A business plan can make or break a business. A strong, concise, and detailed plan provides a clear road map for the future, forces you to think through the validity of a business idea, and can give you a much greater understanding of your business’s financials and your competition.
A business plan typically looks out over 3-5 years, detailing all of your goals and how you plan to achieve each one of them. If you’re applying for a loan or looking for funding from investors, a business plan shows you’re prepared and have fully vetted your business idea.
Here are the essential elements to include in your business plan
1. Executive summary
This is the first page of your business plan and should include a mission statement, which explains the main focus of your business, as well as a brief description of the products or services offered, basic information such as ownership structure, and a summary of your plans going forward.
Here are some questions to get you going on your journey:
- What does your business actually do?
- Which industry is your startup in and where is it located?
- When did the company start?
- Why are consumers interested in your offering/s?
- How does the startup make money?
2. Business description, concept and strategy
This section provides an overall snapshot of your business. It contains important information including its registered name, physical location/s, names of key people in the business, history of the company, nature of the business and more details about products or services that it offers (or will offer).
Use this section to explore your startup more in-depth, in order to focus on the following details:
- How does your product or service work?
- Where did the idea for these offerings come from?
- What makes your products and services unique?
Additionally, you can also use this section of a business plan to expand on your company’s goals. You do this by outlining the goals for your business, the steps necessary to take to achieve them, and the startup’s goal timeline.
3. Market analysis
Market analysis in a business plan outlines your ideal customer and their demographic profile. You’ll study the needs of your customer and how your business can not just meet those needs, but anticipate and meet future needs.
This section also covers who or what makes up your competition. Every business has competitors and can be direct or indirect (meaning that they may challenge your startup in the future).
You should be able to know, at a glance, which businesses are your competitors. Understand what the competition is currently offering, their pricing, and how they serve their customers. Analyze what would make consumers choose your products or services over a competing company.
4. Business and management structure
Here, you’ll list your business’s legal structure, such as a sole proprietorship (Enkeltmandsvirksomhed), Private Limited Company (ApS) etc, as well as key employees, managers, or other owners of the business. You’ll include your background, relevant experience, and core business responsibilities. It should also include the percent ownership that each owner has and the extent of each owner’s involvement in the company.
5. Products and services
In this section, you can detail the products or services you offer or plan to offer. It should include the following:
- An explanation of how your product or service works
- The pricing model for your product or service
- The typical customers you serve
- Your sales and distribution strategy
- Why your product or service is better than what the competition is offering
- How you plan to execute orders
You can also discuss current or pending trademarks and patents associated with your product or service.
6. Marketing and sales plan
This is simply an explanation of what your marketing strategy is and how you will execute it. You can address how you plan to persuade customers to buy your products or services, or how you will develop customer loyalty that will lead to repeat business. This section can also highlight the strengths of your business and focus on what sets your business apart from your competition.
Every marketing and sales plan should cater to your specific company. However, the following points should be covered for an effective plan:
- Define the objective
- State the current situation
- Spell out any barriers that exist
- Review strengths and assets to aid in success
- Determine a marketing and sales strategy
- List your requirements
- Outline a plan of action
7. Business financial analysis & projections
If you’re a startup, you may not have much information on your business financials just yet. However, if you’re an existing business seeking funding or loans, you’ll want to include:
- Sales forecast
- Cash flow statement
- Profit and loss statement
- Expenses budget
- Break-even analysis
- Balance sheet for at least three years out into the future
This is a critical part of your business plan if you’re seeking financing or investors. It outlines how your business will generate enough profit to repay the loan or how you will earn a decent return for investors.
You may also include ratios that highlight the financial health of your business, such as:
- Net profit margin: the percentage of revenue you keep as net income
- Current ratio: the measurement of your liquidity and ability to repay debts
- Accounts receivable turnover ratio: a measurement of how frequently you collect on receivables per year
List any supporting information or other additional information that you couldn’t fit in elsewhere, such as resumes of key employees, licenses, equipment leases, permits, patents, partnership agreements, receipts, bank statements, contracts, and personal and business credit history. If the appendix is long, you may want to consider adding a table of contents at the beginning of this section for ease of use.
Additional tips for your business plan
Now that you’ve written your business plan, here are some tips to ensure your hard work stands out:
Keep it concise: All you need is 15 to 25 pages for a good business plan, as long as the plan is clear, concise and contains all of the relevant information. Focus on the key elements of your business plan and avoid getting too bogged down by the technical aspects of your business or using too much industry jargon. You can always put supporting information or other important details in the appendix.
Tell a story: You want people to be excited by your business, so clearly show how you are solving a problem, doing something groundbreaking or creating something that has global potential.
Write for your audience: The most common business plans are written for investors, lenders and current employees. Know which one you’re targeting and write the plan with them in mind. For example, if you’re writing a plan for a potential investor, it needs to get to the point swiftly, as they don’t want to spend their time reading a long business plan full of irrelevant information. Provide informative ideas which will get them interested in your business. Don’t try to pack every piece of information into the plan, but just enough to make them want to meet with you to discuss your ideas in much more detail.
Tell the truth: Make sure you know your numbers like the back of your hand and only include information and data that you can back up with hard facts and stats. It’s tempting to exaggerate claims, but be prepared to be challenged.
Your business plan is a working document: You may always return back to your business plan and edit accordingly. Revise and reevaluate as you see fit in order to put your business on the most direct track to success.
Proofread: Spelling, punctuation and grammatical errors can jump off the page and turn off lenders and prospective investors, taking their mind off your business and putting it on the mistakes you made. If writing and editing aren’t your strong suit, you may want to hire a professional business plan writer, copy editor or proofreader.
For any further information regarding creating your Business Model Canvas, you can book a free discovery call.
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