Who Reads Business Plans?
- Small Business
- Business Planning & Strategy
- Business Plans
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List of Objectives When Starting a Business
What are the benefits of preparing a business plan, purpose of corporate planning.
- Why Is Planning an Important Step in Starting a Business?
- Business Planning & Analysis
Business plans are detailed written overviews that outline the ways in which a business will ideally be operated. Comprehensive plans include market research, competition analysis, strategic marketing and operating objectives, financial outlooks and short- and long-term goals. While many business plans are written for the express purpose of attaining small business financing, they can be used for a variety of other purposes as well.
Before authorizing a small-business loan, a financial institution will want to read a well-crafted business plan. This helps the lender assess if the business objectives are sound and if you’ve accurately anticipated various expenditures and projected revenue. The business plan is usually read in conjunction with the business loan application, and the lender uses the plan to help her judge whether your business represents a sound financial risk for the bank.
If you decide to take on investors at any point, they will want to read your business plan before making a commitment. The business plan spells out anticipated revenue streams, earning projections and researched plans for reaching your target demographic. It also details the specifics of your products and services and the potential for growth and expansion, and your financials reflect the performance of the business to date. Reading your business plan, in essence, allows potential investors to get a glimpse into your business’s potential future.
If you decide to bring on a partner or hire someone in a high-level executive position, he will want to read your business plan. Reading the plan will help a potential upper-echelon employee understand your objectives, your operating procedures and his own potential for career growth and development. This will help both you and your prospect decide if he is a good fit for your organization and shares the same business philosophy and professional approach.
Smart Business Owners
Ideally, you will regularly read and review your plan to help keep your small business on track. Your business plan should contain goals, objectives and measurements that set the course for your business. Regularly measuring the real-life progress of your business against your business plan goals will help you determine what parts of your operation need to be tweaked. For example, if revenues are not as strong as anticipated, revisit the marketing plan and review the factors you based your initial projections on. Ask yourself if the market has changed or if there are internal measures to take to redirect the business's course.
- SBA.gov: Create Your Business Plan
- SBA.gov: Guide for Writing a Business Plan
Lisa McQuerrey has been a business writer since 1987. In 1994, she launched a full-service marketing and communications firm. McQuerrey's work has garnered awards from the U.S. Small Business Administration, the International Association of Business Communicators and the Associated Press. She is also the author of several nonfiction trade publications, and, in 2012, had her first young-adult novel published by Glass Page Books.
What are the main purposes of a business plan, why is an effective business plan introduction important, how to write a business synopsis, how to write a comprehensive business plan, what are the key elements of a business plan, the importance of a business plan, how to write your business proposal, good questions to ask during an employee goal meeting, what is the difference between a marketing & business plan, most popular.
- 1 What Are the Main Purposes of a Business Plan?
- 2 Why Is an Effective Business Plan Introduction Important?
- 3 How to Write a Business Synopsis
- 4 How to Write a Comprehensive Business Plan
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Chapter Two. Who Reads the Business Plan?
The business plan will be read by people both inside and outside the company. Inside readers will usually be limited to the management team and the board of directors. Outside readers will mostly be those who are sources of funding, although professional advisers will read the plan, and occasionally even a supplier, distributor, or others who have a business interest in the company may want to read it in order to understand how the company runs so he or she can better serve it. For this chapter, however, we will concentrate on those who read the business plan in the context of potentially financing the business.
In general, there are two types of funding sources: lenders and investors. The lenders we are generally referring to are commercial banks, corporate finance companies, and investment bankers.
When lenders consider a loan request, they concentrate on what are sometimes referred to as the “four Cs” of credit: character, cash flow, collateral, and (equity) contribution.
Investors look at many of the same factors, although they often weigh the factors differently and even define them differently. This is because lenders and investors are looking for different things in a business they fund.
Lenders are looking for the ability of a company to repay its debt. No matter how big a hit a company is, a lender usually has only the promise of being rewarded with steady payments of principal and interest. While a borrower may become a better customer ...
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Who Will Read Your Business Plan?
We talk to many business owners who have avoided writing a formal business plan because they aren’t sure where to start or what to include. If that sounds like you, it is time to get past the excuses and put a few things in writing. What should your plan contain? To a great extent that will depend on your audience, but every business plan contains these sections:
- Company Background – This section includes history, mission, vision, values, goals and performance to date. Include a general introduction of the business structure, products, services and key team members.
- Market Research – Who are the target customers and what is important to them? What makes key competitors successful? What market trends indicate there is opportunity for success?
- Business Strategy – How will you meet the needs of your target customer? What will your pricing, marketing, distribution and product strategies be? For example, will you try to be the low cost alternative or a premium product? Do you want to be known for innovative products or great service?
- Operations – The strategy section looks at the external side of your business and the promises you make to clients about what they will get when they buy your product. The operations section focuses on processes and resources required to support your strategy. These resources may include things such as training and bonus structure, staffing and facility or technology needs. Will you need to hire new people, expand your space or make capital expenditures to achieve your goals? That information should be captured here. Don’t forget to include a timeline or milestone that indicates what will occur and who will be responsible for critical tasks.
