A business plan is a document that states the plan for the growth of a business in the near future. It holds the strategies and steps to be taken to take the business forward. It is like a guide book. It has steps to be taken, tasks to be completed, and goals to be achieved. It is like a manifesto which always upholds the purpose of the business
Why is it used?
A business plan acts as a guide for the business which states the guidelines to follow to achieve a goal in the future. Moreover, it is required for getting investors and loans.The purpose of the business plan is to maintain a task list and work accordingly with it. It is a dynamic list which keeps on increasing as time goes by.
Types of business plans
There are different types of business plans to choose from. All types differ from each other significantly; some may have technical language, use more graphical representation, or simply be in casual language. It is important to determine which form of business plan one wants to draft in accordance with his business. The following three are the most common business plan types: one page business plan, the internal business plan, external business plan.
However, these are the major business plan types.
- One page business plan: it is a draft of the business plan which includes only the key essential points pertaining to the business plan. It is a quick synopsis and acts as a quick reference.
- Internal business plan: internal business plan is made for reference. It need not have the bios of managerial team as that is already known to the internal members of the company. It may be written in a casual manner and graphical representations are not required as it need not be shown to any outsider.
- External business plan: this business plan is made essentially for outsiders such as investors, bankers and loan givers. It must be attractive, captivating and must allure the reader into reading further. Use of proper language, appropriate graphical representation and everything that the outsider should be made known of must be present in this plan.
- Lean business plan: it consists of key points which are non descriptive and easy to read and interpret. It is a plan to manage the strategies, tactics, dates, deadlines, activities and cash flow of the firm.
- A mini plan: consist of 1-10 pages. Includes business concepts, financial needs and statement, marketing plan, income projections, cash flow, and balance sheet.
- Working plan: it is a detailed report of the mini plan about the operations of the business. For internal keeping, some points such as management team bios can be omitted whereas, for external view, this point is very important and must be present.
- Growth or expansion plan: this plan consists of the steps to be taken for the growth of the company. Or the specific expansion in a sector or with a particular products.
- Presentation plan: a presentation plan is basically a very impressive way to present the plan to investors, bankers and outsiders to the company. The information in the presentation plan is somewhat similar to that of the working plan. Although, the presentation plan must also contain the competition scenario of the company. It is very important for investors to know what risks they might be taking. It should be in detail and precise. A single little mistake can cause the loss of investor.
- Electronic plan: plans generated and shared electronically through computers.
Who needs a business plan?
All persons engaged in business needs a business plan. Any business which involves large amount of time, money and resources must have a business plan. Anyone starting or expanding a business requires it.
The most significant time to draft a business plan is at the beginning of the business. It sets a complete outline of goals to be achieved, work to be done, problems and their solutions and the growth process in the future.
When established firms plan to expand their firm locally or globally, a business plan helps not only to bring investors but also to successfully guide the entrepreneur in the expansion.
Steps to make a business plan
- Draft the following:
- Business description– what the business is about, what is its purpose are the things to be answered in this part.
- Strategy– what strategies will be followed to achieve a certain goal are important as it decides the guideline for the action.
- Overview of problems– the problems that the company may face as are essential to be present in a plan as it gives the investors and entrepreneur a clear view of the real world. It is also integral to describe solutions for the assumed problems.
- Key values– the values by which the company will abide sets a rule for the members of the company.
- Description of ideal customer- all products and services are made with keeping in mind an ideal customer. Everything cannot be sold to everyone; therefore the description of the ideal customer helps in deciding the marketing plan.
- Target customer– focusing on the target customer is the central part of any business. It helps in deciding a lot of points on marketing and selling of the product.
- Competition landscape– it is very important to understand the competition and make one self prepared to face and defeat competitors.
- Test and validate the made assumptions regarding customer, product, problem solutions, and competition. All the drafted points need to be validated to see and make sure of the scenario of the real world.
- Building sales forecast and budget. Managing cash flow is essential part of any business. Therefore a budget and forecast of sales will determine how much cash is flowing in and out of the business and also to arrange for the same. It is just a small assumption and not a detailed report.
- Schedule tasks and set goals. Having planned so much, it is a must to execute them. Therefore starting work is essential after drafting of the plan.
- Set regular review and revision of plan. Revision on strategy as per needs of the business is very important. It keeps a business updated.
- Make a detailed business document. Having checked every possible thing and scenario, it is important to make a detailed plan to produce to the investors.
- Make a good presentation of the plan for showing to investors. A good presentation will help capture the interest of the investor and make them want to read more. It must be graphically good looking and interestingly projected.
- Lastly, make the executive summary. It is the most crucial part of the plan. A good executive summary can help get investors as they would see the executive summary first, before looking into the detailed plan.
Contents of a business plan
A formal print of the business plan includes executive summary, company overview, information about products/services, marketing plan, a list of achieved milestones, information about members of management team and their roles and details of the company’s financial plan.
The detailed business plan contains the following:
- Executive summary- it must have the key highlights of the plan. It should be intriguing and captivating. It must have the overview of the problems solved by the business, target market, the financial highlights and summary of the management team. It is essential to grasp the attention of the reader or else they would not read the plan any further.
- Company overview- a summary of the legal structure, ownership, history and location.
- Business description- it summaries the products/services the company deals in. Details of all problems, their solutions, and any technology in use, intellectual property and any key factors are included here.
- Market strategies- discuss the strategies to be used to market and sell the products/services. Pricing, promotion offers are included here.
- Competitive analysis- details of the competition scenario and how the business is standing in the competition are to be mentioned here.
- Design and development plan- the key features of developing or building the product at present and how to do the same in future.
- Operations and management plan- the operations part of this part lays the ways to achieve the goals of the firm, and goals which have been achieved.
Management plan consists of the details of the management team and their roles and responsibilities. It must also explain why the management team is best suited for the company.
- Financial factors- how much capital is required, how much investment is required, when how much money is coming in and going out of the business are all included here. It is very important to keep financial plan as it keeps an balance of the cash flow.