What Is a Business Plan?

Basic Definition, Types, Elements, and How to Make a Business Plan


A business plan is a document that outlines a company's objectives, strategies, and detailed plans for achieving success. It serves as a roadmap for the organisation, covering various aspects such as marketing, finance, and operations.

While it is commonly associated with startups, established companies benefit from a well-defined business plan. If you are wondering how to make a business plan, this article will help you understand what elements should a business plan possess.

This document serves both external and internal purposes. Externally, a business plan is used to attract investors and secure funding. It helps communicate the company's vision, market potential, and growth strategies to potential stakeholders.

Internally, a business plan acts as a guiding document that aligns the executive team and employees towards common goals. It ensures that everyone understands the strategic priorities and works towards achieving them.

A business plan is not a static document but requires periodic review and updates. It should be revised to reflect achieved goals, changing market conditions, and evolving business strategies. In some cases, an established company may create a new business plan when it decides to embark on a new direction or venture.

What is a Business Plan?

A business plan is an essential document for any new business venture, serving as a blueprint for success. Financial institutions and venture capital firms often require a well-developed business plan before considering funding for startups.

Business experts advise never to operate without a business plan, as it significantly decreases the chances of long-term survival. Creating and adhering to a solid business plan has several advantages.

Not just it allows entrepreneurs to thoroughly evaluate ideas before investing substantial resources, but it also helps identify and navigate potential obstacles to achieving success.

A business plan should encompass projected costs and potential challenges associated with each business decision.

While business plans may differ among competitors in the same industry, they typically share fundamental elements such as an executive summary, detailed descriptions of operations, products or services, and financial projections.

The plan also outlines the strategies the business will employ to attain its goals.

While it is important to provide sufficient detail, striking a balance between thoroughness and brevity is crucial in ensuring the plan effectively communicates the business's vision and objectives.

Important Points

  • A business plan is a document describing a company's core business activities and how it plans to achieve its goals.

  • Startup companies use business plans to get off the ground and attract outside investors.

  • A business plan can also be used as an internal guide to keep an executive team focused on and working toward short- and long-term objectives.

  • Businesses may create a lengthier traditional business plan or a shorter lean startup business plan.

  • Good business plans should include an executive summary and sections on products and services, marketing strategy and analysis, financial planning, and a budget.

Writing a Business Plan: Essential Elements and Tips

Wondering how to write a business plan? A well-crafted and thoughtfully written business plan holds significant value for a company. While there are several templates available for business plans, they can be too generic. Instead, focus on developing a unique and compelling document that showcases your company's distinctiveness and potential for success.

These are some of the essential elements to include when writing a business plan:

Executive Summary

Provide an overview of your company, including its mission statement, leadership, employees, operations, and location. Concisely convey the key highlights of your business.

Products and Services

It outlines the offerings of your company, including pricing, product lifespan, benefits to consumers, production and manufacturing processes, patents, proprietary technology, and any relevant R&D activities.

Market Analysis

Conduct a comprehensive analysis of your industry, target market, and competition. Demonstrate how your company fits within the industry, highlight strengths and weaknesses, and assess consumer demand and market share potential.

Marketing Strategy

It describes how you will attract and retain customers, including your distribution channels, advertising, and marketing campaigns. Specify the media platforms you will utilise to reach your target audience effectively.

Financial Planning

It includes financial projections, such as sales forecasts, balance sheets, and other relevant financial information. Established businesses should provide financial statements, while startups can include targets and estimates for the initial years and details about potential investors.

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Develop a comprehensive budget that covers staffing, development, manufacturing, marketing, and other business-related expenses. This demonstrates your understanding of financial management and responsible resource allocation.

Remember these additional tips when writing your business plan:

Customise Your Plan: Tailor your plan to fit the specific needs and nature of your business. Use only the sections that are most relevant and impactful.

Length and Structure: Aim to keep the main body of your plan within 15-25 pages. Include additional documents and data as appendices for reference.

Highlight Uniqueness: Emphasise what sets your business apart from competitors and why it has the potential for success. Show your readers the distinctive value your company brings to the market.

Avoid Generic Templates: While templates can provide a starting point, strive to create a plan that is original and compelling. Stand out by showcasing your company's singularity and vision.

By incorporating these elements and tips, you can create a well-rounded and engaging business plan that effectively communicates your company's objectives, strategies, and potential for success.

Considerations to Keep in Mind While Making A Business Plan

If you are also thinking how to make a business plan. Keep these things in mind, while making a business plan.

Strategic Financial Projections

A comprehensive business plan should incorporate strategic financial projections, commonly known as pro-forma financial statements or "proformas." These projections go beyond a simple budget and encompass various elements such as current and future financing needs, market analysis, and the company's marketing strategy.

Other Aspects to Consider

In addition to financial projections, a business plan serves as a tool for owners to gain a comprehensive understanding of their objectives, goals, available resources, potential costs, and potential challenges associated with specific business decisions.

It enables owners to make necessary adjustments to their structures before implementing their ideas, thereby increasing their chances of success. Moreover, a well-crafted business plan enables entrepreneurs to forecast the financing required to launch and sustain their ventures.

If there are particularly intriguing aspects of the business, the business plan should emphasise and leverage them to attract potential financing partners.

Dynamic Nature of the Business Plan

It is important to recognise that a business plan should not remain a static document. As a business evolves and grows, the business plan should evolve alongside it.

Conducting an annual review of the company and its plan allows entrepreneurs or owners to update the document based on achievements, setbacks, and new information.

This process offers an opportunity to assess the effectiveness of the plan in facilitating the company's growth.

Types of Business Plans: Traditional and Lean Startup

Business plans are essential tools for companies to set objectives, manage operations, and attract investors and lenders. They come in different forms, with two common types being traditional and lean startup plans.

Traditional Business Plans: The traditional business plan is the most commonly used format. It provides in-depth detail and comprehensive sections. These plans tend to be longer and require more work to develop.

They include a thorough analysis of each section, covering aspects such as executive summary, company description, market analysis, products/services, marketing strategies, financial projections, and supporting documents.

Traditional business plans are suitable for businesses seeking substantial funding or requiring a detailed roadmap for operation.

Lean Startup Business Plans: Lean startup plans to follow an abbreviated structure and focus on key elements. They prioritise brevity and simplicity. Lean startup plans are not as common as traditional ones, as they can be as short as one page.

While they lack extensive details, they provide a concise overview of the business model, target market, value proposition, revenue streams, and key metrics.

These plans are often used by startups in dynamic and fast-paced environments, emphasizing agility, flexibility, and quick adaptation. If requested by investors or lenders, additional information can be provided to supplement the lean startup plan.

It's important to note that there is no right or wrong type of business plan. The choice between a traditional or lean startup plan depends on the specific needs, goals, and nature of the business. Companies should select the format that best aligns with their vision, audience, and resources.

Why Does Business Plan Fail?

While a well-crafted business plan is important, its mere existence does not guarantee success. One common reason for failure is a lack of adherence to the plan itself. Strong leadership that remains focused on executing the plan is crucial.

Additionally, flawed assumptions made during the planning stage can lead to unexpected cash flow shortages and uncontrolled budgets. Furthermore, changes in markets and economic conditions can pose challenges.

Without the flexibility built into the business plan, adapting to new circumstances becomes difficult.

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