In our last blog about how to get your business started we talked about the importance of a business plan, and today we’re going to discuss how to write one. There are many types of business plans, but there also aren’t any set rules. You don’t have to choose a standard business plan when it comes to building your startup roadmap. You can pick and choose from different templates, adding or subtracting elements depending on the needs of your business. The most important thing is to build a plan that is going to be useful in actively building your business, securing any necessary funding, and keeping you focused on your long-term goals as your business grows.
There are generally two types of business planning approaches: traditional and lean. The traditional approach involves writing a standard business plan. This type of plan is a detailed projection of your company’s first 3-5 years and it is the type most commonly required for investment, as lenders want to fully understand the logistics of how the business will sustain growth and profit.
Lean startup plans on the other hand, are more focused on the core elements of your business structure. They include only the key points of your business plan and are a good option for those operating a simple business model or who don’t want to spend much time planning. This can also be a good place to start before jumping into a full business plan, which you can always create later if it becomes necessary for investment or as a helpful tool for future planning.
STANDARD BUSINESS PLAN
There are a number of business plan formats and templates to choose from. While they usually have anywhere from 6 – 9 sections, the content that they cover is very similar. For the purpose of this article, we’re going to review the content you need to provide rather than focus on specific plan structure.
- An Executive Summary
All business plans start with an overview of your business plan, providing a snapshot of your company and goals.
- A Business Description
You need to describe what service or product your business will provide, the market and competition, and your company’s differentiators. It’s important that you consider not only the present market, but also future developments within the industry.
- A Full Market Analysis
As the name suggests, this is a thorough analysis of your market. This is where you identify your customers and competition, and outline your strategies for building your competitive advantage.
- Your Execution Plan
This is where you lay out all the details of how your business will operate. There is a lot to cover when it comes to the execution of your business, so many plans break this up into several sections like Service or Product Line, Development Plan, Marketing, and Operations. However you choose to format your execution content, make sure you cover key information like your sales and marketing plan, operations plan and performance metrics.
- Details About Your Organization & Management
It’s important to include an overview of your company’s legal structure, location of operations, and any pertinent history. It should also include information about the current team and/or who you need to hire, along with any relevant management structure details.
- A Financial Forecast
Perhaps the most important part of the business plan is the financial forecast. The goal of this information is to demonstrate how your business will achieve financial success. To do this, you will need to provide a detailed forecast covering projected sales, income, operating budgets, any capital expenditure and cash flow. Typically the financial forecast will cover a five year outlook and will contain graphs to help explain projections.
- Appendix Documents
Include an appendix if you need to include additional information, images, resumes, licenses and permits, and other pertinent legal documents or materials.
LEAN STARTUP PLAN
In short, lean startup plans use a simple chart to cover the goals, activities, structure and finances of your business. Just like the standard business plan, you can choose to include as much or as little as you like, but remember that the point to the lean strategy is for your plan to be “lean”.
But that doesn’t mean you should skip over anything important. Your chart needs to describe:
- What niche your service or product your business will serve or the problem it will solve
- Your unique value proposition
- Competitive advantage
- The target market
- The competition
- Channels for reaching your market
- Cost structure for your product or service
- Revenue stream
- Required resources
- Key activities, milestones and metrics
If this sounds more like your style than a traditional business approach, a simple Google search should provide dozens of templates for you to start deciding what format your lean business chart should take. There are also a number of subscriber-based tools out there thanks to the work of other entrepreneurs like yourself if you prefer a more automated route.
Regardless of how you approach your business plan, remember that a plan is only useful if it’s actually implemented. There’s no point writing a solid business plan and then never utilizing it. That doesn’t mean you shouldn’t be flexible in your approach to planning though. After all, plans can – and sometimes should – change. A business plan is a fluid document that will change as your business grows. The plan you start out with today might be something quite different in one, five or ten years.
There are plenty of free business plan templates and other tools out there to help you build your business plan. A great (free) place to get started is the U.S. Small Business Association at www.sba.gov. They have loads of helpful information along with sample business plans, checklists, and even a tool for building your own plan.