A business plan is a foundational document that outlines a business's objectives, strategies, and financial projections and aims to set a company up for success. It records and conveys crucial business information that can help a business owner make informed decisions about different steps you’ll need to take to reach your business goals.
It can serve both internal and external purposes. A business plan can provide an internal roadmap for future planning as well as be used externally to secure funding, attract investors, and measure success.
The type of business plan fit for your business will depend on your business type. These can include a startup business plan, a growth business plan, or an internal business plan—each of which serves a unique purpose.
In a nutshell, a business plan is crucial for
Before we proceed further, it’s important to distinguish between a business plan and a business proposal, as, more often than not, it gets confusing differentiating the two!
A business proposal is used to convince a potential client to buy your product or to propose a deal to a potential partner. The aim of a business proposal is to strike a business deal or agreement, not put your business up for sale.
The structure of the business proposal depends on your client or intended audience, but generally, it outlines the proposed product or service, its benefits to the client, a potential agreement that would be attractive to all parties, terms of sale or collaboration (depending on the nature of the proposed transaction), costs & terms and conditions.
It can also include design, engineering details, and staffing depending on what's requested in a ‘Request For Information’ (RFI), a screening tool used to help buyers understand who and what’s involved. A ' Request For Proposal’ (RFP) is used to request a business plan.
The common elements of a business proposal include
A business proposal is used for external purposes only and is often unsolicited and shaped depending on the client. They both have important roles to play in the operations of day-to-day business. Having a business plan helps a company envision its goals and aspirations for the long term, which allows them to achieve its objectives.
A business plan is a living document subject to change to keep up with business needs. On the contrary, a business proposal is a persuasive document used to bring more money into the business through business deals and sales.
In short, a business’s success largely depends on its business plan and proposals for potential partnerships.
| Business Plan | Business Proposal | |
|---|---|---|
| Purpose | Document business needs & future | Pitch to convince a potential client/partner |
| Utility | Mostly internal but also external | Mostly external |
| Common Elements | Business/product description Market Analysis Financial Projects Marketing/Sales Plans Operation/Management Plans | Problem statement & proposed solution Description of proposed product or service Budget and timelines Benefits of sale/collaboration Terms of sale or collaboration |
As you start your own business, it's essential to understand the importance of a comprehensive business plan. In fact, a study conducted by the University of South Australia concludes that 17% of businesses fail did not know to do enough market research, marketing, or sales, in other words, they did not plan enough for their business. This raises the stakes for an effective business plan.
Here are 10 key elements to include in your business plan:
You will need to include key business information such as business name, structure, location and ownership type– sole-proprietorship, partnership or corporation. You can learn more about different types of business plans here. You will also need to include the names of partners (if any) and their stake in the business— This includes both internal and external owners such as your advisory board, as well as details of your internal management team. Your business plan should also include the following in the ownership section:
A pitch-perfect summary of the entire business plan, including its objectives, strategies, and financial projections. It should be structured in the following way:
An overview of the business, including its history, goals, mission, and vision. This section should include information on the following:
A detailed description of the product or service that you are selling, its competitive advantage in the market and its benefits. You should aim to answer the following questions:
An analysis of the market size, target audience, existing competitors and competitor analysis. For instance, if you are starting a cafe in a suburb, you should research the local area to determine the size of the market, target audience, and competitors. This information can help you determine opportunities and threats, and develop strategies to capitalize on opportunities and overcome threats.
A plan for promoting and selling the business's products or services to key target groups. This section should have the following information:
A plan for managing the business's operations and resources. This should include plans for your team structure, recruitment strategy and expansion plans.
A forecast of the business's financial performance over time. In this section, you should answer the following questions:
An outline of your research and development activities and intellectual property strategy, including allocating resources and protecting your innovations through confidentiality agreements.
A description of relevant legislation that impacts your business, including consumer and business law, and industry-specific regulations that might impact your business development.
Understanding that a poorly crafted plan can result in wasted time and effort is crucial. To prevent failure, it is essential to avoid the following common mistakes in your business plan:
Your business plan should be based on extensive research which would include in-depth market analysis, competitor analysis, industry trends, and target customers.
