, these decisions about which opportunities are best to exploit are critical to the company’s success.
How Will We Attract and Keep Customers?
The marketing plan details which customer groups will be targeted and how these customers will be convinced to make a purchase. The planning process must produce specific and detailed tactics, not vague generalities. Instead of saying the company will employ Internet marketing, the plan must detail which categories of Internet marketing will be emphasized, which websites will be used, and the cost of advertising. Also included in the plan must be reasons why these strategies are likely to result in success.
How Will We Allocate Budget?
The planning process determines how all the assets of the company will be marshaled to achieve the goals and objectives. Thorough planning allows financial resources to be used wisely, and for the human resources of the company to be as productive as possible. Planning helps avoid problems such as cash shortages, inability to deliver products on schedule, or inadequate staff levels.
What's the Financial Forecast?
A financial forecast, sometimes referred to as a company budget, is produced during the planning process. The forecast numbers are compared to actual results during the year. Discrepancies are analyzed to determine if a change of course is required, or if shifting expenses may be necessary due to a changing economic environment.
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Brian Hill is the author of four popular business and finance books: "The Making of a Bestseller," "Inside Secrets to Venture Capital," "Attracting Capital from Angels" and his latest book, published in 2013, "The Pocket Small Business Owner's Guide to Business Plans."
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