What is a Business Plan and What Needs to be Included?

Business, Entrepreneurs, Investment

What is a Business Plan and What Needs to be Included?

Starting a business as an entrepreneur or a small business, learning what is a business plan and how to write one is essential in securing funding or early-stage partners. A startup business plan will also help guide you and your small team on a more focused journey.

If you already have a written business plan or if you need a small business plan template then we’re going to help you achieve those goals today.

Through our startup business background, we have written previously about overcoming challenges for startups, and many entrepreneurs need to learn the components and details in a business plan. This business blueprint will map out future plans showing critical challenges to create a successful business as well as the data to avoid in the long road ahead.

Having a good business plan is extremely important and makes the best business sense. But we see all too often, poorly written, and unstructured ways a business plan is written that have little chance of being funded. 

Here we’re going to look at templates of what is a business plan, and why it is important. What crucial elements should be prepared and included, how is a plan written and put together, so investors are excited about creating your idea as much as you are!

What is a Business Plan, Exactly?

Starting a new business plan is really quite simple. It is a detailed, written roadmap to turn your idea into a business through careful planning and goals. A business plan is a written document that will contain your business goals and the steps you will learn to take to achieve them. However, just writing a plan in Microsoft Word that informs investors plainly of your objective, is no longer enough to convince. It needs to excite the reader and persuade them to back you, invest in you and support you during your quest. If they’re excited in your idea, then they’re more likely to want to assist you and be reassured that their money is being used wisely for mutual benefit.

Where do I Start With a Business Plan?

Staring at a blank sheet of paper and waiting for inspiration to strike is frustrating, and all too common. Realising you need to answer high-level questions about your business is an essential first step.

There are two main questions in business plans that need answering. Why and how.

WHY

  • Why this idea?
  • Why now?
  • Why back you?

HOW

  • How will you make money?
  • How will you acquire customers?
  • How will you grow?

By answering these (what should be) apparent questions, business plans will prove you have:

  • The right product
  • At the right time
  • Using the best team
  • With a well-thought-through strategy

Why You Need an Effective Business Plan

You’ve had your idea, and you’ve run with it. You have an MVP (minimum viable product) already as well as a website and some warm leads. Why do you need a business plan to prove to investors to back you?

Strategy Optimisation

A business plan forces you to research your market thoroughly and identify trends or threats that can help or hinder your business. A PESTLE or a SWOT analysis can help you here, and we’ve written a separate guide on when to chose a SWOT or PESTLE analysis here >  

A good strategy will identify gaps in the market and build in enough flexibility for when the unexpected happens.

Goal Setting

Having a direction for your business can only come about through the setting of goals. Identifying which goals to set, with realistic targets and timelines, as well as priorities and the journey to achieve them, are all very important.

To Receive Funding

Investors, innovation funds and banks have little time to be pitched at and should be seen as people who are looking for an excuse NOT to invest, instead of reasons TO invest. Anything that seems too risky on their grant or investment will mean, no funding. Anything in the business plan that hasn’t been comprehensively answered and researched can potentially be a red flag. A business plan should answer any question and reassure lenders.

Partnerships

Now you wouldn’t necessarily include all of your financials here, but having a business plan with strategies, objectives and outcomes will convey confidence in another company partnering with you. A partnership needs to be taken as seriously as an investment as both companies have a reputation to uphold and need confirmation that they are partnering with the right company.

To Merge or Sell

You may find your company in a position to merge or to be acquired. A business plan is then used by the other party to better understand a realistic price for merging or for outright purchasing. 

Business Plan Structure

Regardless of your business, some standard sections are essential to creating a business plan.

These include:

  1. Executive Summary
  2. Company Description
  3. The Problem 
  4. The Solution  
  5. Industry Overview
  6. Competition
  7. Your Product
  8. Revenue Model
  9. Customer Acquisition
  10. The Team
  11. Funding
  12. Financials

Executive Summary

If an investor only reads one part of your plan, then it is this. From here, they need to understand who you are, what you do, where you need to be, and how much it will cost to get there. You’ll create a basic one first so you can complete the rest of your business plan, but you will definitely revisit this section over and over again to ensure it is focused and clear.

Company Description

Here you will write about your big idea and introduce it to the reader in more detail. What you do, why it matters, and direction you plan to take. Also, discuss the potential size of the business you are building.

The Problem

Without a problem to solve, there is no business, so clearly identifying the size of the problem and the need it has to be fixed is essential. The problem has to be understood by several people so if you have a complicated issue that you’re solving, it is here that you need to identify current practises and why you’ve found a quicker/cheaper/better solution, in a language that will be understood. What is the problem you’re solving, who is it for, and why do they need it.

The Solution

You’ve explained the problem, now it only makes sense to identify your solution. Illustrate how your product/service leads directly back to the issue at hand.

Industry Overview

Here, you identify the market and explain the nuances of it. What is the TAM (Total Addressable Market) and is it growing? If so, by how much? Will the growth in this industry be enough to convince an investor that there is an opportunity? Have a look at the number of competitors here and note if there have been any acquisitions or exits that can prove that this market is lucrative and worth the investment risk.

