A business plan is a plan for making your business work and succeed<\/strong>. There are no exact requirements or fixed size of a business plan: everything depends on your individual case, and you decide what should be included in it. It can be a one-page business plan or a big folder with lots of pages describing every small detail of your future business: as long as it is deliberate, size and particularity don\u2019t really matter.<\/p>\n Of course, there is a standard structure of a formal business plan, and we will have a look at it in detail below, but it isn\u2019t obligatory to follow this structure if you think that your business plan doesn\u2019t need some parts. However, this standard structure is recommended in order to create a full picture of your future business.<\/p>\n It is also important to highlight that a business plan is a dynamic document<\/a><\/strong>. It can be updated anytime as there are always new ideas and changes appearing that should be included in it.<\/p>\n If you are planning to present your business plan to potential investors, or to a bank to get a loan, you will present the snapshot of your business plan the way it is on the day of presenting it. But there is no final point for a business plan: even when you get the necessary investments and start your business, you should still have a business plan to be able to develop your business and make it successful.<\/p>\n Many beginning entrepreneurs don\u2019t realize the benefits of having a business plan and prefer to keep everything in their heads. And this usually becomes the first mistake they make. Unfortunately, keeping everything in your head is great but impossible.<\/p>\n There are so many important details that should be taken into consideration that the chances to forget some of them are too high. Having a business plan means collecting all your thoughts and ideas together and structuring them, and it can be considered as the first benefit. Having a structured plan of your thoughts will free you from the fear of forgetting something important, so you will feel more safe and confident about it.<\/p>\n Apart from that, having your business plan in a written form gives you more chances to accomplish your goals according to your plan, which is the second benefit.<\/p>\n According to research by Dominican University in California<\/a>, people who wrote down their goals accomplished significantly more than those who did not write down their goals. A business plan will help you to determine your business\u2019s future vision, and it will be easier to set up your goals and reach them.<\/p>\n Clarifying the direction of your business development will also help you to understand what exactly needs to be done in order to reach your goals.<\/p>\n Another valuable benefit of having a business plan is having more chances to attract financing for your business project. Potential investors will definitely ask you to provide a financial forecast of your future business to evaluate the potential and decide whether to invest money or not. A well-prepared business plan can quickly become a financing proposal and attract investments.<\/p>\n A business plan will also help you to attract team members and partners. When you see clearly how you will turn your idea into a successful business, you will sound convincing and inspiring to those whom you would like see as a part of your team. Would you follow a person who only has a great idea, or a person who has a great idea and a step-by-step plan to make it work? The choice is evident, unless you are a very risky person.<\/p>\n A business plan is also a great management tool when it comes to the organizational structure of your business, including the team structure and the duties of every team member. It will also help you as a reference to ensure that your business is on the set course to the goals and milestones towards the success.<\/p>\n Tim Berry, the well-known business plan expert and author of Lean Business Planning<\/em>, distinguishes<\/a> one more benefit of it: a business plan will help you to plan and manage cash flow and tie together educated guesses on sales, costs, assets, expenses, and debts.<\/p>\n To sum up, the benefits of having a business plan are quite convincing: being able to focus on your goals and have a clear strategy will definitely help you set up a successful business.<\/p>\n Fortunately, a business plan is not a mandatory 20-page document that is created not for the actual planning of a business, but to impress investors. There are many different types of business plans that might be suitable for various individual business cases. Let\u2019s have a look to see what type of a business plan you should go for.<\/p>\n According to Entrepreneur<\/a>, there are four major types of business plans:<\/p>\n The size of such a type of business plan is usually from 1 to 10 pages. It consists of only the key issues such as the business concept, financing needs, marketing plan and financial statements (cash flow, income projection and balance sheet).<\/p>\n You don\u2019t need to describe each of these components in details, but just highlight the main points. The miniplan suits small and simple businesses, but if you are looking for an investor, you should go for a full-length business plan.<\/p>\n This type of business plan requires a detailed description of key components and can be used as a tool to operate your future business. The working plan is mainly created for internal use and doesn\u2019t require some elements like product pictures, for example. It also doesn\u2019t have to be visually presentable and impressive, as it will be used mainly as an operational tool for your business.