What Are the Musts in a Business Plan?

What Are the Musts in a Business Plan?
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Before you can strive toward a goal, you need a plan. If your goal is to run a successful company, a business plan is an important first step. A solid business plan includes a mission statement, company financials, market analysis and details about your structure.

Why Write a Business Plan?

If you’re starting a small business, planning is an essential part of the process. A business plan puts everything in writing, giving you a document you can present to investors or business partners on demand. By putting it on paper, you’ll also have everything clear in your mind, which will help you answer any questions you receive about your startup.

But the biggest benefit of a business plan is that it forces you to think through every aspect of your business. In the process, you’ll also be able to pinpoint issues that you need to address now to avoid them becoming bigger problems later. A good business plan is one you’ll revisit every now and then and update as your business evolves.

Types of Business Plans

Building a solid business plan can take work, but there are ​twobusiness plan types. If you’re starting up a new business and simply want a quick overview for your own purposes, a lean startup plan will likely be all you’ll need. For a long-term document you can call on if asked, though, you’ll need a traditional business plan.

Here are the differences between the two major types of plans:

  • Traditional business plan:​ This type includes all the details, including the executive summary, market analysis, financial projections and details of your organization and management team.
  • Lean startup plan:​ ​This simplified version gives an overview of your business, including the competitive advantages you have in the marketplace and the resources you’ll use to accomplish your goals.

Formatting a Traditional Business Plan

Entrepreneurs have more help than ever when it comes to developing business plans. You can download a business plan template and simply fill in the various sections. The general layout of a traditional business plan involves the following sections:

  • Executive summary:​ This section of your business plan is the first thing prospective investors or business partners will see. Here, you’ll write a ​one-​ to ​two-page​ summary of your product or service and the problem it solves, as well as your finances and your competition.
  • Company description:​ Here, you’ll detail what your business does and why customers will be interested in buying your offerings. You’ll also highlight your business goals to show that you are looking toward the future.
  • Market analysis:​ In this section, you’ll show that you’ve conducted thorough research on your target market. You’ll detail what you found through this research and include the outlook for the overall industry your business falls under.
  • Organization and management:​ Whether you have employees or not, you’ll need to detail how your company will be structured. Will your business structure be a C or S corporation, a general or limited partnership, a limited liability company or a sole proprietorship? Include an organizational chart that reflects both current and projected positions.
  • Service or product line:​ Detail your business idea here, including the products you’ll sell and any trademarks or patents you intend to secure.
  • Marketing and sales:​ A solid marketing strategy is key to success for any business. Your business plan should address your plans for getting sales and spreading the word about your business.
  • Funding request:​ Once you’re looking for funding, you can slide this section in. It serves as a complement to your elevator pitch, and when you’re requesting or actively pitching investors, they’ll likely go here first to find out how much you want and what you’re offering in terms of equity.
  • Financial projections:​ You should be able to project how your business will operate financially for the next five years. If your business is already established, you’ll also need to attach financial statements and balance sheets to show how your finances are doing currently.
  • Appendix:​ This area of your business plan holds all those extra items that investors, lenders and business partners might want to see. This could include items like your own resume, letters of recommendation and your credit history.

Formatting a Lean Business Plan

There’s more flexibility with a lean business plan. The only tougher part is that templates aren’t as commonplace. All you’ll need are the basic elements to get started, though, and you can pick and choose which of these you want to include.

  • Partnerships:​ No business truly operates independently. You’ll need to work with vendors and business partners to achieve your goals. List other businesses and entrepreneurs you plan to work with here.
  • Activities:​ This section details your processes. How will your business gain an edge over the competition?
  • Resources:​ Here, you’ll take an inventory of your equipment, software, furniture and human assets, including any contractors you use. These are the assets you have at your disposal to help build your business.
  • Value proposition:​ Similar to activities, this section discusses how your business sets itself apart. What unique benefits does it bring to your industry?
  • Customer service plans:​ How will you interact with your customers? If yours is a business-to-business setup, this might include initial consultations followed by phone and email availability once you’re working together. B2C companies should detail plans for customer service availability, whether through a phone-based customer service system or a ticketing option via your website.
  • Target customers:​ Putting together a business plan pushes you to do market research. You’ll need to detail the demographics of your target customer base to show that you understand your audience and are working to create products or services they want.
  • Financials:​ You don’t need to have details on your cash flow for a lean business plan. The financial section on this type of document will include how your pricing is structured and your forecasts for the months and years to come.

