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What does a business plan help with

Do You Really Need a Business Plan?

A business plan is a very important and strategic tool for entrepreneurs. A good business plan not only helps entrepreneurs focus on the specific steps necessary for them to make business ideas succeed, but it also helps them to achieve short-term and long-term objectives. Benjamin Franklin once said, “If you fail to plan, you are planning to fail.” ( Benjamin Franklin ).

While a business plan is essential to entrepreneurship, not every entrepreneur sees the need for one. Many are reluctant to have their plan written down and there are numerous articles online claiming that the business plan is dead or irrelevant. Of course, not everyone agrees with that. A large number of business funding experts support the idea that having a good business plan is not enough. Even excellent business ideas can be useless if you cannot formulate, execute and implement a strategic plan to make your business idea work. If you are looking to raise funds from institutional investors and lenders, keep in mind that having a good business plan is extremely valuable. You should aim to have a well-documented plan that speaks for itself. It needs to be clear and easy to read and understand.

Before writing a business plan , it is important to consider two important factors:

  • Who will the reader be?
  • What do you want their response to be?

For example, if you are interested in raising capital, investors will likely be your target audience. If you are interested in partnerships or joint ventures, your potential business partners will be your audience. Whoever this audience may be, focus on the key message you want them to receive in order to get the response you want.

Four Reasons to Write a Business Plan

1. To raise money for your business

Potential investors or lenders want a written business plan before they give you money. A mere description of your business concept is not enough. Instead, ensure you have a thorough business and financial plan that demonstrates the likelihood of success and how much you will need for your business to be successful in the long-term.

2. To make sound decisions

As an entrepreneur, having a business plan help you define and focus on your business ideas and strategies. You not only concentrate on financial matters, but also on management issues, human resource planning, technology and creating value for your customer.

3. To help you identify any potential weaknesses

Having a business plan helps you identify potential pitfalls in your idea. You can also share the plan with others who can give you their opinions and advice. Identify experts and professionals who are in a position to give you invaluable advice and share your plan with them.

4. To communicate your ideas with stakeholders

A business plan is a communication tool that you can use to secure investment capital from financial institutions or lenders. You can also use it to convince people to work for your enterprise, to secure credit from suppliers and to attract potential customers.

Creating a business plan involves a lot of thought. You need to consider what you want to do and use that as a starting point. It does not need to be complicated. At its core, your plan should identify where you are now, where you want your business to go and how you will get there. Writing a good business plan does not guarantee success, but it can go a long way toward reducing the odds of failure. Besides, even if you are not looking for investment, your entrepreneurial plans will fall flat quickly without a plan to guide them.

The Duquesne University SBDC provides free business consulting for entrepreneurs in the Greater Pittsburgh area. Click here to request free consulting, or contact the SBDC for additional help and information.

Rich Longo is a Business Consultant with the Duquesne University Small Business Development Center where he assists new and existing businesses with developing and implementing business plans. He is also certified in Technology Commercialization. Rich has extensive experience with Federally Qualified Health Centers and has been a Senior Vice President of Network Management for Devon Health Services, Inc., one of the largest regional PPOs in the northeast. He has been an adjunct faculty member at Robert Morris University and the University of Pittsburgh.

Why Does a Business Need a Business Plan?

Business plans provide direction and pertinent information to owners, employees, potential investors and lenders. An effective business plan details the mission and goals of a business and the ways in which your company will achieve them. It provides a road map for business owners just starting out as well as for larger companies looking to expand and excel in their area of expertise. A business plan efficiently answers common and pertinent questions regarding the daily operations of a business and its future.

Owners

Small business owners and entrepreneurs sometimes think they do not need a business plan. They sell a product or provide a service that seems to be a straightforward, no-questions-asked type of operation. However, small business owners gain powerful insight into their business when they take the time to develop and review a business plan. New marketing strategies, untapped areas of development and expansion and effective pricing strategies emerge when examining business practices.