<\/p>\n Basically, the presentation plan might be an improved version of a working plan, with focus on its visual presentation. The presentation plan is used for presenting your business to potential investors or bankers.<\/p>\n That\u2019s why you should make sure that it is written using professional business vocabulary. The readers of this business plan might not know some of the terms you use, so you should have explanations for them. If a working plan is printed on a paper with stains from your morning coffee, a presentation plan should be printed on high-quality paper, and optimally in color.<\/p>\n Every detail matters when it comes to presenting your idea when seeking investments. It should also include graphics and charts to visualize the complicated parts of your business projections.<\/p>\n Nowadays, having a business plan in a digital format is not even necessary, but obligatory. It might be used for some group presentations using a projector, or for sending it to investors who would like to read it in detail. So it should be visually presentable and accurate with the language and numbers.<\/p>\n Tim Berry offers<\/a> a few more types of business plans. One of them is the lean business plan that he considers a faster, easier, and more efficient plan than the standard business plan. It doesn\u2019t include descriptions, summaries, background details, but requires such components as deadlines and milestones, along with the budgets you have to achieve them. The main components of the lean business plan are:<\/p>\n Another type of business plan that Berry mentions is a one-page business plan, or a business pitch. It is similar to a miniplan. It consists of a one-page summary with the most important highlights so a reader can quickly understand your idea and steps to make it a successful business. The one-page business plan is more suitable when you need to present a summary of your business to potential investors, partners, banks, etc.<\/p>\n One more type of a business plan, according to Berry, is a feasibility plan. This type of business plan is normally used to describe the development of a product or technology you are planning to use. For example, if you created a pencil with an automatic sharpener, you will need to describe the steps of producing your product: from establishing a rough version to a first working product.<\/p>\n The feasibility plan is especially useful when you decide to go for crowdfunding: Kickstarter<\/a> and other similar websites will require you to present your product.<\/p>\n Knowing about all these types of business plans, you should decide what type you should go for in your individual case. It will depend on the size of your business, the need of looking for investments or business partners, and the type of product or service you would like to work on.<\/p>\n Nonetheless, no matter what type of business plan you will choose, it is still important to know and understand the main components of a standard business plan<\/strong>. As any type of a business plan has some of these components, let\u2019s have a look at all of them in detail.<\/p>\n The clear understanding of the basic components of a standard business plan will help you to decide on what you should include in your own business plan. Of course, every component is very important to contribute to the full picture of your business. But if you think that you should skip some of them in your case, it is absolutely your choice.<\/p>\n There are 7 main components<\/strong> of a standard business plan:<\/p>\n Let\u2019s see what these components consist of, and how they can contribute to the success of your business plan.\u00a0<\/strong><\/p>\n A standard business plan usually starts from the executive summary after a title page. However, it is crucial to know that it is the last part of a business plan you should write after finishing all the other parts.<\/p>\n The goal of the executive summary is to highlight the strengths of your business plan, which is why it\u2019s better to write it after you prepare the core components to decide what exactly you would like to highlight.<\/p>\n The executive summary should answer two major questions: what is your business idea, and why will this business idea be successful. If you are looking for investors or other financial support, this part is extremely important to grab the attention of your potential investors. The size of the executive summary<\/a> is usually no longer than one page.<\/p>\n The executive summary includes such key elements<\/strong> as:<\/p>\n As mentioned above, a business plan is necessary not only for startups, but also for established businesses to be able to track their development and needs. It might also be a case when an established business is in need of additional investments.<\/p>\n Therefore, according to the U.S. Small Business Administration<\/a>, the content of the executive summary will also depend on the stage of your business: if it is an incipient stage, or an established business.<\/p>\n In case you are starting a business, you should highlight your background and experience in the executive summary. It is essential to convince a reader that you have enough knowledge and skills to succeed.<\/p>\n If you already have an established business, you should provide the following company information:<\/p>\n Because the executive summary will be the last part you need to write for your business plan, you will need to start the actual writing from the business description section.