- Financials – The financials should look at both your capital needs ( money to buy equipment) and operating funds (money to cover the day to day expenditures). This section also includes your projected results. If you follow the plan and everything goes right, what will your results be? What are the results if you have a less than successful year?
While every plan touches on all these elements, not every business plan needs the same level of detail in each section. Where you put your emphasis and where you spend your time depends on who you are writing the plan for. Investors, bankers, you, your partners and even employees need different information to evaluate your business and make decisions about investing time and money with you.
Writing for Bankers
If the primary objective of your business plan is to secure financing from a bank, start and end with the numbers. The financial section of your plan will be the section they turn to first. It makes sense to create the projected financial statements first and then develop a plan which will help you achieve those goals. Present your assumptions clearly and consistently throughout the plan. If you haven’t made any sales yet, include compelling research information which supports your sales forecasts. Be sure to include a discussion of critical risks in the operation section. This is not being negative, it is being realistic. Bankers tend to be risk averse, so give them confidence by demonstrating you have thought through some of the worst case scenarios.
Writing for Investors
Are you looking for investors for your business? Most business investors assume any financial projections put in front of them are optimistic, especially if this is a new business. They are more concerned with the business concept than the numbers.
Present your ideas confidently and succinctly. Clearly describe the needs of potential customers instead of focusing on your infatuation with an innovative idea. Prove you have done your homework and thought through the execution details.
Investors will look at the market research section to see if you have solid information driving your business forward. They are also concerned with the people behind the business and want to know what makes them uniquely qualified to lead so spend more time writing compelling bios in the key team member section of the company background.
Writing for Yourself
Is your primary objective is to develop an operating plan to use as a map for success? Spend your time perfecting and growing the action section of your business plan. Business owners tend get bogged down in the introductory sections of the plan and end up burning out before tackling the real meat of the plan; the strategy and operation sections. Action steps are overlooked and impede the growth of the business. Don’t let that happen to you.
Grammar and spelling can take a backseat when you write your first draft. The purpose is to get your ideas on paper so you can review; and update them over time. The best business plans are not beautiful documents sitting sedentary, gathering dust on a shelf. They are tattered and smudgy from frequent use as a road map, guiding you along a path to success.
There has never been a better time to start working on your business plan. Include all of the crucial elements I listed in top of this blog post, but focus your energy on the elements most relevant to your audience.
Looking for a starting point for your plan? Download our free outline or call us for help.
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Return from Who Will Read your business plan to Business Plan Template
Who Reads Business Plans?
by Charles Crawford
Published on 26 Sep 2017
The business plan is a planning tool with a number of audiences and secondary uses. Its primary purposes include testing ideas to see their probable effect on the company, and measuring performance against goals or objectives. Important outsiders who may read a company's business plan include investors, lenders, suppliers and executives who may be joining the company.
The core management team should be intimately involved in the writing and updating of a company’s business plan. Instead of filing the plan away and forgetting about it after the company begins operations, management should keep the plan close and use it for its intended purpose — planning. The first edition of a business plan should point out the problems management is facing, along with the intended remedies. Subsequent plans should track the progress in those problem areas. The financial section of the plan can show the results of improvement efforts over time.
Investors and Lenders
In many cases, the first outside readers of a business plan are the private investors who have expressed interest in investing in the company. Such investors range from sophisticated venture capital firms to local angel investors. These people want to know about return on investment, exit strategies, break-even points and why anyone would want to buy the company’s product or use its service. Bankers and other lenders want to gauge the creditworthiness of company principals, and see what kind of collateral or guarantees might be available to support a loan request.
At nearly every stage in its development, a company will want to have the best possible payment terms with its suppliers. A start-up business will want to negotiate deferred payment terms of practically any length. A company that has been succeeding in its industry will want the best possible payment terms. If a supplier’s credit manager can learn more about the company by reading its business plan — or at least the financial section — the company might be able to negotiate favorable terms.
If a company has been involved in searching for a senior executive to join the management team and has decided on a particular candidate, it may be the right time to make a significant gesture. Management can grant him access to the plan for a certain period of time, after he signs a non-disclosure agreement. This gesture delivers two messages to the candidate. He sees that the company is serious about making an offer. He also sees that the company takes planning seriously and may turn out to be a well-run business — a place where he would like to work.
6 Reasons Why Your IT Company Needs a Business Plan and a Guide on How to Write One
If you've recently started a new business, you've probably wondered about the importance of developing a business plan. Do you really need one? Is any specific computer software needed to create one? How exactly do you write a detailed business plan? Just because there are some questions arising, many entrepreneurs overlook the importance of writing a plan down.