Finances

Most businesses require financing by lenders or investors at some point in their development. A business plan details the financial health of a company, its chances of success and its ability to pay financial obligations. The very detailed information contained in the financial section of a business plan includes information on the cost of materials, equipment and business operations along with data describing a company’s pricing strategy and profit potential. Potential lenders and investors insist on this detailed information before providing money to a company.

Employees

Employees need clear direction in both their job duties on a daily basis and their long-term purpose within a company. A business plan describes this information clearly and concisely for employees as they seek to increase individual productivity and that of the business as a whole. Employees in supervisory and management positions remain focused on the big picture by having clear goals and objectives in place.

Government Agencies

Government agencies sometimes request business plans and other pertinent information depending on the circumstances and form of business under which you are operating, according to New Jersey attorney Donald A. Griesmann. This becomes especially important when setting up a nonprofit organization that will be closely examined by both the Internal Revenue Service and the state in which the business plans to operate.

Monitor Progress

Use a business plan to evaluate your business and its progress. Schedule annual business reviews to assess overall business operations, financial health and goal attainment as outlined in the business plan. The business plan should guide changes made within the business in order to complete as-yet unreached goals. Keep in mind that business plans can change and evolve according to the needs of your company.

Writing a business plan can be overwhelming to new entrepreneurs. Your local chamber of commerce may offer assistance in creating a workable and realistic business plan. There are many business plan templates and samples available online for additional help and guidance. The U.S. Small Business Association, a federal agency, provides detailed information on all aspects of business operations, including writing business plans.

Business Plan

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master’s in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

Khadija Khartit is a strategy, investment, and funding expert, and an educator of fintech and strategic finance in top universities. She has been an investor, entrepreneur, and advisor for more than 25 years. She is a FINRA Series 7, 63, and 66 license holder.

Vikki Velasquez is a researcher and writer who has managed, coordinated, and directed various community and nonprofit organizations. She has conducted in-depth research on social and economic issues and has also revised and edited educational materials for the Greater Richmond area.

What Is a Business Plan?

A business plan is a document that defines in detail a company’s objectives and how it plans to achieve its goals. A business plan lays out a written roadmap for the firm from marketing, financial, and operational standpoints. Both startups and established companies use business plans.

A business plan is an important document aimed at a company’s external and internal audiences. For instance, a business plan is used to attract investment before a company has established a proven track record. It can also help to secure lending from financial institutions.

Furthermore, a business plan can serve to keep a company’s executive team on the same page about strategic action items and on target for meeting established goals.

Although they’re especially useful for new businesses, every company should have a business plan. Ideally, the plan is reviewed and updated periodically to reflect goals that have been met or have changed. Sometimes, a new business plan is created for an established business that has decided to move in a new direction.

Key Takeaways

  • 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.
Want Funding? You Need a Business Plan

Understanding Business Plans

A business plan is a fundamental document that any new business should have in place prior to beginning operations. Indeed, banks and venture capital firms often require a viable business plan before considering whether they’ll provide capital to new businesses.

Operating without a business plan usually is not a good idea. In fact, very few companies are able to last very long without one. There are benefits to creating (and sticking to) a good business plan. These include being able to think through ideas before investing too much money in them and working through potential obstacles to success.

A good business plan should outline all the projected costs and possible pitfalls of each decision a company makes. Business plans, even among competitors in the same industry, are rarely identical.

However, they can have the same basic elements, such as an executive summary of the business and detailed descriptions of its operations, products and services, and financial projections. A plan also states how the business intends to achieve its goals.

The plan should include an overview, and, if possible, details of the industry of which the business will be a part. It should explain how the business will distinguish itself from its competitors.

While it’s a good idea to give as much detail as possible, it’s also important that a plan be concise to keep a reader’s attention to the end.

Elements of a Business Plan

The length of a business plan varies greatly from business to business. Consider fitting the basic information into a 15- to 25-page document. Then, other crucial elements that take up a lot of space—such as applications for patents—can be referenced in the main document and included as appendices.

As mentioned above, no two business plans are the same. Nonetheless, they tend to have the same elements. Below are some of the common and key parts of a business plan.

