Figures from the United States Bureau of Labor Statistics show that 70% of businesses fail before reaching their fifth year.
The factors that lead each business to close down depend on the business, owners, market, and external economic factors. But there are trends among businesses that fail:
- 38% ran out of money to fund the business
- 35% offered a product or service the market didn’t need
- 20% couldn’t beat a competitor
- 19% had a “flawed business model”
How do you avoid these issues in your business? That’s where a business plan comes in. A business plan is a document that outlines how your business will operate. It can’t fix failure, but it can give you a roadmap that guides you towards success.
This article will help you design a business plan from scratch, covering why you need one, what to include, and a few tips for a solid business plan.
Table of Contents:
- Why you need a business plan
- Key sections to include in your business plan
- Tips for a great business plan
- Create a successful business plan for a competitive advantage
Why you need a business plan
As some financial institutions require businesses to present a plan when seeking a business loan, many business owners naturally associate a business plan with securing bank funding.
However, business plans serve many other purposes. They can help you:
Convince people to invest
Your business plan outlines your organization, business plans, and offerings. Naturally, you can use it to introduce your business to potential investors and prove your business’s financial health.
Attract and keep skilled employees
Research on 600 businesses from Zenefits shows that 81% of businesses see employee turnover as a “costly problem.” It’s no wonder why. Organizations throughout the United States spend $2.9 million on replacing workers daily and replacing a single worker costs roughly 20% of the worker’s salary.
Naturally, you want to recruit the right employees from the start. Crafting a business plan and sharing it with potential recruits can help you do that.
Why? A good business plan will show potential recruits that your values and goals align with their vision and skills. That alignment will benefit both of you, as your employees will be happier, and you’ll attract the right person for the job.
Evaluate your business idea
You don’t necessarily need to build your business plan for other people. Writing out your business plan is a great way to evaluate your ideas and consolidate your thoughts so you can plan your venture carefully.
Let’s go back to the reasons startups fail. Better planning could have mitigated many of the issues — pricing and cost issues, product mistiming, lack of market need, and poor capital management. A business plan can help you plan better.
Find a business partner
Finally, crafting a business plan gives you a roadmap to present to potential business partners and co-founders. This roadmap will help you find the right partner, as once you know what your business needs to succeed, it will be easier to find a partner with the drive to get there.
Additionally, a sound plan will show that you’re serious about your venture. After all, would you rather join a startup with a clearly defined direction or a startup that says it’s “still figuring things out?”
Key sections to include in your business plan
Though every business plan will look slightly different, most plans include eight key sections:
- Executive summary
- Business goals
- Products and services
- Market opportunities
- Sales and marketing
- Logistics and operations
- Financial analysis
Let’s cover those sections in detail now:
An executive summary is an outline that summarizes your business plan. To make writing an executive summary easy, create it last by drawing from the rest of your plan.
Your executive summary should ideally span half a page to a single page. You don’t need to add much detail to the executive summary, as its primary purpose is to pique the reader’s interest.
Here are some things to include:
- Your business’s “why”
- A description of your offerings
- Your goal and 1 — 3 of the KPIs that measure your progress towards it
- A summary of the market your business operates in
- A summary of your business model
- Where you aim to be in 12 — 26 months
- An overview of your funding plans (including how much money you need to raise)
You can also open with your elevator pitch if you want to start strong. An elevator pitch (sometimes called an “elevator speech”) is a 30 — 60 second proposal used to grab someone’s attention.
Here’s an example of an elevator pitch from Hux:
The “business goals” section (sometimes called the “overview and objectives”) section offers readers a more detailed introduction to your business.
This section should answer five key questions:
- “What is (brand)’s business idea?”
- “What does (brand) do and why?”
- “Who runs (brand)?”
- “Who is included in (brand)’s target market?”
- “What is (brand)’s goal?”
This section is very flexible, so it’s also a great place to outline any charitable visions you have, any Corporate Social Responsibility (CSR) initiatives you want to put into place, and your mission statement.
Many of the parts of this section are subjective, so we won’t cover them in much detail. Instead, let’s focus on two key things: your goals and target market.
Your business goals section should present readers with a clear goal and several objectives to help you get there. Goals are overarching, long-term targets, while objectives are short-term targets measured with KPIs. For example, “sell top-class speaker systems” is a goal, and “increase Instagram followers by 10% with smart hashtags” is an objective.
This section of your business plan should also outline your target market with buyer personas. A buyer persona describes your target market with generalized characteristics like age, gender, race, education level, interests, motivations, and challenges.
Here’s a buyer persona example to draw from:
Product and services
The “products and services” section of your plan contains exactly what you think it should: a detailed description of your offerings. This includes:
- Product purpose
- Manufacturing or procurement plans (including a product roadmap)
- Legal considerations for product development
- Pricing strategy
- How it compares to other products
This section should also outline your offerings’ Unique Selling Proposition (USP). Your USP is the “thing” that makes your offering superior to competing products or services.
AAMI is an excellent example if you are looking for inspiration. AAMI’s USP is “the doers of insurance,” and AAMI emphasizes that it’s an insurance company that will “do everything” in its power to “make your life easier.”
The “market opportunities” section describes the external environment of the market your brand will operate in. Of course, this doesn’t just include your industry and niche but covers your other businesses, too.
You will need to conduct extensive market research on your proposed industry to build this section. Conducting a SWOT and PESTEL analysis can help with this.
A SWOT analysis looks at an organization’s Strengths, Weaknesses, Opportunities, and Threats. Specifically:
- Strengths cover advantages
- Weaknesses cover disadvantages
- Opportunities cover factors that a brand could use to grow and increase profit
- Threats cover factors that could interrupt the brand’s growth, integrity, and profitability
Strengths and weaknesses are internal to your brand, while opportunities and threats concern external factors.
A PESTEL analysis looks at the Political, Economic, Social, Technological, Environmental, and Legal factors that influence a brand positively and negatively. Here’s what a PESTEL analysis includes:
Once you’ve conducted a SWOT and PESTEL analysis, finish your “market opportunities” section by addressing these questions:
- What does the market need?
- How will the market grow in one, two, and five years?
- How will (brand)’s offering meet market needs?
Sales and marketing
The “sales and marketing” section explains how you’ll market your brand and offerings. There are three critical parts to this section:
- Positioning strategy
- Marketing strategy framework
- Public relations strategy
First, you need to cover your positioning strategy. Your positioning strategy outlines your brand identity (or how you want people to remember your brand).
To understand what a positioning strategy looks like in practice, check out this ad from Honey:
It positions Honey as a friendly shopping assistant that helps users “save time and money.”
Develop a positioning statement to explain your positioning strategy. This statement includes what you do, your target market, what makes you special, and what you do for customers. You might like to use a template like: “(brand) helps (target market) to (what you do) because (brand) offers (what makes you special).”
Second, build your marketing framework. A marketing framework is a detailed roadmap that explains how you will reach your marketing goals. You’ll need to consider marketing channels like these when designing your framework:
- Social media advertisements
- Paid-Per-Click (PPC) advertisements
- Social media
- Content marketing
- Email marketing
- Offline marketing (including mail marketing, billboards, TV, and radio)
Third, design your Public Relations (PR) strategy. Your PR strategy outlines how you communicate with customers, stakeholders, and anyone impacted by your brand.
As part of developing your PR strategy, you’ll need to build a website, develop a brand voice, and create customer communication channels. These channels could include a customer service email, phone number, social media chatbot, or website chatbot.
Build a crisis management plan to put extra detail into the PR section.
The “management” section describes how your organization will handle management, staffing, and employee relations. To introduce this section, describe your company’s hierarchy and outline the roles managers and employees will play in the organization.
Then, outline your company culture. Developing a strong company culture will help you create a more productive workplace, attract better employees, and build chemistry and connection between team members. As your company culture starts forming as soon as you launch, it’s crucial to include it in your business plan.
You might like to use some of these adjectives to describe your culture:
Finally, you should outline how you plan to manage your employees. This includes how you will approach workload management to ensure employees don’t get burned out. As we know that people’s moods impact their productivity, creative thinking, and decision-making abilities, managing people’s workloads is vital to keeping your employees happy and healthy.
Logistics and operations
The “logistics and operations” section covers the “how” of your brand. It includes a detailed description of:
- Your manufacturing process
- Product delivery and shipping plans
- Research and development plans
- Staffing needs and plans
- Vendor and supplier plans
- Inventory management
- Legal considerations (including any patents, trademarks, insurance, licenses, permits, and copyrights you need)
You should also outline any tools and software you will use in this section. That includes Human Resources (HR) and payroll systems, marketing and media tools, and Customer Relationship Management (CRM) tools.
Though selecting the right tools may seem tricky, there are many great options to choose from. You can implement factoHR for the accurate management of your HR and payroll system, Mention for media monitoring, and Salesforce as a CRM tool.
Finally, you should conclude your business plan with a detailed analysis of your business finances. There are five key documents to include:
1. A balance sheet, which reports your assets, liabilities, earnings, and shareholder equity
2. An income statement (or “profit and loss statement”), which shows your projected revenue and expenses so readers can see if your company will become profitable
3. A cash flow statement, which shows how your business will spend its capital. This document includes all expenses — staff wages, inventory costs, and operational costs.
4. An operating budget, which shows projected revenue and expenses for a certain period (like a quarter)
5. A break-even analysis, which projects when your business will break even. When a business breaks even and becomes profitable, revenue becomes higher than expenses.
The scope of this section will depend on the reason you are creating a business plan. If you are seeking investors, a partner, or a loan, you may need to consult with a financial analyst or accountant to put these financial projections together. Otherwise, internal projections will work.
The “financial analysis” section is arguably one of the most crucial parts of your business plan, so it’s worth spending more time on this section. Make it presentable and engaging. For example, you might want to create videographics, infographics, graphs, and charts to highlight key figures.
Tips for a great business plan
Now that you know what a business plan includes, you’re nearly ready to create your own. Here are two tips that can help you write a business plan effectively.
Create an additional one-page plan
A one-page plan is a concise, visual version of your business plan. This shortened plan is like a cheat sheet or image-based executive summary. Naturally, it’s a great document to give potential investors during a pitch or new employees during training.
To create a one-page plan, take each business plan section’s key points and summarize them into dot points. Then, add them into a business plan template like this:
Check for bad spelling and grammar
Imagine this: you attend an investor presentation, and when you open a copy of the new business plan you were given, there’s a spelling error in the marketing and sales plan. What kind of impression would this give you about the business? Would you still invest?
Poor spelling and grammar can turn investors away, as it makes your plan look rushed and poorly thought out. To avoid this and keep your plan looking professional, use a spelling and grammar checker like Grammarly, ProWritingAid, or the Hemingway App.
Create a successful business plan for a competitive advantage
Creating a good business plan is more of an art than a science. However, you can’t go wrong if you include these sections in your plan:
- Executive summary
- Business goals
- Products and services
- Market opportunities
- Sales and marketing
- Logistics and operations
- Financial analysis
Excellent plans focus on your finances, require extensive market analysis, and present your business in a positive (but not embellished) light. Above all else, they show the “thing” that makes your brand special.