Formatting Financial Documents

If you’re seeking investment dollars or a loan, particular interest will be paid to the financial details you include. This is typically in the form of attached documents. Luckily, you can find templates online for most of them since there are expectations related to how these items should look.

  • Income statement:​ Also known as a profit and loss statement, this document will show your gross income and your expenses over a fixed timeframe. Early on, you will likely show one month’s income but once your business is more established, you’ll likely put this document together for an entire quarter.
  • Cash flow statement:​ Investors and lenders will want to see the money coming in and out of your business every month. But it serves as a handy tool for you, too, since it helps you pinpoint issues well in advance of them becoming problems.
  • Balance sheet:​ This document shows your business’s net worth. It will summarize all your assets, from equipment and inventory, as well as your outstanding and ongoing debts.

Conducting Market Research

One of the biggest challenges you’ll face when preparing a business plan is gathering the data necessary to show that you know your market. But competitive analysis of your industry is essential to success. Lenders and investors want to know you understand the market for a reason. It helps you ensure there’s moneymaking potential in your venture.

You can grab a clipboard and pen and head out to do your own research locally, but you can also pay for research others have conducted. Here are some of the top platforms for gathering research in your target market:

  • Pew Research Center​: This free service is a great first stop for learning about your target audience’s political leanings, social media habits, media consumption and income levels.
  • Living Facts:​ To dig a little deeper into your audience’s lifestyle, this sister site to Pew Research is another free market research tool.
  • Growthbar:​ This tool is great for research competitors. It resides in your search bar and offers information about the terms you enter. You can look at the monthly searches for your competitors or for keywords in your category.
  • Qualtrics:​ If you don’t mind paying, Qualtrics offers ready-made panels made up of people who are willing to give you details on how people perceive your brand.

Using Your Business Plan

Once your business plan is ready to go, you probably can’t wait to take it out for a spin. Of course, the planning is a big part of the work, but it’s also important to make sure any existing or future team members understand what’s inside. The information from the executive summary can be summed up in a mission statement, which is a brief, one-sentence description of what your company does, how you do it and, most importantly of all, why you do it.

Over the lifecycle of starting and growing your business, your need to show your business plan will change. Initially, you may just use it to get a business loan, but you could move on to using it to land investment funds. Once you’re more established, you could have shareholders or other business partners who ask for a copy.

Presenting Your Business Plan

A business plan can be a pretty dry document. Among the musts of what you should include are the musts of how you’ll present it. You can’t simply hand your multipage document over to a lender or potential investor and wait.

With a business plan presentation, it’s all about the pitch. You want to ensure you make your pitch a success, whether you’re seeking investment dollars or a loan. You’ll need to be able to sum up your products and services, your market, your leadership team and what you bring to the market that will make you a success.

In some cases, your presentation will be in the form of an actual presentation. You can find templates and samples for pitch decks online. With your business plan on hand, you can simply summarize the information into an easily digestible, visually appealing format that will serve as an overview of the details in your business plan.

Read More:Pitching to Investors

Business Plan Help

You don’t have to go it alone when creating your business plan. In addition to online templates, you can get in-depth help from the following sources:

  • Small Business Administration​: The SBA offers one-on-one business consulting through centers across the country. Simply input your zip code on the SBA website to find one near you.
  • SCORE​: You can access a free business development workshop on the SCORE website. You’ll go, step by step, through the process of creating a business plan.
  • U.S. Department of Veterans Affairs​: If you’re a veteran entrepreneur, make sure you take advantage of the Veteran Entrepreneur Portal for help with your business plan, as well as access to opportunities not available to the general population.

A business plan can help position your small business for success, whether you’ll be presenting it in the near future or not. In addition to pushing you to create a marketing plan and research your market, a business plan also requires you to take an in-depth look at your financials. For best results, revisit your plan frequently and update it to reflect the evolving picture of your business.