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Anyone can have a great business idea. But having the vision to turn it into a flourishing business is the real game-changer.
As someone who has worked and helped more than 1,000 businesses grow and many with 6 and 7 figure sales turnover, I know what it takes for a business to be successful.
A business plan is your secret tool to grow your business and take it where you want it to go. Even research backs this up.
- A vast majority of successful medium-sized and large businesses have a business plan in place.
- The University of Oregon compared businesses with plans with businesses without plans and found that the former were consistently better at determining strategy-handling challenges, getting things done, and moving their businesses forward.
- Entrepreneurs that write formal business plans receive more financial support than if they had no plan.
- A study found an association between the completion of a company’s strategic plans and its profitability.
- Another study found that having a formal business plan was associated with higher gross revenues and growth in sales.
- Companies who finish their business plans are twice as likely to succeed in growing their business than those who don’t have a business plan. Case in point: Companies with a business plan grow 30% faster than companies without the plan.
Now, growing 30% is no small issue.
You see, thanks to the power of compounding, if you go 30% faster this year, you’ll also grow 30% faster next year, and hopefully, this growth will carry on.
Therefore, you’ll grow really far, really fast.
But that’s not it…
The thing is that it isn’t only about “Write a business plan” or “Don’t write a business plan.” What really matters is the kind of planning to do and the time you spend on it to make it perfect.
In this ThinkTyler guide, I’ll tell you everything you need to know about business plans—definition, important sections, and why you should write a solid plan for your business—all using my 20-year experience and expertise.
Are you ready?
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What Is a Business Plan?
A business plan is a detailed plan for your business that covers how you’re going to work and what you’re going to do to make it successful. It’s meant to represent your intention — or rather a series of your intentions.
Think of it as a roadmap that gives you a sense of direction. You can use it to plan ahead in the future and take necessary precautions to avoid bumps in the road.
Here’s what a good plan generally covers:
- The kind of business you intend to build
- The products you plan to sell
- The people you want to sell to
- The structure of how you want to capitalize on the market
- The competitors you have in the market
- The exit strategies you’ve considered
Let me explain this to you practically with a classic example.
Suppose you want to go from Los Angeles to Las Vegas via car. At the most basic level, you have to figure out how to get to Las Vegas — something that having a plan makes possible.
In this case, your plan should cover the following questions:
- Which route will you take to go to Las Vegas from Los Angeles?
- What kind of car do you plan to use to make this journey?
- How much gas will making the journey cost?
- Do you have enough money to cover all expenses for the trip?
- What sites do you want to see along the way?
Figuring out the answers to these questions will help you make a more accurate estimate of how long it’ll take to make the trip, what experiences you want to explore, and what you can do to make your trip more enjoyable and comfortable.
Now imagine if you would’ve just “winged” it.
Not having any plan puts you in a 50-50 situation. Your trip may work out just fine, but it may also be a complete failure — you may travel in the wrong car, not have sufficient money, or end up making the wrong turn. So many things can go wrong!
Think about it: Which situation sounds ideal to you?
Exactly.
The more time you spend on making your business plan thorough and accurate and keeping it up to date, the better your chances of becoming the owner of a successful and growing enterprise.
How Should You Present Your Business Plan?
Interestingly, research says that entrepreneurs should customize their business plans based on whether they’re seeking funding from a bank, venture capital fund, or business angel.
But regardless of your funding strategy, your business plan goes on forever.
You’ll find yourself constantly tweaking it, evaluating it, and making appropriate changes so you stay on track and ensure the best possible results. Precisely why it should be a dynamic document that you keep on your computer.
It’s only on select occasions should your plan take a printed format, like when you want to share it with outsiders or team members.
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How Can Making a Business Plan Help Your Business?
If you’re serious about your business’s success, you should also be serious about business planning.
A business plan isn’t only for starting a new business or applying for business loans — it can also help you run your business — and run it well. It can aid you to determine whether you need new loans or investments, whether you’re keeping up with the ever-changing market conditions, and whether you’re utilizing available opportunities to the max.