<\/p>\n The business description, or the company description, is the section where you need to provide a review of the key elements of your business. The purpose of this section is to let readers quickly understand your business idea and strategy. Your business description should very clearly: who you are, what you do, and why you do it.<\/p>\n Here is the basic structure of the business description<\/a> section:<\/p>\n It is always better if you have some basis for your judgments, especially when you will be talking about the problem in the market that your products or services will solve. So you should make sure that you do some research on the market and provide some reliable data<\/strong>: investors will definitely ask you why you think there is such a problem. You can also provide the footnotes with the sources you used, so you can skip such a question and make the right impression.<\/p>\n It is also important to find a balance<\/strong> between being modest and being too self-assured and ambitious about your competitive advantages. Don\u2019t skip the evident advantages: if you have a product that isn\u2019t presented at the market at all, or if you\u2019ve found a way to deliver services of a much better quality than your competitors because of the professionals that joined your team, make sure you talk about it. But don\u2019t go too deep in praising yourself.<\/p>\n After completing this section, it is always a good idea to read it again<\/strong> and cut out all the repetitive elements and unnecessary information to make it clear and to the point. There are no strict boundaries for the size of the business description: it can be a few paragraphs, or a few pages. However, you should try to keep it short<\/strong>, as the main purpose is to hold the attention of the reader.<\/p>\n When the business description is ready, your next step is to prepare the industry & competition overview.<\/p>\n You can find a lot of different names for this section: competitive analysis, industry section, and business environment analysis.<\/p>\n Some sources prefer to divide this section into several sections: for example, Discover Business offers<\/a> three different chapters: business environment analysis, industry analysis, and competitive analysis. Nevertheless, we decided to arrange it as one section, the industry & competition overview, and include all the necessary information for this part of the business plan.<\/p>\n This section is important not only when you are seeking funding, but also for your own understanding of the market you are planning to step into. Knowing your competitors is an essential advantage if you want to succeed.<\/p>\n It is also necessary to be able to support all of your statements<\/strong> with market research results and knowledge, as many entrepreneurs usually make the mistake of taking their personal opinions as facts. Yes, you can feel that there is a niche for your product at the market and nobody else produces it, but you should do research first and check all the possible similarities with your product.<\/p>\n Based on the steps offered by Discover Business<\/a>, here are the main components of the industry & competition overview:<\/p>\n According to Entrepreneur<\/a>, these questions might be helpful when working on the industry & competition overview:<\/p>\n Answering these questions will contribute to the industry & competition overview in order to make it full and detailed.<\/p>\n After finishing with this overview, your next step is to prepare the operations & management plan.<\/p>\n This section describes how your business will operate in order to archive the goals you\u2019ve set up. It includes two parts: the operations plan and the management plan, but they are usually combined into one section to make it more effective. It is important to make it as detailed as possible as this is a core feature of your business function.<\/p>\n The operations & management plan should include the following components:<\/p>\n You can make it in the form of a chart with explanations of who does what in your business. It is crucial to write in detail what the positions in your company will be and what duties and responsibilities each position will have.<\/p>\n Describe what type of business you are running or planning to run: corporation, partnership, sole proprietary, etc.<\/p>\n According to the U.S. Small Business Administration<\/a>, this part should consist of:<\/p>\n You don\u2019t need to present all the information you have about every member of your team, but you should provide the backgrounds of the key people in your team to show how they are valuable and how they can implement the work of your company. Include the following information:<\/p>\n If you have an advisory board, provide the information about who the directors are, what their background is, and why exactly these people are on the board.<\/p>\n The size of this section will truly depend on the complexity of your company. If you have only two people in your team, it is obvious that you won\u2019t have a lot to write. But if you are planning to hire at least one hundred people, you should choose only key members to show their profiles.<\/p>\n Remember that readers won\u2019t have so much free time to read the backgrounds of one hundred people, so you should value your and their time as well.<\/p>\n The product or service description will be concentrated around your idea: here you can provide all the information about your product or service, highlighting the benefits and innovative features of it.