  • Executive summary: This section outlines the company and includes the mission statement along with any information about the company’s leadership, employees, operations, and location.
  • Products and services: Here, the company can outline the products and services it will offer, and may also include pricing, product lifespan, and benefits to the consumer. Other factors that may go into this section include production and manufacturing processes, any patents the company may have, as well as proprietary technology. Information about research and development (R&D) can also be included here.
  • Market analysis: A firm needs a good handle on its industry as well as its target market. This section of the plan will detail a company’s competition and how the company fits in the industry, along with its relative strengths and weaknesses. It will also describe the expected consumer demand for a company’s products or services and how easy or difficult it may be to grab market share from incumbents.
  • Marketing strategy: This section describes how the company will attract and keep its customer base and how it intends to reach the consumer. A clear distribution channel must be outlined. The section also spells out advertising and marketing campaign plans and the types of media those campaigns will use.
  • Financial planning: This section should include a company’s financial planning and projections. Financial statements, balance sheets, and other financial information may be included for established businesses. New businesses will include targets and estimates for the first few years plus a description of potential investors.
  • Budget: Every company needs to have a budget in place. This section should include costs related to staffing, development, manufacturing, marketing, and any other expenses related to the business.

Unique Business Plans Help

The best business plans aren’t generic ones created from easily accessed templates. A company should entice readers with a plan that demonstrates its singularity and potential for success.

Types of Business Plans

Business plans help companies identify their objectives and remain on track to meet goals. They can help companies start, manage themselves, and grow once up and running. They also act as a means to attract lenders and investors.

Although there is no right or wrong business plan, they can fall into two different categories—traditional or lean startup. According to the Small Business Administration (SBA), the traditional business plan is the most common. It contains a lot of detail in each section. These tend to be longer than the lean startup plan and require more work.

Lean startup business plans, on the other hand, use an abbreviated structure that highlights key elements. These business plans aren’t as common in the business world because they’re short—as short as one page—and lack detail. If a company uses this kind of plan, it should be prepared to provide more detail if an investor or lender requests it.

Special Considerations

Financial Projections

A complete business plan must include a set of financial projections for the business. These forward-looking financial statements are often called pro-forma financial statements or simply the “pro-formas.” They include an overall budget, current and projected financing needs, a market analysis, and the company’s marketing strategy.

Other Considerations for a Business Plan

A major reason for a business plan is to give owners a clear picture of objectives, goals, resources, potential costs, and drawbacks of certain business decisions. A business plan should help them modify their structures before implementing their ideas. It also allows owners to project the type of financing required to get their businesses up and running.

If there are any especially interesting aspects of the business, they should be highlighted and used to attract financing, if needed. For example, Tesla Motors’ electric car business essentially began only as a business plan.

Importantly, a business plan shouldn’t be a static document. As a business grows and changes, so too should the business plan. An annual review of the company and its plan allows an entrepreneur or group of owners to update the plan, based on successes, setbacks, and other new information. It provides an opportunity to size up the plan’s ability to help the company grow.

Think of the business plan as a living document that evolves with your business.

What Is a Business Plan?

A business plan is a document created by a company that describes the company’s goals, operations, industry standing, marketing objectives, and financial projections. The information it contains can be a helpful guide in running the company. What’s more, it can be a valuable tool to attract investors and obtain financing from financial institutions.

How Do I Write a Business Plan?

The well-considered and well-written business plan can be of enormous value to a company. While there are templates that you can use to write a business plan, try to avoid producing a generic result.

Start with the essential structure: an executive summary, company description, market analysis, product or service description, marketing strategy, financial projections, and appendix (for documents that support the main sections). Your plan might include any funding requests you’re making. Keep the main body of your plan to around 15-25 pages.

What Does a Lean Startup Business Plan Include?

The lean startup business plan is an option when a company prefers a quick explanation of its business. The company may feel that it doesn’t have a lot of information to provide since it’s just getting started.

Sections can include: a value proposition, a company’s major activities and advantages, resources such as staff, intellectual property, and capital, a list of partnerships, customer segments, and revenue sources.