Plus, every business has unique long-term and short-term goals, expense budgets, and sales targets. A business plan encompasses all of these requirements to give every business owner a really solid foundation to rely on.
Even one of the best books to help one understand money, Rich Dad Poor Dad, highlights the importance of business plans. The poor dad taught the protagonist how to write an impressive resume, whereas the rich dad taught him how to make good business and financial plans to create jobs.
Think someone as established as Robert Kiyosaki would be on to something?
Business plans are generally for two kinds of businesses: startups and existing businesses. Here’s how they benefit from these plans:
Business Plans for Startups
Business plans for startups are mostly focused on explaining what the new company is going to do, how it plans on achieving its goals, and more importantly, why investing in the founders is the right thing to do.
The plan should also detail the amount of money the owners would need to get the business off the ground and through the initial growth phases before, hopefully, setting on the path of profitability. This is actually very crucial since most business owners don’t know exactly how much money they need and when they need it.
It’s why a business plan is necessary for all startups, regardless of whether the founders need to convince investors, banks, or family for funding.
Laying out sales projections, costs, expenses, and timing of payments is a huge influencer for your overall success. When making business plans for startups, my main priority is to help founders eliminate any uncertainty and provide meaningful insights into different aspects of the business, such as the expense budget, sales projections, milestones, and tasks.
Business Plans for Existing Businesses
There’s a simple reason why existing businesses use business plans: strategic planning.
You see, business plans can be a critical driver for business growth. Existing business owners can use them to strategically manage and take control of the business, steering them towards success. Not only will a business plan assist you to efficiently address changes in your target market, but also take full advantage of available opportunities.
For me, the goal is to create a plan that sets the schedule for regular review and revision to reinforce strategy, help manage responsibilities and goals, establish key metrics, and track results. Once everything laid out and organized, you’ll be able to plan and manage your resources, including critical cash flow, much more effectively.
In other words, having a business plan for your existing business will give you a competitive advantage over your rivals, helping you drive faster growth and innovate better.
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Why Making a Business Plan is SO Important
A business plan is important for a lot of reasons, from ensuring smoother operations to raising capital to your very survival. In fact, one of the first things I do when taking on clients is to start working on a business plan.
To give you more context, I’ll decode the main benefits of making a viable business plan for your enterprise.
Business Idea Evaluation and Legitimization
Every idea sounds fantastic… until you put it on paper.
A finished business plan can prove your business idea is actually worth pursuing and feasible. While documenting your market process, capital requirements, and estimated return on investment or ROI, you can also find out if there are any serious hiccups, because of which you should second-guess your plan.
Think about it: You take all that pain to launch your business only to learn it isn’t going to take off.
Not cool.
Moreover, a business plan reassures your readers that whoever wrote the plan is serious about their idea. People, especially financiers, like people who work hard, and when you make the effort to create a plan, putting hours into fleshing out effective growth tactics and financial projections, it speaks volumes about your strong work ethic.
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Securing Finance and Loans
Money is an inescapable reality of starting a business. Precisely why you need to figure out a reliable way to secure finance from investors.
Convincing people to give you their money is hard. You want to do everything you can to do it right, and presenting a solid business plan can be a great step to ensure that.
The whole point of making a business plan is to chalk out ways to make a business succeed, break-even, and become profitable. This makes it the perfect document to show potential investors and loaners how their capital will be put to work, proving to them that their money is in the right hands.
In fact, nearly all banks, investors, and venture capitalists want to see a business plan before getting on board. In my experience, I’ve found investors want to know if — and when — they will be getting back their money, preferably with a profit, how the business will reach projected financial goals, and how well do the sales, marketing, and operation plans align.
A lot of people freak out about the different aspects of making a business plan, especially the financial bit. Luckily, having an experienced business coach by your side will make it a lot easier.
Not only do business coaches help you handle all the difficult parts, but they can also come up with realistic benchmarks and appropriate profit models to increase or appear in front of investors.
