Every company should have a business plan, including those that are not pursuing new investment. If you don’t need to show the plan to outsiders, a lean business plan may suffice, one you and your team can use as a roadmap.
However, in case you need to put the plan in front of investors, bankers, and so on, you need a detailed business plan that follows a certain outline — no two ways about it.
Which begs the question: How does one go about creating a convincing business plan?
Start with a business plan outline. On basis of it, you’ll be able to decide how comprehensive or compact your plan should be.
In this article, we will share a simple — yet highly effective — business plan outline. So let’s get started.
Before we get started, you might be interested to check out our industry-specific Ready-made Business Plan Templates with pre-written text and automatic financials which you can easily customize and adapt to your own project, no financial expertise required.
What Must be Put in a Business Plan?
Many people ask the above question, so we decided to take it up before delving any deeper.
There are different types of business plans, but each one should include 6 basic sections because these sections allow a potential investor or an external party to learn about the main aspects of your business at a glance.
What are these 6 must-have sections?
Here we go…
Six Sections Every Business Plan Must Have
The executive summary is the most important part of your business plan — and for this reason you should write it at the very last.
Think of your executive summary as the gateway to the business plan. Whether the target reader will read your plan or throw it into a bin depends on the executive summary.
Bankers, lenders, senior executives, CEOs and managers are busy people. They won’t read a business plan if its executive summary doesn’t excite them, pique their interest, or show them reading the document will be worth their time.
So when you approach them with a detailed business plan, regardless of how promising you think your plan is, their first question that you must address — and address it well — is, “Why should I read it?”
It is important your executive summary makes for an interesting read. Make it to-the-point, underline the key findings from your research and — most importantly — end with a clearly defined and spelled out action plan.
Remember, the executive summary should be brief and precise. At the same time, it should have the most important points. Last but not the least, clearly state what is your ask.
Here’s a head-up: Investors are not really keen to know your side of the equation. That is, what your cost of doing business is or how you will get your service or product delivered to the end customer. Of course these things are important but they are not what investors focus on the most.
What they really want to know is the purpose your product or service is going to serve. In other words, details that investors want to see in clear, concise language are: Will your product or service address specific pain areas of your customers? What problem is your solution solving? How pressing is the need?
Make sure you have these questions covered in this section. Focus on customer needs and the benefits they will get from using your product and service, and investors will be all ears to what you have to say.
At times, you will need to add tables to this section to provide additional details. If that’s the case, go ahead and do that. The idea is not to bombard the reader or listener with information, but at the same time, you should not miss any important details.
So, to summarize, this section needs to share two important pieces of information: The pain points your new offering is going to address and the details about your new product or service.
The Market Analysis
This is one of the most important sections of the business plan. You should use the market analysis to:
- Discuss the needs (pain points) of your customers
- Identify where your clients are
- Explain how you are going to reach them and deliver your solution
In short, you must have a clear idea about your target market. That is, the particular group of consumers at which your service or product is aimed.
In case you are not completely sure about how to identify your target market, here are some useful tips.
First, start with finding answers to these questions:
- What product or service are you selling? What makes your offering special?
- To whom do you want to sell your new offering?
- Exactly why should people purchase from you?
Once you have figured out the answers to these questions, there are two things you must do.
Identify your primary market – Sometimes business owners make the mistake of believing that everyone would be interested in their services or products. However, even if your offering appeals to a wide market, it is important that you identify your ideal customer.
Research your market – Learn as much as possible about your target audience. Use publicly available market reports and industry research. You can also conduct your own customer interviews and surveys. If you have enough budget, conduct a focus group or commission a market research company to do an in-depth market analysis for you.
The Implementation Plan
You should use this portion of the business plan to outline the sales and marketing plan you intend to follow. Also, include the operating plan, the hiring plan as well as all other logistics involved in smoothly running the business.
This is the section where you should talk about the technology you will use as well. However, bear in mind not to inundate potential investors with technical jargon left and right. Explain the technology you will use briefly and in simple, easy to understand language.
In addition to this, share information about your business location, any special equipment or machinery you may need, and the roadmap to get the business about and running. Last but not the least, outline the most important metrics and KPIs you will track to ensure your company is moving in the right direction.
The Management summary
In this section, explain who is behind the business.