What is the business plan, then? Some think it's just another meaningless piece of paper, but they could not be more wrong. It is, in fact, the most acceptable way to convey all key information about your company's objectives. We'll go through the most crucial details with you if you're not familiar with the concept.
Business plan as a map to success - why is it important for IT companies to have it?
An IT solutions company business plan is like a map - it contains an outline of your company's objectives and describes how you want to achieve them. If formed properly, a business plan can help you assess your success and schedule for the future. According to one study , entrepreneurs who create a formal business plan are 16% more inclined to reach viability in a competitive market. This factor alone could persuade to invest some time into constructing a business plan. Let's take a closer look at some other reasons.
Reason 1: To successfully start and grow your IT business
Even if your business is just a small startup, a solid IT department business plan is essential for its growth. Many small businesses fail due to the lack of well-defined business ideas and poor market analysis - it's a big mistake.
To write a business plan, you need to verify your data, rethink your sales strategies, and consider how you want to reach potential customers. It can help you identify possible weaknesses before you make the big decisions. Looking at the numbers, you can also allot your funds and plan purchases more efficiently - seeing a bigger picture here is a huge advantage you should make use of. You can also look up business plan templates online to see how this section should look.
Reason 2: To get inspired
Small business or not, when researching the business situation, you have to take a look at your competition and the overall market . Learn more about your customer segments, analyse your balance sheets, and calculate your start-up expenses, as educating yourself in the field of consumer needs and industry trends may inspire you to try a different approach or adjust something in your company's long-term plans. New ideas are essential to business growth, and writing a business plan based on what you find out can inspire you to get creative with fresh concepts.
Read various IT industry business plans online - there are a lot of free templates and examples on the Internet. You might find an idea you like in one of them and want to use it in your company's business plan as well! Knowing how other business plans are structured and what information is included in them can definitely benefit you in the future. Proper research is one of the keys to a winning business plan, especially for small businesses.
Reason 3: To prove to potential investors that you are reliable
Possible investors and lending institutions will want to know if your company is viable. To raise capital, you need to be taken seriously - and without a formal business plan that includes proper financial statements, you can anticipate a rejection .
You need a plan to demonstrate that you are accountable and responsible, with a viable market for your services. Show how you want to reach your financial milestones, and convince investors that your business idea will be efficient. Explain what you need the funds for and how you are planning to manage the financial resources - remember to mention any additional revenue streams you might have. Having an appropriately written plan can give you a considerable competitive advantage on the market.
Reason 4: To set and communicate your objectives and marketing strategy
A good IT company business plan, based on extensive market research will certainly present your ideas meticulously. You can announce your business plans and prospective marketing initiatives to future business partners and key members of the company. The financial information you provide, such as operating costs, financial forecasts and cash flow statements included in the plan can let both your management team and prospective customers know, what exactly are your goals for the company.
Present your business goals to your target audience, and use the business plan as a depiction of how determined you are to achieve your pursuits. Nevertheless, remember about setting realistic goals - your objectives must be measurable, as overly ambitious ones may appear too difficult to achieve. A well-planned approach will motivate and inspire not only you but also your IT company's employees. Furthermore, a good marketing strategy will indicate to your business partners that you are willing to face challenges and do your best.
Reason 5: To evaluate the success of your business
You should revisit your business plan after some time has passed, maybe even on a follow-up event with your team. You can then determine whether you met your objectives by reviewing the strategic plan you worked so hard on. Examine the cash flow statement, think about the customer relationships established, and see your business from the customers' perspective.
Did you achieve your goals? Is your company doing well, or do you need to make some changes? Is there any noticeable progress? Your stakeholders and clients will undeniably want to know how your company is doing. Having a business plan makes it easier to present the results later by allowing you to compare specific periods and results of planned actions taken.
Reason 6: To prepare for the future
The process of creating the plan can help you map out your company's expected future, as proper research will help you grow. A well-researched business plan can help you focus on the most important strategies. When determining your goals, you should consider what might happen in the future and different possible outcomes.
While developing your business plan, research your competitors to learn about their goals and strategies; this will provide you with valuable market insights and allow you to plan accordingly. Find out what the recent trends are and what seems to be gaining popularity - and see if you could perhaps capitalise on that. If you can use the knowledge you get during the business plan writing process to better prepare for the future, it's terrific!
How to write a company business plan?
Traditional business plans include various details about the company plans - general marketing strategy, financial projections, information about the product or service you want to sell, and a company description. You should also declare the business model you plan to operate on and what is your target market. That seems like a lot of information, but instead of a detailed business plan, you can use a lean business plan , which provides the information in a simplified way.
You may wonder how long does it take to write an IT consultancy business plan - it could take one month or a whole year, depending on how complex your ideas are. How much does it cost to write a business plan, then? Professional writing service is expensive, so you may prefer to do it yourself - luckily there is an abundance of free business plan templates on the Internet for every business plan format, and you can use them as a blueprint to construct yours.
What are the different business plan types and which one should I make?
