Exploring business plan: Definition & template guides
What is a business plan? Definition & objectives
Definition
A business plan is a document that serves as the very first foundation for starting a business. But a business plan is more than that: it will also be your compass to guide your business growth throughout. Saying the business plan is the be-all and end-all of your company would not be an understatement.
In plain terms, when you write a business plan, you are crafting a comprehensive roadmap that details:
- your business idea ;
- your strategic vision for your business idea ;
- how you plan to achieve your goals.
This document is not just a tool for internal planning but, as we’ll see, it is also useful (and expected) to convince potential investors, partners, or financial institutions to get onboard with your project.
From establishing a business vision to securing funding
Now that we have a basic understanding of what a business plan should be, let’s review in detail all of its purposes.
First, a well-rounded business plan provides you with a structured approach to your business idea thanks to visions, mission and objectives which are all parts of the roadmap we just mentioned. All in all, a business plan helps you focus on what matters most, to make sure your business stays on track as it grows.
Why is the vision so important? Simply because this is what enables you to make informed decisions and avoid common pitfalls, which is particularly essential in the early stages of your venture.
Another primary objective of a business plan would be to secure funding. Whether you are approaching banks for a loan, seeking venture capital, or looking for business angels, a well-written business plan is your only path to getting funds. Indeed, above all else, financial institutions and investors require a detailed understanding of your business:
- target market analysis ;
- currently unaddressed needs your offer could cater to ;
- existing and potential competitors ;
- financial projections ;
- how you plan to achieve profitability (i.e. your business model)
Without a solid business plan, it is nearly impossible to convince key decision makers that your business is worth their investment.
Managing and planning
Well, planning is in the name and managing goes hand in hand with it, so no surprises here. A business plan aims at:
- setting realistic goals for your business ;
- allocating resources as efficiently as possible ;
- meticulously and cautiously managing risks.
But then again, a business plan is not set-in-stone, it is designed to be updated and revisited in order to track your progress and make necessary adjustments without having your business go astray over time.
How do I write a business plan? Key components
Each section of the plan serves a specific purpose, and together, all elements create a cohesive document that draws the complete picture of your business, from concept to execution. Let’s explore all of these key components in detail.
Description of the business and strategic vision
You should always start by describing your business first. In this first section you provide an overview of your business idea, as well as the products or services that derive from it. In other words explain and show:
- what your business does ;
- who your target market is ;
- what sets your business apart from your future competitors.
In this first section, you also make your mission statement, which focuses on the core purpose and values of your business.
A third aspect you absolutely need to include in this first section is obviously the vision you have for your business. Such a strategic vision mainly refers to two things:
- The long-terms goals you have for your business ;
- how you plan to achieve these goals, which will serve as a basis for your business model.
Your strategic vision should be ambitious yet realistic, providing a clear direction for the future of your business. Ask yourself questions such as:
- Where do you see your business in five or ten years?
- What market position do you aim to achieve?
- How do you plan to innovate and grow?
Market analysis and business model
Before writing this section, you will have to conduct thorough research on your industry, competitors, and target market. The end goal here is to demonstrate that you have a deep understanding of the market environment in which you will operate your business.
This is why you need to identify:
- market trends: demographics, buying behaviors, and preferences ;
- customer needs ;
- potential opportunities and threats (key competitors, their strengths and weaknesses, and how you plan to differentiate your business from them).
This information will pay its dividends when it comes to develop a commercial strategy that effectively addresses the needs of your customers.
Once you have a clear understanding of your market, you can develop a commercial strategy and a business model that outline how you will attract and retain customers. This is the part where you determine your:
- pricing model ;
- sales and distribution channels ;
- marketing and advertising tactics ;
- partnerships or collaborations that will help you reach your target market.
When you craft your business model, you are setting your business up for long-term revenue and success.
Financial planning
Next up, you need to provide your readers with a clear picture of your business’s financial health and future growth potential. Financial projections usually include income statements, cash flow statements, and balance sheets which are nothing less than a snapshot of your business’s financial performance regarding revenue, expenses, profits and losses.
The financial sections should not only be about the future but also about your currently available resources, that is to say an exhaustive budget of your business:
- production ;
- marketing ;
- sales operations ;
- staffing.
This budget has two main purposes:
- establishing how you plan to allocate resources ;
- managing costs to ensure that your business is financially sustainable.
Another important component of financial planning is identifying potential sources of funding. Whether you are seeking loans, grants or equity investment, your business plan should outline how much funding you need, what it will be used for and how you plan to repay or provide returns to investors. Money attracts money so this information is crucial for convincing potential investors or lenders that your business is a profitable investment opportunity.
