A business plan is a key tool you should have when setting up a company. But what exactly is it, what should it aim to do, and what should it include?
Explaining a business plan and who needs one
A business plan is basically a document that provides a written description of your company’s future. The plan should explain your business strategy and your key goal to get from A to B or here to there:
A (here) – where you are today, with certain resources and abilities.
B (there) – a point in the future, usually from one to three or five years, when you aim to have a different set of resources, greater profitability and increased assets.
In getting from here to there, it should explain what you plan to do and how you plan to do it. It should lay out your plans from a marketing, financial and operational viewpoint. It should also act as a benchmark for the performance of your company.
Anyone who sets up a new company should have a business plan. It can also be an important tool for an established company that’s moving in a new direction.
What should your business plan aim to do?
Your business plan should aim to give a good outline of your company, your business strategy and action plan – how it will make money and what you need to do to achieve your goals. It should also explain why your business will succeed where others might fail.
It should show that you have a clear understanding of your business and the market it will operate in. It should set out how you expect it to perform and explain any funding requirements you might need. It should also be a useful tool to:
- Help you focus and develop ideas and identify your business priorities
- Help you think through options, identify opportunities and make the most of them
- Help convince banks, investors and other key contacts to support and fund you to grow your business
The plan can also be important for attracting new senior management, business partners and distributors.
What should your business plan include?
A business plan should include seven key sections: an executive summary; a business description; details of market strategies; competitor analysis; a design and development plan of your products and services; information about your operations and management plan; and financial factors. It’s also wise to have an appendix.
The section containing your financial factors should include your income statement, cash-flow statement, and balance sheet. This should aim to provide an accurate picture of your company’s current value and your ability to pay bills and earn a profit.
You can learn more about these seven sections and what they should include in our guide to writing a business plan.