You can choose between a traditional business plan and a lean business plan; the main difference is the level of detail and information provided. Even though writing a lean one is quicker, it would be preferable to use a traditional type if you need a startup business plan. It may be tempting to save time, but unless you understand roughly how to build a lean plan, stick to the classics. Want to know how? Let's take a look at our step-by-step guide on how to write a business plan.
While you can use an online business plan template , let's first learn about the fundamental elements of a business plan so you can create your own in future. A typical business plan should include all of the eight core sections:
- Executive summary
- Company description
- Market analysis
- Product or service description
- Business structure
- Financial plan and analysis
- Sales and marketing strategy
- Operational strategy
A guide on the 8 essential sections your business plan NEEDS to have
Section 1: executive summary .
The executive summary is basically an introduction to your plan - so explain, why your business idea is important, and create what essentially is a persuasive sales pitch . Convey the mission statement and convince the reader that the product or service you offer is indeed something novel and interesting.
What is your vision for the business? Try to limit this part of the plan to 1-2 pages - state your main idea clearly and go forward. Whether you're a new business or an established IT company, assume the reader is unfamiliar with you and provide enough information in the executive summary for them to become acquainted with your business.
Section 2: Company description
In the company description section, you plainly describe your business , starting with providing its name. Include any details such as its background, physical address, who are the leaders and key members of the company, and what makes you different from the competition. Is it an S corporation, a limited liability company, or a sole proprietorship? What exactly is the product or service being offered, and by whom was it originally created? Who founded the business and why?
Section 3: Market analysis
Another aspect to include is the market analysis . Don't worry, it's not as difficult as it seems. In this section, you should assess your market's size, customer demographics, and purchasing patterns. You should also include information about your industry's competition and what keeps your company from losing to other businesses in the same market. Have you come up with some cutting-edge technology? Do you have your own proprietary distribution channels? Are you certain you'll have constant access to the resources you'll need? Provide the answers to those questions in the business plan.
Depending on whether you are a small startup or a bigger company, you might have to conduct a large-scale analysis for that - it is worth spending some time on it though, as this part of the plan can affect your future greatly. Include information about your future expansion strategy in your business plan as well!
Section 4: Product or service description
T his part is one of the easiest to go through. Explain in detail, what are you selling. Prove its originality and viability - clarify, why it is your product that will gain popularity on the market. Your promotion strategy and future marketing plans should be described here as well, so the reader knows you have everything planned and ready to go. Remember to capture your reader's attention - present all of the unique features of your product or service, and persuade them that you're bigger and better than the competition.
Discuss the price in relation to the quality of what you offer - many buyers are not interested in a cheap product if it is of poor quality, so try not to focus too much on the low price. How long will the production process take? When and where will customers be able to purchase your product? To have a solid foundation, provide answers to all the questions that come up. A brainstorming session would be a great help.
Section 5: Business structure
Investors and potential business partners will most likely be interested in your business structure . Unless you are a one-person operation, your business structure will almost certainly have multiple levels, and they should be shown in your business plan. List the employees of the company, their positions, and their daily responsibilities. Introduce the management team and board members, giving a good understanding of who is in that group.
You do not need to include lengthy descriptions of each employee; however, remember to briefly explain why they are important to the company and what experience they have in the field they are employed in. You can also include an organisational chart in your business plan as a visual guide.
Section 6: Financial strategy
Money is one of the most important aspects of business, so don't forget to include a section on your financial strategy . This part of your business plan is where you paint a picture of your expected revenues and losses. Regardless of whether you are a small business just starting up or a large corporation making millions, inform the reader about your expected net profit, potential cost savings, and legal expenses. Provide an income statement or a balance sheet if you have them, as they can have a considerable impact on your financial plan.
If your company is new and you do not yet have the data required, be clear about it and inform about any potential financial risks; if you have been in business for a long time, demonstrate your financial stability. The chief financial officer of your business can certainly help you with collecting the required data. Make sure your financial analysis is as thorough as possible. If you have spreadsheets and balance sheets that describe your cost structure, feel free to incorporate these into your business plan. Income statements are a good addition as well. Bank loans, and angel investments are often funding sources for new businesses, and banks and investors will likely want to see your business plans to make sure they can return the loan. An investor in your company can feel confident and know that you have the ability to operate it successfully if you have a proper, adequately written plan.
Section 7: Sales and marketing strategy
Another section of your business plan is your sales and marketing strategy . Here you are supposed to describe your plans for future marketing campaigns, promotion plans for driving sales and your general selling proposal. Writing a brief explanation of how your marketing efforts will affect the target group and influence buyers to choose your product or service is a must.
How will you be getting leads and what is your budget for it? How do you intend to make the world know about what you're selling? After conducting thorough market research, you will most likely come up with new promotional campaign ideas. Be specific - break down the marketing steps that you want to take to conquest the market. Make sure that all your ideas are actually relatable to the product or service you are planning to sell, as not every type of marketing suits every product.
