What Exactly Is a Business Plan?

The absolute fundamental aim is to make money out of satisfying customers. – John Egan

 A business plan is a formal blueprint of an organization’s goals and steps for achieving those goals. Business plans typically include corporate, sales, and marketing strategy as well as financial projections. In some industries, plans are required before businesses can secure financing. Regardless of the industry, drafting a clear, detailed plan is a great first step in ensuring effective management and foresight.

Elements of a Business Plan:

The components of a strong business plan can vary depending on the enterprise, but attorney Ian Scott of Scott Legal Services identifies some key elements:

1. Description of Your Business: Include a short description of your business with a brief history of the business and its ownership structure by focusing on, who you are, what you do, & where you are going.

2. Mission Statement: Lay the groundwork for your ‘brand’ by describing what your company will be to its customers or clients & what you want to be remembered by.

3. Goals or Milestones: Make a list of five or so long-term goals.

4. Market Analysis and Research: You must always be able to explain; what you know about your industry, what you know about your competition, who is you target market, and what obstacles will you have reaching them.

5. Why Are You Different: You should describe in detail what makes your product or service unique in the market.

6. Personnel Plan: Describe who your staff will be and include descriptions of key personnel and special skills.

7. Other Sections as Relevant: Business Plans are not a one size fits all proposition. Consider what makes sense in your business plan given your goals and add sections accordingly.

8. A Detailed & Comprehensive Financial Plan: This is a Must even if you do not like numbers! You should also note that the financial plan will take up a significant number of pages in your plan (over half). Tailor the financial data part of your plan to your needs but most plans include the following information: Start-Up costs, Revenue projections with comprehensive assumptions, Expense projections with comprehensive assumptions, Five-year cash-flow projections, Five-year balance sheet projections, Sources of Capital, and Other data as needed.

[Credit: Key Tips for Developing Business Plans for Entrepreneurs, Investors & Business Owners - Ian Scott]

Capture the Passion:

Simply having all the key elements is not always enough. In addition to the basics, there are some important stylistic elements that can take a business plan from good to great.

Attorney Bradley H. Lehrman at law firm Lommen Abdo stresses the importance of going the extra mile and ensuring that readers of a business plan will sense passion, competence and ingenuity. Entrepreneurs should highlight their skilled management team, their capability for market penetration, distinguishing features of their technology or services, and a rational and defensible fundability statement. Then, to top it off, package all the impressive data in a vivid and professional format. In regard to the management team section:

Make sure the reader knows that you have the moxie, and networking capabilities to pull together a management team or an advisory team, or a board that is accomplished, well connected and has the skill sets to achieve your business goals. Do not rely on buddies or relatives unless they have very specific capabilities for your business. If you are seeking outside investment, this category will be more than 51% of the risk mitigation for investors in evaluating your ability to succeed… [Credit: No Nonsense Business Plans - Lommen Abdo]

What’s the End Game?

Starting a business is a little like falling in love; there is so much excitement at the newness and a constant need to impress and woo. While it is extremely important when drafting a business plan to focus on the current state of affairs and hopes for the future, it is almost equally as important to contemplate and plan for the end game.  This is where business succession planning comes into play. Many business plans will include an “exit strategy” section. However, attorney Callie Whatley at Burr & Foreman suggests that entrepreneurs take it a step further and develop a business succession plan either contemporaneously or shortly after creating their business plan:

Businesses in their early stage are usually focused (for good reason) on survival, but a keen eye on the future helps a business grow and develop on a path that fits the needs and goals of the owner. Of course, those needs, goals and direction may (and likely will) change over time, but no one ever said that a business succession plan was set in stone. Instead, it can and should be evolving in nature.

By creating a business succession plan early on in a business’s life, you, as the business owner, establish it as part of the critical foundation for the business and its success, hopefully avoiding an unnecessary scramble at the end of your career to figure out what you will do next.  Reviewing a business succession plan should be as routine and fundamental as reviewing a business’s marketing strategy or a budget, and by establishing those habits early on, a business is more likely to keep its focus and successfully manage its succession plan over time. [Credit: Business Succession Planning: Time is Not on Your Side - Burr & Forman]

In the end, a business plan is about sharing entrepreneurial vision and demonstrating to investors, colleagues, friends and family that there is the capacity and the competence to carry the vision to fruition. Good luck with that!

Further reading: