What Is a Business Plan?
The 3 basic documents that a startup needs to prepare before the founders go to a fundraising pitch are a concise and to-the-point pitch deck, a comprehensive financial projection, and an elaborate business plan.
A business plan is a thorough document that acts as a bridge between a pitch deck and a financial model which clearly sets out the vision and objectives of the startup and a step-by-step plan of how will it achieve those set milestones and eliminate the predicted obstacles within a given timeline in all parts of the business including sales & marketing, operations, and finance.
Who needs a business plan?
To be clear, every entrepreneur needs a plan for establishing the modus operandi within their business organization.
A well-written business plan forms the guidance for all the people working in a business and facilitates a path of development towards a common goal.
What is a business plan used for?
The business plan has a variety of valuable use cases.
The first and foremost is being useful to the entrepreneur for firmly laying down the timeline for reaching various milestones. It helps establish the various steps that are required to successfully reach the targets set.
The other scenario where having a business plan proves to be incredibly helpful is while going through the process of raising funds. Whether it is through venture capital, angel investors, or obtaining bank finance, it is imperative to have a document explaining the business and future plans to give investors/ banks a sense of the credibility of the future success of the venture.
It can also serve to be valuable in the hiring process to convince a high-ranking crucial employee to join the team.
When should you prepare a Business Plan?
A study by Harvard Business Review found that entrepreneurs that wrote business plans within six to twelve months of deciding to start a business from scratch were most successful and it increased their chances of success by 8%.
It also shows that adherence to a well-drafted business plan increased the chances of venture viability by 27%
Importance of a business plan / why is a business plan important?
The importance of having a properly drafted business plan and adherence to it increases in cases of small businesses and startups as the risk of things going haywire increases due to a lack of established brand image and greater sensitivity to uncertain market movements.
Without a clear step-by-step business plan, it is difficult for the entrepreneur to track the performance of the business and steer the operations of the business to achieve the desired outcomes.
What are the Types of Business Plans?
A specific type of business plan is prepared for a specific set of purposes and has its own niche audience. Hence, to understand the types of business plans effectively, they have to be divided based on audience, scope, & purpose.
For example, based on the audience that it will have, a business plan can be an external business plan if the circulation is expected to be outside the organization, or an internal business plan if it is prepared for the use of executives & employees within the organisation.
A lean version of a standard business plan can also be prepared which skips the information on the background and other detailed descriptions.
Business plans are also prepared for purposes like operations, strategy, growth, feasibility, etc.
Elements of a Business Plan
The elements of a business plan could be customised as per the nature, purpose, and circulation of the document.
But, a general content outline for a typical business plan is as follows:
- Executive Summary
- Problems/Gaps in the Market
- Solution Provided
- Industry Overview
- Market Analysis
- Competitive analysis
- SWOT Analysis
- Management & Operations
- Future Roadmap of Products & Services
- Marketing & Sales Strategy
- Financial Analysis
A business plan by its very nature is a future prospect of a business. It is very reasonable to assume that not every minor detail will be predicted with the utmost accuracy.
No matter how detailed and well-drafted a business plan is, there is always an inherent risk of uncertain events that may require a business to scrap the entire plan and re-write it from scratch.
Nevertheless, it is still a significantly important process towards building a viable and hopefully a successful business.
As Rick Cottrell, CEO of BizResults.com has said, “It is simply a time-consuming process that cannot be rushed”