Section 8: Operational strategy
Every business must have an operational strategy in place to ensure that everything runs smoothly at all times. The key to this section of a business plan is to explain how you will operate and what steps you will take to ensure it. Here, you tell the reader how your products will be made (or how the service will be provided) and how you will maintain a certain standard.
Will you have to work with another company, such as a delivery service or a manufacturer? Do you plan to outsource part of the work? List all of the connections you'll need and explain how they'll facilitate the creation of your product. If you have to physically store your items somewhere, explain where and why. It's also a sound idea to include information about any possible risks and safety precautions you want to take to mitigate them.
Optional section: The appendix
After all core parts of your business plan are written down, you can think about adding an appendix . Its purpose is to provide any supporting information or documentation - those can be product tester testimonials, customer lists, information on intellectual property, licenses required for your business to operate and more. If you share confidential information in the appendix, make sure it is secure and inaccessible to unauthorised parties. Because an appendix is unlikely to be included in a business plan template found online, you must be creative here.
Also, keep in mind that the appendix is the last section of the business plan, so if it's multiple pages long and includes large blocks of text, the reader may skip it. Aim to keep your writing simple and easy to read.
The overall importance of an IT company business plan
Not only will it explain the complexities of your business to readers, but it will also serve as a guide for you to take the next steps on your path to success. This strategic tool can assist you in obtaining proper funding and hitting new financial milestones - potential investors will be pleased to see that you are achieving what you promised.
While conducting market research for the market analysis section of the business plan, you can also learn new things about your industry competitors. You might discover as you're describing your product for the business plan that there are some issues that need to be fixed or that the competition has an advantage that you need to be ready for. The business plan will assist you in establishing a focus on what still needs work and not stressing about things that have already been accomplished, thus helping you in achieving your goals.
No matter what type of industry or consumer your product is dedicated to, a good business plan can greatly assist you when climbing to the top . Whether it is a traditional business plan written from scratch by you or made using business plan templates from the Internet, it is an important part of establishing a great product or service, that will influence your business growth.
If you want to learn even more about IT business, you can read more about business plans on our blog .
With Microsoft technologies related since 2005. He graduated from the Computer Science Faculty of the Bialystok University of Technology where he was the leader of the .NET Group and the Microsoft Student Partner. Four times finalist of the national stage of the Imagine Cup competition, and later the mentor and the jury member of the contest. Co-founder of the Bialystok .NET Group. He lectured .NET development at the Bialystok University of Technology. Microsoft MVP in the Client Application Development category in 2008-2010, when he actively participated in the IT community. Constant new technology enthusiast and IT consultant.
14 Reasons Why You Need a Business Plan
10 min. read
Updated October 27, 2023
There’s no question that starting and running a business is hard work. But it’s also incredibly rewarding. And, one of the most important things you can do to increase your chances of success is to have a business plan.
A business plan is a foundational document that is essential for any company, no matter the size or age. From attracting potential investors to keeping your business on track—a business plan helps you achieve important milestones and grow in the right direction.
A business plan isn’t just a document you put together once when starting your business. It’s a living, breathing guide for existing businesses – one that business owners should revisit and update regularly.
Unfortunately, writing a business plan is often a daunting task for potential entrepreneurs. So, do you really need a business plan? Is it really worth the investment of time and resources? Can’t you just wing it and skip the whole planning process?
Good questions. Here’s every reason why you need a business plan.
- 1. Business planning is proven to help you grow 30 percent faster
Writing a business plan isn’t about producing a document that accurately predicts the future of your company. The process of writing your plan is what’s important. Writing your plan and reviewing it regularly gives you a better window into what you need to do to achieve your goals and succeed.
You don’t have to just take our word for it. Studies have proven that companies that plan and review their results regularly grow 30 percent faster. Beyond faster growth, research also shows that companies that plan actually perform better. They’re less likely to become one of those woeful failure statistics, or experience cash flow crises that threaten to close them down.
- 2. Planning is a necessary part of the fundraising process
One of the top reasons to have a business plan is to make it easier to raise money for your business. Without a business plan, it’s difficult to know how much money you need to raise, how you will spend the money once you raise it, and what your budget should be.
Investors want to know that you have a solid plan in place – that your business is headed in the right direction and that there is long-term potential in your venture.
A business plan shows that your business is serious and that there are clearly defined steps on how it aims to become successful. It also demonstrates that you have the necessary competence to make that vision a reality.
Investors, partners, and creditors will want to see detailed financial forecasts for your business that shows how you plan to grow and how you plan on spending their money.
- 3. Having a business plan minimizes your risk
When you’re just starting out, there’s so much you don’t know—about your customers, your competition, and even about operations.
What’s your biggest business challenge right now?
As a business owner, you signed up for some of that uncertainty when you started your business, but there’s a lot you can do to reduce your risk . Creating and reviewing your business plan regularly is a great way to uncover your weak spots—the flaws, gaps, and assumptions you’ve made—and develop contingency plans.
