What is a Business Plan?

What is a Business Plan

A Business Plan is a perfect tool to write the most accurate portrait of the market, product/service, and entrepreneur’s behavior and attitude. It is a written document that contains detailed information on the field, products and services, customers, competitors, suppliers, all the operational and financial goals of the company, as well as its marketing and sales strategy. Most of all, it aims to display the strengths and weaknesses of the business, and to protect the gains and losses of the organization. This way, it is possible to identify the viability and sustainability of the idea.

Who needs a Business Plan?

The business plan is important both for the one who is opening the business and the one who is expanding it. Having a business plan doesn’t eliminate the risk, although it avoids errors by lack of analysis. It is important for the one who wants to:

  • Organize the ideas before starting a new venture;
  • Have a guided expansion of their running business;
  • Have support toward business management, both on figures and strategies;
  • Make communication among partners, employees, investors, customers, and suppliers easier;
  • Raise funds, whether financial, human, or partnerships.

A business plan may take longer to be concluded. However, an accurate and complete document is essential for the success of the company – and that’s also why it is important to be kept updated. But most importantly, a business plan is more recommended for established companies where forecasting is possible. New companies, like startups, have more doubts than answers and that’s why a business model is much more recommended in the very early stages of a company.

How to write a Business Plan?

Cover and Table of Contents

The business plan must be presented as a single volume printed, in a folder, for example. The cover needs to show the name of the company and the board, address, telephone, e-mail, website, and date. It can also have the brand’s logo. Then, the first page should be a table of contents, displaying everything the business plan contains, with titles and corresponding pages.

Executive Summary

It is a short statement of the objective, i.e., why the business plan is being produced and registered. The summary shouldn’t be longer than half a page, but it needs to have:

  1. Concept, product, targeted audience, and competitive advantage;
  2. Financial resources (including sales and profits if running);
  3. Financial requirements (how much needed to foundation or expansion);
  4. Type of operation, owners’ names, and foundation date;
  5. Patents, prototypes, main partnerships, among other core information.

Business Description

This must start from the market and location where the company will be inserted, with the present scenario and future perspectives. It has to be based on facts, with referenced sources. After that, the description of the business itself, with the field, new or established, partners and board (and their occupations in the company), customers, and how the product is distributed and marketed.

Product/Service Description

The product or service description aims to explain how the consumers utilize that and what features differentiate against the competition. It also includes a way to acquire a competitive advantage over the others.

Market Analysis

An accurate market analysis allows getting to know your target customers so you can set price, distribution, and advertising strategies. First, define the size of the market, with demographic profile, social and economic tendencies, and growth perspective. Then, calculate how much you will sell annually, in order to find out your market share. On that, you’ll be able to build your strategic planning. Describe, also, your positioning strategy. Check the differential advantage of your product/service, the niche you want to reach, how you will do it, and who your competition is. Besides, add the price of the product/service, according to the pricing method you judge more sustainable for the business. Determine the logistics and distribution process, observing the distribution channels your competitors use – a different channel may be a strategical advantage.

Competitive Analysis

This has to be carried out in order to get to know the strengths and weaknesses of your competitors (including how to exploit those weaknesses), the strategies that give you an advantage over them, and the barriers that you must impose to avoid the entry or expansion of competition in the market. Remember that, when looking at competition, it is important to also look at the indirect competition, both nowadays and in the future.

Marketing Plan

Define all the activities that are going to be developed in order to meet the wishes and needs of your customer. Here, you can employ the four Ps: product, price, place, and promotion. That’s the best way to know the value your product carries, both on price and quality, in order to make decisions about advertising it. Getting to know what you sell helps to make other people buy that.

Operational and Management Plan

This is for you to project how your business works continuously. The operational plan describes all the business’s structure, facilities, equipment, inventory, supplies, as well as all the logistics and supply chain of the operation. And management involves the responsibilities of each team, what each team is going to deliver, and the necessary and specific knowledge of each function. Therefore, it also includes a strategy for finding and hiring qualified personnel.

Financial Plan

The financial plan needs to contain income statement, cash flow and balance sheet (but, if your business is just starting, then you need to inform where the initial financing will come from – bank credit, outside investment, bootstrapping, etc.:

  • Income statement: reports the revenue generation capacity the company will have, as it shows how much the business gains and loses throughout the year, by subtracting costs and expenses from income, reaching profit, or loss.
  • Cash flow: says how much money you need to meet your obligations and where that revenue will come from. Ideally, a cash flow statement should be made monthly during the first year, quarterly in the second and annually thereafter.
  • Balance sheet: measures assets against liabilities, in order to calculate net worth. The current business plan should include the balance sheet for the last period, and the plan for new business needs to project what equity it may accumulate.

Supporting Documents

Here is the section for placing any other documents that you assess as essential for evaluating your business, but that cannot be included in the previous sections. For example, resumes, contracts with suppliers, contracts with customers, legal and tax documents, etc.

Why is Business Plan Important?

A business plan is important because it is able to determine whether your idea is sustainable for business or not. It also shows the weaknesses to be repaired, as well as the strengths to be potentialized. It is a kind of script, to guide the company towards its future, reducing the chance of failures and unforeseen events. Besides, it is a core document if you are looking for partners or investors, in order to demonstrate profitability. Many new entrepreneurs go through a really hard time in the first months due to a lack of planning. Besides simply having the idea and finding a nice location, planning the company’s future is essential. And that’s why the business plan is imperative. Finally, don’t forget that a business plan is a living document. It contains projections and reports, thus, needs to be regularly reviewed and updated, whenever necessary.

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