While it is natural to be optimistic about your business, optimism shouldn’t lead to unrealistic projections. Your business plan should include financial projections based on sound assumptions and backed up by data. Do not underestimate your expenses or overestimate revenue.
Your business plan should clearly define your target market, ensuring you have a tailored marketing strategy.
Your business plan should be detailed and include specifics about your products, services, marketing strategies, and operational plans.
Your business plan should acknowledge your competitors and outline how you plan to differentiate your business from theirs.
A business plan should be easy to read and understand. Avoid using complicated language or convoluted sentences that may confuse the reader. Always check your plan for grammatical mistakes.
Your business plan should be a living document that is updated regularly to ensure it is a credible source of information.
An executive summary is a crucial part of your plan, which will outline and focus on why your business is going to be successful. This short pitch will encapsulate key decision-making information in a concise manner. It should be short, compelling & easy to understand to ensure your audience is hooked. Here are some tips for writing an effective executive summary:
Define why your business exists and its goals and vision.
Your audience should know what product or services you are selling, the business's unique value proposition and competitive advantage.
Define the target group your product will likely be attractive to. Use market research and data to support your assumptions.
Explain your marketing strategy to sell to your target group.
You should include data on your current financial state as well as financial projections. This would be key for investors looking for an estimate of returns.
Your summary should also outline the funding you are asking for and how you plan to use the funding if you receive it.
Finally, your summary should leverage your talented team whose skills will be key to the success of your business.
You can learn more about writing compelling executive summaries to attract more investors and clients.
Writing a business plan for your business can be a daunting task, but you can also write an impressive business plan by following these steps:
Define your business goals, objectives, mission and vision before you draw up a plan. Having an end in mind and working backward can help determine if you need extra steps or support to reach your goals.
Your business plan needs to be concise and clear to ensure even the busiest investors are able to grasp all key information quickly.
Your projections, assumptions and claims need to be backed up by rigorous research and data. Evidence-driven decision-making in a business is crucial to reduce any personal biases that might impact decisions.
Clearly define why your product is unique and cutting-edge in a competitive market–does it fill any gaps in the market? Is it innovative? How will it compete against other name brands?
Always be realistic in your financial projections. Do not exaggerate your revenue or profits.
Proofread your plan for errors and inconsistencies and revise your plan if underlying research, data, or market trends change.
Here are some free business plan templates to help you write a clear business plan.
If you are still unsure about writing your own business plans from scratch, online resources can help you. You can download a free business plan to guide you in writing your business plan.
These books and online courses also can help you become a better business plan writer:
These tools can make business plan development seamless and set you up for success.
An effective presentation of your business plan to potential investors can be an effective way to secure funding. To ensure that your business plan presentation is compelling, here are some tips:
Your presentation should convince the audience that you are a confident business owner and have full faith in your business and its promise. Practice with friends and family before presenting to investors to ensure your presentation is executed flawlessly.
Speaking up can reflect a confident personality and a resilient attitude that investors can value in a business owner. It’s also hard to listen and follow someone who is speaking too softly and not enunciating. Speaking up is key if you are trying to capture attention, especially if you need someone to invest in your business.
This is your business, so you know the most about the products, prices, manufacturing process, and marketing plans. When you explain all of these things to potential investors, they need to see how passionate you are about the product. This will give them the confidence to give you their money as funding.
Before outside investors are willing to give you their hard-earned money, they want to see that you are passionate enough to have invested some of your own money as well. Show proof of how much of your own money and resources you have invested in your business. This can signify commitment and belief in your venture.
Being receptive to feedback is key for growth and development. If you happen to be unsuccessful, don’t get too down. Don’t be afraid to ask those you presented to for feedback. Maybe your business plan needs perfecting, or something about the product itself needs to be tweaked.
You can learn more about presenting your business plan and ensure you make a compelling pitch.
Writing a good business plan can be a key determinant in the success of your business. Therefore, seeking expert advice is recommended. You can use a free business plan template to develop your own plan.
You can also hire a lawyer who can help you determine the relevant business laws that could impact your business.
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