Your business plan will also help you define budgets and revenue goals. And, if you’re not meeting your goals, you can quickly adjust spending plans and create more realistic budgets to keep your business healthy.
- 4. Crafts a roadmap to achieve important milestones
A business plan is like a roadmap for your business. It helps you set, track and reach business milestones.
For your plan to function in this way, your business plan should first outline your company’s short- and long-term goals. You can then fill in the specific steps necessary to reach those goals. This ensures that you measure your progress (or lack thereof) and make necessary adjustments along the way to stay on track while avoiding costly detours.
In fact, one of the top reasons why new businesses fail is due to bad business planning. Combine this with inflexibility and you have a recipe for disaster.
And planning is not just for startups. Established businesses benefit greatly from revisiting their business plan. It keeps them on track, even when the global market rapidly shifts as we’ve seen in recent years.
- 5. A plan helps you figure out if your idea can become a business
To turn your idea into reality, you need to accurately assess the feasibility of your business idea.
You need to verify:
- If there is a market for your product or service
- Who your target audience is
- How you will gain an edge over the current competition
- If your business can run profitably
A business plan forces you to take a step back and look at your business objectively, which makes it far easier to make tough decisions down the road. Additionally, a business plan helps you to identify risks and opportunities early on, providing you with the necessary time to come up with strategies to address them properly.
Finally, a business plan helps you work through the nuts and bolts of how your business will work financially and if it can become sustainable over time.
- 6. You’ll make big spending decisions with confidence
As your business grows, you’ll have to figure out when to hire new employees, when to expand to a new location, or whether you can afford a major purchase.
These are always major spending decisions, and if you’re regularly reviewing the forecasts you mapped out in your business plan, you’re going to have better information to use to make your decisions.
- 7. You’re more likely to catch critical cash flow challenges early
The other side of those major spending decisions is understanding and monitoring your business’s cash flow. Your cash flow statement is one of the three key financial statements you’ll put together for your business plan. (The other two are your balance sheet and your income statement (P&L).
Reviewing your cash flow statement regularly as part of your regular business plan review will help you see potential cash flow challenges earlier so you can take action to avoid a cash crisis where you can’t pay your bills.
- 8. Position your brand against the competition
Competitors are one of the factors that you need to take into account when starting a business. Luckily, competitive research is an integral part of writing a business plan. It encourages you to ask questions like:
- What is your competition doing well? What are they doing poorly?
- What can you do to set yourself apart?
- What can you learn from them?
- How can you make your business stand out?
- What key business areas can you outcompete?
- How can you identify your target market?
Finding answers to these questions helps you solidify a strategic market position and identify ways to differentiate yourself. It also proves to potential investors that you’ve done your homework and understand how to compete.
- 9. Determines financial needs and revenue models
A vital part of starting a business is understanding what your expenses will be and how you will generate revenue to cover those expenses. Creating a business plan helps you do just that while also defining ongoing financial needs to keep in mind.
Without a business model, it’s difficult to know whether your business idea will generate revenue. By detailing how you plan to make money, you can effectively assess the viability and scalability of your business.
Understanding this early on can help you avoid unnecessary risks and start with the confidence that your business is set up to succeed.
- 10. Helps you think through your marketing strategy
A business plan is a great way to document your marketing plan. This will ensure that all of your marketing activities are aligned with your overall goals. After all, a business can’t grow without customers and you’ll need a strategy for acquiring those customers.
Your business plan should include information about your target market, your marketing strategy, and your marketing budget. Detail things like how you plan to attract and retain customers, acquire new leads, how the digital marketing funnel will work, etc.
Having a documented marketing plan will help you to automate business operations, stay on track and ensure that you’re making the most of your marketing dollars.
- 11. Clarifies your vision and ensures everyone is on the same page
In order to create a successful business, you need a clear vision and a plan for how you’re going to achieve it. This is all detailed with your mission statement, which defines the purpose of your business, and your personnel plan, which outlines the roles and responsibilities of current and future employees. Together, they establish the long-term vision you have in mind and who will need to be involved to get there.
Additionally, your business plan is a great tool for getting your team in sync. Through consistent plan reviews, you can easily get everyone in your company on the same page and direct your workforce toward tasks that truly move the needle.
- 12. Future-proof your business
A business plan helps you to evaluate your current situation and make realistic projections for the future.
This is an essential step in growing your business, and it’s one that’s often overlooked. When you have a business plan in place, it’s easier to identify opportunities and make informed decisions based on data.
Therefore, it requires you to outline goals, strategies, and tactics to help the organization stay focused on what’s important.
By regularly revisiting your business plan, especially when the global market changes, you’ll be better equipped to handle whatever challenges come your way, and pivot faster.
You’ll also be in a better position to seize opportunities as they arise.
- 13. Tracks your progress and measures success
An often overlooked purpose of a business plan is as a tool to define success metrics. A key part of writing your plan involves pulling together a viable financial plan. This includes financial statements such as your profit and loss, cash flow, balance sheet, and sales forecast.