Specifically speaking, tell the investors about your organization, key management members, and other relevant details, including, but not limited to, who are the owners of your company, when the company was established, the state in which your business is registered, and the areas in which you have a presence.
Also, briefly describe the experience and background of your key managers. So in a way, these snippets act much like a brief resume, describing different managers’ functions within the company. If you want, you can append full-length resumes of your managers in the document’s appendix.
The Financial plan
This is the last section of your business plan, but that doesn’t mean it is any less important than the others. If anything, this section is probably one the most important.
So what should you include here?
Well, that depends to whom you are presenting your business plan. All the same, regardless of the audience, you would want to include sales forecasts, income statement forecasts, cash flow statement forecasts, and your balance sheet. You should also list the key assumptions you are making to get to these financial projections.
In case you are presenting the business plan to a potential investor, clearly mention the amount of money you need to raise in addition to how you plan to utilize the funds.
Moreover, use hard facts and solid figures to prove that your revenue forecast is based on sound assumptions, not on intuition or personal opinion.
Frequently Asked Questions
Finally, here are the answers to some frequently asked questions.
1. What sort of a business plan do I require?
There’s no one-size-fits-all answer to this question. There are different types of business plans suitable for different needs. So it all boils down to what exactly you want to achieve through your business plan.
Is your business only for your internal team? If so, a lean business plan — a trimmed down version that focuses on taking small steps, assessing your results, and generating incremental improvements, all the while lowering your chances of failure — will prove sufficient.
A useful tool, the lean business plan makes it easier to see the direction in which your company is moving. As you enhance your business strategy, you can refine the document accordingly.
The advantage is that this type of a business plan is not just a business document; quite the opposite, it is a continuous process of rigorous planning, testing, and fine-tuning. It is ideal for businesses that need a tool to track their financial statements and refine their marketing strategy rather than raise new investments.
In case you are trying to woo investors, you are likely to benefit from a comprehensive business plan. Your business plan must have all the important elements and be written in the standard format if you want to impress your potential investors.
Your plan should have things that financial sponsors want to see and in the exact order they want to see them in. For this reason, having a standard plan outline gives you the best chance to stay on track and get the coveted approval from a venture capitalist or a banker.
2. How to create a good business plan?
As often as not, investors want you to present your business in a particular order. However, that doesn’t imply you need to write your business plan in the same order. As a matter of fact, it is usually better to not write the plan in the exact order you show them to others.
Here’s an example. As you now know, the executive summary is the first section of any business plan. All the same, you are likely to write the most effective executive summary when you write it in the end. That is, after you have penned the rest of the business plan.
Similarly, even though the section regarding your management team comes toward the end, you may want to start your business plan with it, for the simple reason that it is the easiest section of the plan. You may also begin with a strategy summary or mission statement. Some people, in contrast, prefer focusing on the numbers before other things, and hence begin with their spending budget or sales forecast.
The long and short of this is you can start anywhere, but get going.
Every business planning process involves a lot of back and forth, so you can begin with any section you like. Some like to start with the easiest part, some opt to begin with numbers, while some others prefer to face the hardest part first up. This is purely a personal choice.
3. Is it important to have the business in a specific order?
There’s no hard-and-fast rule regarding the order in which different sections of a business plan should appear, except that the Executive Summary should come first. Provided that you cover all main components, you should be fine and the business plan will reflect your business goals.
4. Is it necessary to include charts and tables in the business plan?
Bar charts, pie charts, and other charts help illustrate numbers better. They help the viewer digest complex figures in a more effective manner. So it would be best if you use them while explaining the numbers. That being said, there’s no rule as such dictating that a business plan must have tables and charts but of course, it is strongly recommended to include them.
A good business plan can do so much for you, even if you are not seeking funding. If your business plan is only for internal purposes, it serves as a roadmap for success, showing you whether you are heading in the right direction or not.
If you are addressing investors, an effective business plan becomes all the more important. Whether investors will seriously consider your business idea depends largely on your business plan.
Every good business plan needs a fool-proof outline. While you can customize your business plan according to your requirements, evidence shows that it must have six sections — executive summary, opportunity, market analysis, implementation plan, management summary, and financial plan.
You can play around with the sequence in which these sections appear as you deem right, but make sure the executive summary is upfront. It is the most important section of the plan and can make or break your first impression on your target readers.