Strategizing and Better Decision-Making
Your business plan should clearly explain what your goals are and how you plan on achieving them. This includes financial matters, management issues, human resource planning, technology, and value creation.
The idea is to draft it in a way that addresses every question and thought that could potentially pop up on your investor’s mind for every scenario, right from acquiring an office space for conducting business to explaining your tactical approach for market penetration.
Again, hiring a business coach could really help you understand your vision and master effective planning. Thanks to their experience, they know what is important to your industry, your target market and help you identify your unique positioning — all of which can come in handy to sway investors.
Identifying Potential Weaknesses and Uncovering New Opportunities
A business plan is an incredible tool to identify potential pitfalls in your business idea. In addition to this, other people can also give you good advice and share improvement ideas when you share the document with them.
Besides this, you can use them to uncover new opportunities.
Brainstorming, creative interviewing, and whiteboarding will allow you to see your business in a different light, which, in turn, will lead to newer, more effective ideas for marketing your product or service and running your business.
The fact you can attract more partners and top-quality talent is another plus.
Procuring Business License
Business licenses, especially for companies in the cannabis and food space, can make or break your business.
If you go through my definition of a business plan, you’ll understand it comprises exactly what officials want from you to determine the legitimacy of your business and how well-equipped you are to run it before granting your license. Naturally, a good business plan will likely make getting a license much easier for you.
Unfortunately, many founders are still unaware of the substantial role a business plan can play in accelerating the license procurement process. Don’t be one of them.
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The Different Types of Business Plans
Business plans vary greatly depending on your niche, strategy, and vision.
Some plans never leave the office and are used exclusively for internal management and strategic planning; some are meant to rope in top capitalists, and hence, need to be more comprehensive and formal.
Below are the two main types of business plans to help you understand the different categories.
The Lean Business Plan
A Lean business plan is the diet version of a traditional business plan.
The business strategy, tactics, metrics, milestones, budgets, and forecasts are the primary focus of a lean business plan. It only includes crucial details and financial information, making them more suitable for internal use to facilitate strategic planning and growth.
Since you aren’t writing this plan for investors, you don’t need an exit strategy section and can even skip company history and management team information. Everyone in your company will almost certainly know other people on the team.
It’s best to review and revise Lean business plans every once a month to ensure they guide the growth of your business and measure progress in the best possible way.
The Standard Business Plan or External Business Plan
An external business plan is more formal. It’s designed to provide information about your business to outsiders to either convince investors to fund your business or support a loan application.
You can consider these types of business plans as an extension of the Lean Plan. While the latter is mostly a snapshot, a standard business plan is a polished and well-presented plan that gives a lot of attention to the finer details and how it’s presented and in what language.
It elaborately describes how potential funds are going to be used, which makes sense since investors aren’t just going to hand over cash with no strings attached. They want to know exactly how you plan on using their funds, and what the expected return on the investment will be.
External plans also strongly emphasize the team that forms the company, a.k.a you and your team members.
Investors invest in people instead of their ideas. So whether you want to get more funding or secure a loan, you must include biographies of key team members and how their background and experience will help grow the company.
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Decoding the Crucial Sections of a Business Plan
The formal and straightforward structure of a traditional business plan applies to nearly all types of business. The general idea is to stick to a structured outline and include key details in every section to make sense of what you want to do with your business and how you’ll get it done.
Every business plan has certain standard sections that serve as an excellent foundation to start writing a solid business plan. But before you do that, you have to know and really understand the sectional breakdown of a business plan.
1. Executive Summary
The purpose of writing an executive summary is to give a short introduction to everything that follows in your business plan. Kind of like a cover letter or abstract of the whole plan.
It’s supposed to be written in a way that even time-crunched investors and lenders can get a brief overview of your business plan, persuading them to read further. Here’s what I typically include in an executive summary:
- Business Concept. What does your business do?
- Mission Statement. What does your business want to do? What are its core values and purpose?
- Product Description and Differentiation. What product or service do you sell, and why is it different?
- Target Market. Who do you want to sell to?