Risk management strategies and the role of credit management
This section is where you deal with the potential risks that your business may face and how you plan to mitigate them.
Business risks are rather diverse as they range from market fluctuations and economic downturns to operational challenges and legal issues. The goal is to pinpoint them to prevent or at least mitigate their impact by developing appropriate strategies. This is a big step toward company resilience in the face of challenges.
As for credit management, this is about a specific risk: your business’s credit risk. To put it simply, how you extend credit to customers and how you manage your own debts. Without effective credit management, you will have a hard time maintaining a healthy cash flow and avoiding financial difficulties.
So for the sake of financial stability, you need to write down in your business plan your credit policies:
- how you assess creditworthiness,
- how you set credit limits,
- how you handle debt collections.
Business plan template: understanding it well
At first glance, creating a business plan looks like a daunting task, but using a business plan template can make the process much more manageable. A business plan template is the structured format that you need, as it summarizes all the necessary components of a traditional business plan. With a business plan template, you can save a lot of time and focus.
How to use the template?
First select a template that is suitable for your type of business. There are many free business plan templates available online, ranging from simple one-page models to more detailed traditional business plan formats. Choose one that suits your needs and that is flexible enough to be customized.
Once it is done, proceed to fill in the basic information about your business, such as your business name, location, and contact details. Then, work your way through each section of the template, adding details and customizing the content to reflect your business idea and strategic vision. Don’t forget any of the components we just discussed.
As you work on your business plan, keep in mind that the template is nothing more than a starting point. It is a great starting point, granted but you should personalize the content to reflect the specificities of your business. Here are a few pointers:
- Tailor your market analysis to your industry ;
- adjust your financial projections based on your business model ;
- develop a business model and a commercial strategy that put the emphasis on your target market.
When it comes to accurately representing your business as well as its potential, customization is the name of the game.
Introduction to the various business plan templates
There is no such thing as a one-size-fits-all business plan model. Quite the opposite actually, as there are several different models, each designed for different types of businesses and purposes. If you want to be able to choose the right fit for your business plan, you need to get a good grasp on what differentiates these templates.
First up, the traditional business plan, which is a document that includes all the key elements discussed earlier. This one is ideal for businesses that are seeking funding or planning for long-term growth. It provides a detailed overview of the business and its strategies, making it a valuable tool for both internal planning and external communication.
Another popular model is the lean business plan, which is a more streamlined version of the previous one. The lean business plan focuses on the essential elements of the business, such as:
- business idea ;
- target market ;
- value proposition ;
- key metrics.
This lean business plan template is ideal for startups and small businesses in need of quick validation of their business concept and market entry. It is also a good choice for businesses that do not require neither extensive funding nor outside investment.
For businesses still in the early stages of development, the one-page business plan is another viable option as it provides a high-level overview of the business, focusing on the most critical aspects such as the business idea, target market, and revenue model. The one-page plan is also quite popular with entrepreneurs who need a simple and concise document to communicate their business idea to potential investors or partners.
Finally, it is worth mentioning that there are also specialized business plan templates for specific industries or organizations, such as non-profits, social enterprises or franchises.
Resources and tools for creating a business plan
When you create your business plan, you will need access to the right resources and tools. Luckily, in our day and age, there are many digital solutions that can help you write a business plan, conduct market research, develop financial projections ; and overall, save time.
- Business plan software: This type of online solutions offers templates, guidance, and automated tools for creating a business plan. Platforms like LivePlan or BizPlan often include features such as financial modeling, market research tools, and collaboration capabilities ;
- Online courses and tutorials: If you want to develop leadership competencies, online courses and tutorials can provide valuable guidance and insights. Coaching sessions are the best way to learn how to put up a highly effective business plan ;
- Market research tools: As we said before, conducting thorough market research is essential for developing a strong business plan. There are online tools like Statista or more simply Google Trends that can help you gather data on your target market, analyze industry trends and assess your competition.
- Financial modeling tools: Developing accurate financial projections is a critical aspect of your business plan. Financial modeling tools such as QuickBooks or PlanGuru help you create detailed income statements, cash flow statements, and balance sheets, which make your financial projections more realistic and reliable.
To wrap it up, a well-designed business plan is the cornerstone of your entire business strategy. It serves as a roadmap for yourself and business partners but also for potential investors, who need to be reassured that your project is a safe and viable investment. An effective business plan takes quite some time to be designed and written down and it supposes quite a number of preparatory steps like a thorough market analysis, among others.
If you’re committed to ongoing self-improvement and have a passion for learning, if you’re driven to reach your full potential and aim to become the best version of yourself as a leader or manager, then get started with your journey with CoachYZ!