Competition

This can be in a list form identifying similar features and opportunities for your product. Clearly showing their size, market reach, pricing and features, will prove that you have something different to offer over and above the competition. What are competitor strengths and weaknesses, and how can you leverage or mitigate these? It is useful here to look at a SWOT or a PESTLE analysis

Your Product

Explain how your product or service works. What are the key features and how will people use them. The reader will need to understand what and how your product addresses the problem. What is unique from the competition?

Revenue Model

You need to identify the way you will achieve money, very simple. What is your pricing strategy compared to the competition? How much is it, how will they buy it, and how much will it cost to acquire a new customer? Here you will also illustrate your sales growth model for at least 3 years.

Customer Acquisition

Here you need to state who your customers are so the investor or reader understands who is most likely to buy your product or service. It’s a great idea to use personas to show ideal customers. We have written a simple article with a downloadable worksheet for an easy way to create personas here > 

When acquiring your customers, what will be the most productive way to do that? Increasingly, it is more cost-effective and productive to digitally acquire your customers. Again, we have written a guide to develop your strategy that will suit this section here > 

List your channels here as well. Will you adopt direct or partner channels? Will you use a PPC strategy and improve your SEO to acquire new customers? List what percentages of each channel you plan to use and how that will change over time.

The Team

Showcasing your expertise will help secure confidence in not only your idea but in the people delivering on the business plan objectives. Having the right team and being able to build the company around the founders is essential. Make sure that you have covered the essentials of a founding team using the ‘Startup Square’ approach. In the Startup Square you include the 4 bases of business success through a Hustler (Business Lead), Hacker (Builder of the Product), Hipster (Experience and Design), and the Handler (Product Development).

Introduce the members of the team and how you work together (through the startup square approach) to deliver the business. Include names, job titles and their professional background, including any special skills they have through previous experience that is relevant now. What makes the team qualified to drive the success of the business? 

New hires and a timeline can go in here, but all salaries and detailed information on new hires can be saved for the appendix.

Funding

Here, any investor needs to understand what you plan to do with their money. How much do you need to get you to the next stage [of investment]? What type of investment are you looking for? Would it be debt funding, an equity round or a grant?

Financials

Your financials will typically be within the appendix and show your 3-year forecast based on specific assumptions. As your team expands, then the salary will be shown to increase but at the same time sales should be rising in line and above this. You will be showing your cash on hand at the beginning and end of each month as well as the sales of your product, the COGS (Cost of Goods Sold), customer acquisition costs as well as staffing, taxes, utilities, rent and equipment overheads.

What is a Business Plan Approach?

Like most documents, you need to first research, then outline what goes into each section and finally organise it, so you cover all of the business plan objectives.

Research

You will have a tonne of assumptions about your business, some of which will be proven through experience and others will not necessarily be based in fact. Conducting business plan research will be a fact-finding mission that will prove or disprove your assumptions. Having this evidence to back up your direction will be referenced in the appendix of the business plan. Any research that shows a shift in trends or course will be useful to represent why you have needed to pivot, leave a particular industry segment or focus on a broader beachhead market.

Outline

Using the framework listed above, in an order that works for you, you will identify which of your research fits into specific areas. Instead of trying to write the document from A-Z, draft sections and headings of what you need to discuss and identify. Highlight areas where additional research may be required. Having an outline will help delegate parts of the business plan to your team for supporting information. For instance, your Technical Director may need to speak to the technology you are using and why you use it. Using this heading and sub-heading model means you will stay focused on detailing relevant information and not include irrelevant arguments. A business plan outline also makes the task of writing much more manageable and achievable.

Organise

Add questions into each section that you need to answer. This way, you can stay focused and ensure you are writing the business plan for the target reader and answering the questions they want to be answered.

For example, in your Customer Acquisition section, you could write down questions as headings to be answered, for instance:

  • How Will We Reach Our Customers?
  • What Are Our Digital Marketing Strategies?
  • How Will We Implement Our Outbound and Inbound Strategy?

 

What is a Business Plan in Conclusion?

Writing a business plan can look like a lot of work, and after all, it will form a legal document should you be asking for investment. We’ve listed sections and headings for you above but to summarise, here are our takeaway points:

  1. Research before you start so you understand your industry
  2. Rewrite as you go along ensuring nothing contradicts
  3. Write clearly in an easy-to-understand language even if your solution is complicated
  4. Always reference resources and keep a list in the appendix.
  5. Ensure the problem is real and apparent and your solution is best placed to resolve it
  6. Prove your financial assumptions are valid and include them in the appendix
  7. Preferably write in the first person, so you speak directly to the reader
  8. Explain your acronyms and assume your reader doesn’t understand them
  9. Try not to repeat the same copy in different sections, reference back if needed
  10. Never claim you have no competitors, you always will, even if that competitor is Microsoft Word and Excel
  11. Format your business plan layout in columns with a proper hierarchy of type. We’ve written design basics in another post here > 
  12. Proofread it thoroughly, then proofread it again. Then give it to other people to read over so ensure they understand it.

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