A business plan is a document that outlines how and why a new business is being formed. While creating a business plan is not a requirement, it is highly recommended because of the benefits it confers.
For example, an effective business plan can help entrepreneurs achieve better results from their marketing and funding initiatives, as well as help them avoid costly mistakes. The act of writing one can also help founders recognize potential hurdles that aren’t otherwise obvious.
To attract investors or lenders and target a scalable market, a business plan should be as factual as possible so they understand the risks. It can also help employees to better understand your company’s goals.
What to include in your business plan
1. Your company’s purpose and goals
Explain your business idea with a clear and factual description. Then, describe your company’s vision and mission, the objectives you want to achieve, proof of viability and growth potential, and funding requirements.
Next, explain the problems that your business will solve, and clearly describe how you’ll solve that problem to make a profit. In other words, outline what you plan to do, how you plan to do it and how you will succeed.
2. Define your business
Provide the following information:
- Define your industry and business type.
- Describe your target customers, as it’s much easier to serve a market that you are able to quantify.
- State any challenges you might encounter and what you’ll do to overcome them.
- List the products, services and equipment you’ll need to run your business.
3. Products and services
The products and services section of your business plan should elucidate:
- What products and services your business will provide.
- Why customers will purchase your products or services.
- How you will provide your products or services — if you plan to assemble a product, explain the development process as well as the end product.
- What facilities you need to provide your products or services.
- How your products and services differ from those offered by competitors.
- How you’ll meet demand if a supplier runs out of capacity or goes out of business.
- If your product or services are in the development phase, provide a timeline for bringing them to market.
If applicable, also use this section to elaborate on:
Intellectual property: List any patents, copyrights or trademarks owned or licensed by your company in this section. However, aim to do it using straightforward language without using industry buzzwords or becoming too technical.
Competitive advantage: If you plan to purchase products from suppliers or wholesalers readily available through several outlets, highlight this competitive advantage.
4. Market opportunities
Provide analyses of your customer demographics, purchasing habits and willingness to adopt new products and services. This section should help readers understand the opportunities for your business in your target market by providing details like:
- The size of your target market and customers and whether it is growing, stable, or declining.
- The current state of your industry — whether it is growing, stable or declining.
- Potential rise or fall in demand for your products or services.
- The spending or purchasing ability and habits of potential customers in your market.
- How you will serve your market.
- Conditions that could affect market share, such as the rise of low-cost competitor products.
5. Marketing strategies
Effective marketing can increase your brand’s value and attract potential customers, in turn generating higher sales or profit. Your marketing strategy should set you apart from competitors by highlighting the benefits your customers will receive. If you plan to distribute products to other companies or suppliers, you should also explain your distribution strategy here.
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The marketing section of your plan should answer these key questions:
- What is your budget (in terms of percentage of income) for sales and marketing?
- How will you determine if your marketing plan is successful? How will you adapt if it underperforms?
- Will you need a sales team to promote your products? If so, briefly describe its structure.
- How will you acquire and keep your customers?
6. Competitive analysis
The competitive analysis of your business plan should inform readers about how your business is different from its competitors. You can evaluate your competitors by gathering information about their products, services, quality, pricing and marketing campaigns.
To compile this information, check their websites and marketing materials, visit their sites, assess their marketing strategies and search the internet for their news, reviews and recommendations.
To stay ahead of competitors, stay up to date on news about your industry, about related products or services, and about your target market — and don’t forget to assess your competition regularly. Doing so keeps you apprised of your competitors’ strengths and allows you to take advantage of any weaknesses, such as price, service or convenience.
Make sure your competitive analysis addresses:
- Current competitors, including their target customers and market share.
- The growth potential of your business.
- How you’ll react if a competitor enters or drops out of your market.
7. Operating methodology
In this section, describe the strategies you’ll use to manage and operate your business on a day-to-day basis. Inform your audience about these aspects of your business operations:
- Required space, equipment and supplies.
- Research and development.
- Production and service methods.
- Licenses and permits.
- Policies and procedures.
- Vendors and suppliers.
8. Leadership
Many lenders weigh the skills and experience of the management team when evaluating a new business’s potential. Defining your management team, or presenting an organization chart in your business plan, will inform readers about leaders in key roles, including their experience, educational background and skills. It should also explain the responsibilities to be performed by each leader.
9. Financial analysis
This section of the business plan should describe the company’s cash position, including assets, liabilities, shareholders and profit retained to fund future operations or expansion. Financial projections and analyses further help investors or lenders evaluate its potential.
Provide details about sources of income and fixed and variable expenses to help your audience further determine whether your company can become profitable during a given time period under specific conditions.
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Since 2006, Escalon has helped thousands of startups and midsized companies to accomplish their business objectives with our outsourced solutions for accounting, HR, payroll, insurance, and recruiting and taxes — and we can help yours too. Talk to an expert today.