<\/p>\n These are the main components of this section:<\/p>\n As stated in the Inc.com business plan manual<\/a>, these key questions<\/strong> will be very helpful to work on the content of this section:<\/p>\n The main goal of this section is to make the reader understand the nature of your product or service. Therefore, there is no need to use technical or specific words that the readers may not know. Try to use simple language to make it clear, especially if your product or service is innovative.<\/p>\n After completing the product description, you will move on to the marketing strategy section.<\/p>\n The marketing strategy is the engine of your sales machine. However, there is no exact way you should work to create it: everything will depend on your product\/service, your goals and plans, and other individual factors. But of course, there is some guidance for the strategy and tactics that might be helpful for you.<\/p>\n This section should consist of these 6 elements:<\/p>\n It will require preliminary research, so you will be able to define the target market: its size, structure, trends, growth opportunities, and sales capability. Determining your target market might be built on different factors: geographical, product-oriented, payable, etc.<\/p>\n This part will show how you are planning to place your company and your product in the market, meaning how you want your customers and competitors to perceive it.<\/p>\n These strategic questions mentioned in New Business Beginner\u2019s Guide: Tools for a New Business<\/em><\/a> are essential when setting up the position of your business:<\/p>\n Answering these questions based on your research will help you to formulate the position of your company you want to have in the market.<\/p>\n The pricing strategy is extremely important for the financial well-being of your business. The prices for your products or services must be competitive as well: there is no point in making the price higher than your competitors if there aren\u2019t a lot of differences between them.<\/p>\n Of course, it might seem very complicated to understand what price you should put for your product, especially when you are doing it for the first time. Many entrepreneurs are afraid to make it too cheap or too expensive, and can\u2019t find the right balance in between.<\/p>\n These are the ways you should go for when setting up your prices<\/a>:<\/p>\n You should also describe how you are planning to deliver your product to customers. The most common way to do so is to analyze your competitor\u2019s channels, noticing their advantages and disadvantages. Then you should decide whether you would like to go for the same type of channels, or look for other ways to make it more effective and beneficial.<\/p>\n These are the most common distribution channels<\/a> that you could choose from:<\/p>\n Promoting your product or service is the crucial component of reaching and communicating with your target audience and selling it.<\/p>\n The best promotional strategy should include all possible marketing tools, such as:<\/p>\n This is the first financial projection you should make before going to the financial projections section. It is necessary to evaluate the sales potential of your product or services based on the market research you did. In order to do so, you will need to create a revenue model.<\/p>\n This includes three major elements: \u201cT\u201d \u2013 the total number of customers, \u201cA\u201d \u2013 the average revenue per customer, and \u201cS\u201d \u2013 the sales projection. So if you multiply T by A, you will get S \u2013 your sales potential.<\/p>\n This is a very simple description of the revenue model; however, it includes a lot of other factors<\/a> apart from the number of customers and the average revenue. But you can prepare it in detail in your next section on financial projections.<\/p>\n The financial projections section is the most scrupulous section of a business plan. It will be mindfully read by your potential investors, which is why you should put a lot of effort and attention into it.<\/p>\n Despite the fact that it seems to require a lot of deep financial knowledge, you can definitely prepare this section at a high level. Moreover, there is nothing bad in asking<\/a> a person with accounting skills or startup experience for some help with it. There are also a lot of companies who can assist you with the preparation of financial projections.<\/p>\n Don\u2019t take financial projections as the section needed to impress your readers; its main goal is to help you estimate the amount of money your business needs and its potential profitability.<\/p>\n This section provides your vision on how profitable your business will be, how much investment it is requesting, and how much time it will take you to pay back your investors.<\/p>\n Financial projections include 4 major components:<\/p>\n The income statement<\/a> can also be called a Profit & Loss statement (P&L) or earning statement. It mainly shows if you are making money or not. In order to prepare the income statement, you\u2019ll need the financial data of your business activity for some period of time that you can determine by yourself.<\/p>\n The very basic idea of the income statement is to calculate the profit by subtracting expenses from revenue. For this, you should calculate first your expenses and revenue.<\/p>\n Your expenses will include operating expenses, non-operating expenses, and losses. Your revenue will consist of operating revenue, non-operating revenue, and gains on long-term assets.