By housing these financial metrics within your business plan, you suddenly have an easy way to relate your strategy to actual performance. You can track progress, measure results, and follow up on how the company is progressing. Without a plan, it’s almost impossible to gauge whether you’re on track or not.
Additionally, by evaluating your successes and failures, you learn what works and what doesn’t and you can make necessary changes to your plan. In short, having a business plan gives you a framework for measuring your success. It also helps with building up a “lessons learned” knowledge database to avoid costly mistakes in the future.
- 14. Your business plan is an asset if you ever want to sell
Down the road, you might decide that you want to sell your business or position yourself for acquisition. Having a solid business plan is going to help you make the case for a higher valuation. Your business is likely to be worth more to a buyer if it’s easy for them to understand your business model, your target market, and your overall potential to grow and scale.
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- Writing your business plan
By taking the time to create a business plan, you ensure that your business is heading in the right direction and that you have a roadmap to get there. We hope that this post has shown you just how important and valuable a business plan can be. While it may still seem daunting, the benefits far outweigh the time investment and learning curve for writing one.
Luckily, you can write a plan in as little as 30 minutes. And there are plenty of excellent planning tools out there if you’re looking for more step-by-step guidance. Whatever it takes, write your plan and you’ll quickly see how useful it can be.
See why 1.2 million entrepreneurs have written their business plans with LivePlan
Tim Berry is the founder and chairman of Palo Alto Software , a co-founder of Borland International, and a recognized expert in business planning. He has an MBA from Stanford and degrees with honors from the University of Oregon and the University of Notre Dame. Today, Tim dedicates most of his time to blogging, teaching and evangelizing for business planning.
Table of Contents
9 Min. Read
10 Qualities of a Good Business Plan Explained
2 Min. Read
What to Include in Your Business Plan Appendix
How to Write a Business Plan for a Service Business
6 Min. Read
How to Write a Fix-and-Flip Business Plan + Free Template PDF
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The 8 Target Audiences for Your Business Plan It's not just investors or bankers who'll want to see your business plan. Find out exactly who may be looking it over.
By The Staff of Entrepreneur Media, Inc. • Jan 22, 2015
In their book Write Your Business Plan , the staff of Entrepreneur Media, Inc. offer an in-depth understanding of what's essential to any business plan, what's appropriate for your venture, and what it takes to ensure success. In this edited excerpt, the authors offer reasons why you may want to tailor your business plan to the audiences you're showing it to.
The potential readers of a business plan are a varied bunch, ranging from bankers and venture capitalists to employees. Although this is a diverse group, it is a finite one. And each type of reader does have certain typical interests. If you know these interests up front, you should be sure to take them into account when preparing a plan for that particular audience.
Let's take a look at eight typical audiences who'll be reading your business plan.
1. Active venture capitalists.
VCs see hundreds of plans in the course of a year. Most plans probably receive no more than a glance from a given venture capitalist before being rejected; others get just a cursory inspection. Even if your plan excites initial interest, it may receive only a few minutes of attention to begin with. It's essential, when courting these harried investors, that you make the right impression fast. Emphasize a cogent, succinct summary and explanation of the basic business concept, and don't stint on the details about the impressive backgrounds of your management team. That said, make it concise and to the point. Remember, time is of the essence to venture capitalists and other investors.
Bankers tend to be more formal than venture capitalists and more concerned with financial strength than with exciting concepts and impressive resumes. For these readers, you'll want to give extra attention to balance sheets and cash-flow statements. Make sure they're fully detailed and come with notes to explain any anomalies or possible points of confusion.
3. Angel investors.
Angel investors may not insist on seeing a plan at all, but your responsibilities as a businessperson require you to show them one anyway. For such an informal investor, prepare a less-formal plan. Rather than going for impressive bulk, seek brevity. An angel investor used to playing their hunches might be put off by an imposing plan rather than impressed with your thoroughness.
4. Potential partners.
If you were thinking about becoming a partner in a firm, you'd no doubt be very concerned with the responsibilities you'd have, the authority you'd carry and the ownership you'd receive in the enterprise. Naturally, anyone who's considering partnering with you is going to have similar concerns. So make sure that any plan presented to a potential partner deals comprehensively with the ownership structure and clearly spells out matters of control and accountability.
Customers who are looking at your business plan are probably doing so because they're contemplating building a long-term relationship with you. They're certainly going to be more concerned about your relationships with your other customers and, possibly, suppliers than most of your readers. So deal with these sections of your plan in greater depth; you can be more concise in other areas. Customers rarely ever read a company's business plan, so you should probably have your miniplan available for these occasions.
Suppliers have a lot of the same concerns as customers, except they're in the other direction on the supply chain. They'll want, above all, to make sure you can pay your bills, so be sure to include adequate cash flow forecasts and other financial reports. Suppliers, who naturally would like their customers to order more and more, are likely to be quite interested in your growth prospects. In fact, if you can show you're probably going to be growing a lot, you may be in a better position to negotiate terms with your suppliers. Like customers, most suppliers don't take the time to read lengthy business plans, so again, focus on the shorter version for such purposes.
