- Business plans, which range from 30 to 50 pages, play an important role in the growth of a business.
- Entrepreneurs can start writing a business plan by including key elements.
- If a traditional business plan seems too overwhelming, you can write a lean business plan.
Writing a business plan, if you’ve never done it before, can seem like a daunting task at first. According to the US Small Business Administration (SBA), the recommended length of a business plan should be between 30 and 50 pages.
Do you still feel nervous trying to figure out what to include in this document? A good rule of thumb is to remember that a business plan plays an important role in the growth of your small business. This document acts as the blueprint for your startup. Plans tend to be very detailed, but are also open to revisions once the initial documents have been drafted. Your business plan helps establish a foundation for the start-up. It allows you and potential investors to better understand the feasibility of the business and the vision and mission you have for its future.
Whether you’re starting a business for the first time or revising an existing document, it’s pretty straightforward to craft a well-written business plan. Let’s take a look at the key elements included in a traditional business plan. We’ll also look at whether your business is better suited to writing a lean business plan.
Traditional business plans
Traditional business plans are the aforementioned 30-50 page documents. These plans usually cover the following in depth.
- Company description, concept and strategy
- Market analysis
- Industry Analysis
- Organization and management
- Financial projections
- Request for financing
Open your business plan with a table of contents that includes page numbers. This will allow you to better describe and break down, section by section, what the reader might expect to find in the document. From there, you can move on to a brief summary (1-2 pages) about your business. An executive summary should be able to answer the following questions.
- Who are you?
- What is your business doing?
- In which sector is the startup?
- Where do you do business?
- What is your expected start date?
- How does the business make money?
- Why are consumers interested in your offers?
Additionally, you can include a value proposition statement that details the value your business brings to its market.
Company description, concept and strategy
Sometimes called a business overview, this section takes a closer look at the nature of your business. Be aware of the general appearance of this section when answering the following questions:
- Where did the idea for your product / service come from?
- How does your product / service work?
- What makes this product / service unique in its market?
- How does this product / service benefit potential and current customers?
- What strategy will you use to achieve your business goals? (This is especially important to address if your startup is still in its development stages and needs a timeline for its goals.)
To date, your startup has conducted enough research and used census data to understand who is in your target market. Use the market analysis portion of a business plan to define your target demographic. Create consumer profiles to identify the distinguishing characteristics, demographics and needs of your target market. Next, outline a strategy for how your business will attract, capture, and retain this audience. Think about what media you will use to reach them.
Over time, you may find a growing audience in another market, such as Gen Z, who may be interested in your offerings. Review this section and create new consumer profiles as needed to better understand the needs of your current and future audience.
Now that you understand who your target market is, you should have an equally in-depth understanding of your industry’s competition. Every business has direct competition, which your startup should know at a glance. They also have indirect competition, which can pose challenges for your business in the future. Understand what direct and indirect competition currently offers their consumers. What are their prices? How do they serve their customers? Why would consumers choose their offers over yours? How do they interact with their customers? You can even use social media platforms, like Facebook and Instagram, to better understand how they reach consumers.
Additionally, the SBA recommends creating a competitive analysis of your entire industry. Your startup should be able to create its own assessment of its strengths and weaknesses. A strength assessment, for example, analyzes your ability to meet customer needs and establish sustainability as a brand. The weakness assessment determines how your business maintains brand loyalty as technology evolves and in downturns.
Organization and management
This section of the business plan describes the organizational structure and ownership of the business. Describe the names of the startup’s owners and their percentage of ownership. Itemize how they are involved in the business and their basic information, including when they were hired, job title and responsibilities, and resumes. Keep this section updated over time, especially as you hire more people for new roles.
There is a lot of information that needs to be covered in the financial section of a business plan. You are strongly advised to provide honest details. If you are unsure of the actual income from your business, the SBA advises you to conduct a review with a professional accountant.
If you want to attract investors or apply for funding for your business, you will need financial projections showing that your startup is profitable. These projections can be presented in tables and charts that detail your company’s cash flow. Additional areas to detail include:
- Income statement (or forecast income statement).
- 12-month income statement.
- Sales forecasts.
- Estimates (usually within 24 months).
- Adequacy Report.
- Profitability Analysis.
- Review for at least three years in the future.
Why do you need to include all of this information? Many companies are looking to attract investors for a little extra capital. Investors will want and need to review their current and existing financial data. This ensures that they are investing in a business that can generate profit and that the business owner himself has established good credit.
Request for financing
This request identifies the exact amount of funding your startup needs from investors to get started. Make sure the request is accurate, not a guess or rough estimate. You will also need to explain how the money will be spent and how it will be spent. In addition, it is also a good idea to detail how you will approach plans for financial situation in the future. What if you decided to sell your business or go public with your business? Investors will need to understand your strategic approach to dealing with these situations.
This space is dedicated to all the other things your startup may have that doesn’t quite fit elsewhere in the business plan. To name just a few documents, these may include:
- Letters of Incorporation.
- Trademark deposits.
- Industry studies.
- Partnership agreements.
Lean business plans
Lean business plans are often ideal for entrepreneurs who need to quickly describe the structure of their startup. These plans are much shorter than traditional business plans – sometimes no longer than a few pages. A lean business plan will cover these aspects of starting a business:
- Value proposition. A clear statement that describes the value your business brings to its respective market.
- Partnerships, resources and key activities. This details information about your current business partners and any strategies you use to gain competitive advantage and create value with your audience.
- Customer segments, channels and relationships. It comes down to traditional market analysis. You should be able to define your target market and audience as well as detail how you are going to reach and engage with them.
- Income stream. Simply put, this is a list of the feeds your business uses to make money.
There is no right or wrong answer as to whether you should choose to write a traditional or lean business plan. You can always start with a lean business plan and move on to a traditional plan, making any necessary changes.
Regardless of the format, however, remember that your business plan should be structured in a concise and objective manner. Over time, you will be happy to see how many goals you have achieved and continue to achieve in business.