- Marketing Strategy. How do you plan to reach out to your customers?
- Current and Projected Financial State. What's your current revenue, and how much do you foresee earning in the future? Do you have any existing funding sources or investors?
- The Ask. How much capital do you want to raise?
- Company Information. What is the company‘s name? Where is its headquarters? Who are the founders or owners and the management team?
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2. Company Summary
The ‘Company Summary’ section of a business plan answers two questions: Who are you and what is your purpose?
Below are some vital pointers generally included in a company’s summary:
- Your business structure, i.e, are you a general partnership, limited partnership, or a corporation?
- Your business model and operating industry
- Your business’s vision and mission statement, as well as a value proposition
- Information on your business or history
- Your long-term and short-term business objectives
- Your team, including the key personnel and their salaries
A company summary details why you’re in business, what makes you different from your competitors, what’s your value proposition and USPs, and why investing in your company is a good bet.
The idea here is to get to the core of why your business exists, what it stands for, and what you hope to accomplish through it.
While most of the factors are straightforward and factual, you’ll have to come up with something attractive and thought-provoking when defining your business values and objectives and mission and vision statement.
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Consider all the people your company is accountable to, including owners, employees, suppliers, investors, and of course, customers.
How would you like to conduct business with each one of them? - Your short-term objectives should cover goals you plan on achieving within the next year, whereas your long-term goals should focus on a longer period, say, five years. What would yours be?
- A good mission statement should explain why your business exists and how it can help — all presented convincingly in a one-sentence format. Do you have one?
A business coach can help you understand the more intangible aspects of your business, including your business ideals, principles, and cultural philosophies. They’ll give you more clarity regarding the kind of impact you envision your business having on the world once you achieve your objectives, which can help to develop your vision and mission statement.
3. Products and Services
This section outlines the product and services you have an offer for your target customers. It’s also good to include information about your pricing, product lifespan, and how it could solve the consumer’s pain points.
Additionally, you can detail the production and manufacturing processes, vital research and development (R&D), and any patents or proprietary technology you may have. Below are a few pointers this section usually includes:
- Pricing – Your approach for your pricing strategy, i.e whether it’s cost-plus, market-based, or value-based.
- Promotion – Your promotion plan should cover your plan for communicating with your prospects and customers, along with how you’ll measure the overall cost and success
- Packaging – Mention whether your packaging matches your positioning strategy, and how it communicates your key value proposition and compares to your competition.
- Advertising – An overview of the kinds of advertising you plan to spend money on — traditional, off-line, or social media.
- Content Marketing – Your approach to educating your prospects on topics they are interested in and leverage your product or service as the perfect solution for their pain points.
- Public Relations and Social Media – While you don’t need to be on every social media channel or invest in public relations, both tactics can be useful to give the exposure you need to grow your business.
In addition to the above, the Products and Services section should also cover the other aspects of business execution:
Operations that talk about your distribution plan, logistics, and technology. It should cover how you plan on sourcing, fulfilling, and distributing your products. As for technology, while you don’t have to give away trade secrets, you do have to describe how your technology works and why it makes you better than other solutions on the market.
Milestones to describe all your planned major goals or things you look forward to. Your business plan should also mention if you have any “traction.” Investors are particularly interested in knowing your traction since it indicates whether your company has seen some form of early success in the form of initial sales, a huge partnership, or a successful pilot program.
Every company milestone has been carefully determined, along with due dates, names of the employees responsible for it, and other crucial details. This will enable you to plan daily activities accordingly to improve outcomes and make sure everything is completed before the deadline.
Metrics to judge the health of your business. This refers to numbers you plan on watching regularly to monitor growth and spot problems early on.
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4. Market Analysis Summary
Your target market can make or break your business. How well you choose your market has a significant impact on your business’s success.
You choose the right market — one with lots of customers who need your product — and you’ll find yourself on the fast track to success. However, if you choose the wrong market or even the right market at the wrong time, you’ll be struggling to make a single sale.
Precisely why market research and analysis are such a crucial aspect of a business plan. It’s really the only way you can make a realistic estimate of how many people need your product using relevant data.