7. Strategic allies.
Strategic allies usually come to you for something specific—technology, distribution, complementary customer sets, etc. So any plan you show to a potential ally will stress this aspect of your operation. Sometimes potential strategic partners may also be potential competitors, so you may want to present your plan in stages, saving sensitive information such as financials and marketing strategies for later in the process when trust has been established.
Managers in your company are using the plan primarily to remind themselves of objectives, to keep strategies clear and to monitor company performance and market conditions. You'll want to stress such things as corporate mission and vision statements and analyses of current industry and economic factors. The most important part of a plan intended for management consumption is probably in the financials. You'll want to take special care to make it easy for managers to compare sales revenue, profitability and other key financial measures against planned performance.
There's one caution to the plan-customization exercise. Limit your alterations from one plan to another to modifying the emphasis of the information you present. Don't show one set of numbers to a banker you're trying to borrow money from and another to a partner you're trying to lure on board. It's one thing to stress one aspect of your operation over another for presentation purposes and entirely another to distort the truth.
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How to Write a Winning Business Plan
- Stanley R. Rich
- David E. Gumpert
The business plan admits the entrepreneur to the investment process. Without a plan furnished in advance, many investor groups won’t even grant an interview. And the plan must be outstanding if it is to win investment funds. Too many entrepreneurs, though, continue to believe that if they build a better mousetrap, the world will beat […]
The Idea in Brief
You’ve got a great idea for a new product or service—how can you persuade investors to support it? Flashy PowerPoint slides aren’t enough; you need a winning business plan. A compelling plan accurately reflects the viewpoints of your three key constituencies: the market , potential investors , and the producer (the entrepreneur or inventor of the new offering).
But too many plans are written solely from the perspective of the producer. The problem is that, unless you’ve got your own capital to finance your venture, the only way you’ll get the funding you need is to satisfy the market’s and investors’ needs.
Here’s how to grab their attention.
The Idea in Practice
Emphasize Market Needs
To make a convincing case that a substantial market exists, establish market interest and document your claims.
Establish market interest. Provide evidence that customers are intrigued by your claims about the benefits of the new product or service:
- Let some customers use a product prototype; then get written evaluations.
- Offer the product to a few potential customers at a deep discount if they pay part of the production cost. This lets you determine whether potential buyers even exist.
- Use “reference installations”—statements from initial users, sales reps, distributors, and would-be customers who have seen the product demonstrated.
Document your claims. You’ve established market interest. Now use data to support your assertions about potential growth rates of sales and profits.
- Specify the number of potential customers, the size of their businesses, and the size that is most appropriate to your offering. Remember: Bigger isn’t necessarily better; e.g., saving $10,000 per year in chemical use may mean a lot to a modest company but not to a Du Pont.
- Show the nature of the industry; e.g., franchised weight-loss clinics might grow fast, but they can decline rapidly when competition stiffens. State how you will continually innovate to survive.
- Project realistic growth rates at which customers will accept—and buy—your offering. From there, assemble a credible sales plan and project plant and staffing needs.
Address Investor Needs
Cashing out. Show when and how investors may liquidate their holdings. Venture capital firms usually want to cash out in three to seven years; professional investors look for a large capital appreciation.
Making sound projections. Give realistic, five-year forecasts of profitability. Don’t skimp on the numbers, get overly optimistic about them, or blanket your plan with a smog of figures covering every possible variation.
The price. To figure out how much to invest in your offering, investors calculate your company’s value on the basis of results expected five years after they invest. They’ll want a 35 to 40% return for mature companies—up to 60% for less mature ventures. To make a convincing case for a rich return, get a product in the hands of representative customers—and demonstrate substantial market interest.
A comprehensive, carefully thought-out business plan is essential to the success of entrepreneurs and corporate managers. Whether you are starting up a new business, seeking additional capital for existing product lines, or proposing a new activity in a corporate division, you will never face a more challenging writing assignment than the preparation of a business plan.
- SR Mr. Rich has helped found seven technologically based businesses, the most recent being Advanced Energy Dynamics Inc. of Natick, Massachusetts. He is also a cofounder and has been chairman of the MIT Enterprise forum, which assists emerging growth companies.
- DG Mr. Gumpert is an associate editor of HBR, where he specializes in small business and marketing. He has written several HBR articles, the most recent of which was “The Heart of Entrepreneurship,” coauthored by Howard. H. Stevenson (March–April 1985). This article is adapted from Business Plans That Win $$$ : Lessons from the MIT Enterprise Forum, by Messrs. Rich and Gumpert (Harper & Row, 1985). The authors are also founders of Venture Resource Associates of Grantham, New Hampshire, which provides planning and strategic services to growing enterprises.