<\/p>\n If you are just starting up your business and don\u2019t have any financial data at the moment, you can try to look for some statistics of similar businesses in your industry. You can definitely find some general data that you can use for the income statement projections.<\/p>\n If you are planning to sell microwaves, for example, then the percentage of annual sales of microwaves within the industry might be your starting point. Of course, it won\u2019t give you specific numbers, but that\u2019s why this section is called projections: you are projecting your business finances, not delivering the exact financial data to analyze.<\/p>\n You can prepare this statement manually in Excel, or download our free P&L statement template to save your time.<\/p>\n The balance sheet shows the value of your business based on three main indicators: assets (what your business owns), liabilities (what your business owes), and equity (a net worth). To calculate your company\u2019s assets, you need to add liabilities to equity. This means that your assets should be equal to your liabilities and equity.<\/p>\n Your company\u2019s assets<\/a> will include fixed assets, investments, current assets, loans, and miscellaneous expenditures. The liabilities consist of share capital, reserves, loans and current liabilities.<\/p>\n In order to prepare the balance sheet, you can simply download our free balance sheet template.<\/p>\n The cash flow statement<\/a> shows the flow of cash for some period of time along with the amount of cash you have on hand at the moment of creating this statement. It consists of two parts: sources of funds and uses of funds.<\/p>\n The first part, sources of funds, will show the amount of cash flowing in and out of the company balance. The second part, uses of funds, will show exactly how the cash was spent. To create your cash flow statement, you can download our free cash flow template and fill in your numbers.<\/p>\n Considering the fourth part of the financial projections sections, i.e. other financial information<\/a>, it will be necessary depending on each individual case. Some investors might ask you to prepare additional forecasts, for example, your personal finance statement in case you are planning to provide your personal loan to the company.<\/p>\n Despite the fact that the financial projections section is the last one in your business plan (apart from the appendix with additional materials<\/a> if needed), it is a truly important part when seeking funding.<\/p>\n Therefore, you should make sure you prepare it very carefully and in detail. The right calculations and the detailed description of how you are planning to deal with the finances of your business are key to attracting investors or getting a bank loan.<\/p>\n These are the main components of a standard business plan that you can decide to include in your own business plan.<\/p>\n Many small businesses and startups choose not to go for this traditional business plan model just because of the size of the business and its necessities. However, if you are planning to start a medium-sized company, you should consider preparing as much information as possible.<\/p>\nEvaluating the benefits of having a business plan<\/h2>\n
![\"A](\"https:\/\/i2.wp.com\/www.invoiceberry.com\/blog\/wp-content\/uploads\/2016\/11\/business_plan_full_guide_1.jpg?resize=690%2C290&ssl=1\")
Structuring your thoughts<\/h4>\n
Accomplishing\u00a0your goals<\/h4>\n
\nAttracting financing<\/h4>\n
Attracting team members and partners<\/h4>\n
Managing your project<\/h4>\n
Choosing the right type of business plan for your business<\/h2>\n
1. Miniplans<\/strong><\/h4>\n
2. Working plans<\/h4>\n
3. Presentation plans<\/h4>\n
4. Electronic plans<\/h4>\n
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5. Lean business plan<\/h4>\n
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6. One-page business plan<\/h4>\n
7. Feasibility plan<\/h4>\n
The main components of a successful business plan<\/strong><\/h1>\n
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Executive summary<\/strong><\/h2>\n
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Business description<\/strong><\/h2>\n
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\nIndustry & competition overview<\/strong><\/h2>\n
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Operations & management plan<\/strong><\/h2>\n
1. Your company’s organisational structure<\/h4>\n
2. Ownership information<\/h4>\n
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3. Profiles of your management team<\/h4>\n
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4. Board of director’s qualifications<\/h4>\n
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Product \/ service description<\/strong><\/h2>\n
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![\"Product\/service](\"https:\/\/i0.wp.com\/www.invoiceberry.com\/blog\/wp-content\/uploads\/2016\/11\/product_service_description.jpg?resize=690%2C290&ssl=1\")
Marketing strategy<\/strong><\/h2>\n
1. The definition of your market<\/h4>\n
2. The position of your business<\/h4>\n
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3. Price establishment<\/h4>\n
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4. Distribution<\/h4>\n
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5. Promotional strategies<\/h4>\n
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6. Sales potential<\/h4>\n
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Financial projections<\/strong><\/h2>\n
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