It should contain an overview of your market niche, where you cover how big you estimate the market is for your product and analyze your business’s positioning in it. Including an overview of the competition is also important.
The section should answer the following questions:
- What features or benefits do you offer to your target customers that your competitors don’t?
- How would you describe your customer's primary needs and wants?
- How are your competitors positioning themselves?
- Do you have any strategy for differentiating your company from your rivals? Why should a customer choose your product or service instead of your competition?
- Where do you see your company in the market of other solutions?
- What risks are you taking with this business?
Answering these questions will help you understand your positioning strategy and then define it in your business plan. Remember, this section should support all your conclusions with solid backup and research to validate your assumptions, and more importantly, persuade investors.
5. Web Plan Summary
Today, having an online presence is monumental for your business’s survival, and a website is the nucleus of your online persona. And while it may not seem like it, your potential investors are going to be very interested to see your website and what you plan on doing with it.
The Web Plan will outline what your website will look like, how it’ll function, and most importantly, how it’ll fit in your overall marketing and sales strategy. It should also cover all your requirements to develop one, namely, a website developer, hosting, and so on.
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6. Management Summary
This part of the business plan will contain the resumes and biographies of each of your company’s owners and management team, as well as an organizational chart for your company. It’ll have a clear description of all your individual duties, and what every team member will contribute to the company.
Do you see how detailed this section can get? It’s important to highlight the strengths, experience, and expertise of every team member, as well as detail any unfulfilled roles or roles you foresee needing to fill based on your growth strategy.
7. Financial Plan Summary
You have to detail your financial planning and future projections to attract investors. For already-established businesses, this includes attaching your financial statements, balance sheets, and other financial information.
On the other hand, business plans for new businesses should instead mention targets and estimates for the first few years of the business and if they already have any potential investors on board.
Below is a brief overview of what the different subsections and under the financial plan summary should include:
- Sales Forecast – Your projections of how much you think you’re going to sell over the next few years.
- Personnel Plan – An estimate of how much you plan on paying your employees, along with something known as “employee burden,“ which refers to the cost of an employee beyond the salary. This usually includes insurance, payroll taxes, benefits, and so on.
- Income Statement – Also known as the profit and loss statement, the income statement indicates whether you’re making a profit or loss based on your sales forecast, personal plan, and a list of other ongoing expenses (cost of goods sold, operating expenses, interest, taxes, depreciation, etc.).
- Cash Flow Statement – This statement helps you keep track of how much cash you have at any given point in time, and no, it isn’t the same as the profit and loss statement.
- Balance Sheet – This document gives you an overview of the overall financial health of your business. It’ll list your assets, liabilities, and equity in detail.
- Use of Funds – A brief explanation of how you plan on using your investor’s cash.
- Exit Strategy – Your plan for eventually selling your business either to the public in an IPO or to another company.
Imagine something like this:
I know making all these charts and graphs looks complicated, and honestly, it can be because you need an understanding of key financial terms and have the experience to make calculated predictions.
No need to panic, though. Business coaches have both — the knowledge and experience — to help you out.
8. Appendix
An appendix isn’t necessarily a crucial part of your business plan, but it’s useful to add any critical information like tables, charts, legal notes, and definitions, that although crucial, would’ve felt too out of place if included anywhere else in your business plan.
For instance, if you have product illustrations, a patent, or patent-pending, the appendix is where you’d include them.
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Get Started With Your Business Plan ASAP!
At this point, you know how important a good business plan is for your business’s success.
You also know what it comprises and how every section has a significant role to play to lure investors, attract partnerships, and of course, ensure the smooth functioning of your company.
You may be freaking out about how to do it right. Or you may be thinking about what you can do to make a solid business plan.
The good news is, irrespective of whether you’re overwhelmed or contemplative, As a business coach, I can help you make a strong business plan that does everything you want it to do using my 20-year experience and expertise.
Get in touch with a business coach today to create your roadmap for growing your business and ensure success.
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