A business plan is touted as the most important document while starting a business. Based on my experience with multiple businesses, my answer is it depends. A business plan is very useful in helping define the mission, marketing plan, financial projections. I started a business with a one-page business plan in one case and a very detailed multi-page business plan in another case. I always had a business plan and I’d advise you to start with one.
So when is a business plan most important? Simply put, When you are seeking external financing. Irrespective of the length of the business plan, the document needs 7 key sections.
Marketing and Sales Plan
The Executive Summary should be written after the entire plan is finalized and should ideally be kept to one page. It is an overview of the business, key problem(s) solved by its’ products/services, why this business’ solution is different, the business’ ideal customer, and the expected financial results. The Executive Summary is essentially a high-level description of the company and the business.
The Company Overview is a brief summary of the business, key products & services, the mission (purpose), how it got started, market positioning, operational structure, and financial goals. After reviewing this section, the reader should have a broad understanding of what the business is setting out to do and how it is organized. Keep this section short and succinct.
This section will address the business opportunity in terms of the following questions: what problem(s) is the company trying to solve? If the business’ service addresses something the market has yet to identify as a problem (for instance, a new mobile app or a new clothing line), then also describe how the business’ solution addresses those problems or delights the customers.
After addressing the opportunity, describe the products/services in detail, how they solve those problems, and how the customers will benefit.
This section also describes in more detail how the services will be delivered and the pricing structure (e.g., fixed rate versus an hourly fee for services ).
Try to answer the value proposition, market need, and the solution offered by your business in great detail if possible.
Value proposition: One sentence that describes the value you provide to your customers. If you were composing a tweet to tell people about your business, what would you say? With only 140 characters, describe what you do and what makes you unique. Your goal is to communicate the value you are providing to your customers in a way that they will understand.
Market need: What problem does your business solve for your customers? If you aren’t solving a problem for your customers, you are going to have a hard time building your business. If you’re not sure, try talking to your potential customers and ask them what they like about your products or services. Why do they choose you over other alternatives?
Your solution: How do you solve your customer’s problem? What products and services are you offering? Describe your product or service and why it’s better than the alternatives. Essentially, if someone asked you what you sell, what would your answer be?
The Market Analysis provides the reader with an understanding of how well the business knows and understands its market. This section provides an overview of the industry that the business will participate in.
Target market: Who is your ideal customer? Describe your ideal customer. Who are they? Be as specific as possible—age, gender, shopping habits, and so on. If you target different types of people, create market segments for each group.
In defining the target market, the plan will identify key elements such as geographic location, demographics, buyer characteristics, the target market's needs, and how market needs are currently being met. If there are any direct competitors, explain how the company’s service compares to the competitors in terms of solving the consumers’ problems.
This section may also include a Strengths, Weaknesses, Opportunities, and Threats (SWOT) Analysis as necessary, to better assess the business’ position against the competition.
Competition: What products and services do your customers choose today instead of yours? How are you different? What makes your business and products better than the alternatives that are out there?
An operating plan should address how the company currently is organized and will continue to develop. This section includes management responsibilities with dates and budgets and making sure results can be tracked. What are the envisioned phases for future growth and the capabilities that need to be in place to realize growth?
The operating plan describes how the business works. Depending on the type of business, important elements of this plan should include how the company will bring services to market and how it will support customers. It is the logistics, technology, and basic blocking and tackling of the business.
Team: Why are you and your business partners the right people to make your company successful? Even if you’re starting out with just you, write a few quick bullets about why you’re the right person to run this business. If you need to hire key people in the future, list those positions as well, even if you don’t know who specifically will fill those positions right now.
Partners and resources: Do you need to work with other companies or organizations to make your company a success?
Marketing and Sales Plan
Promoting the business, whether through generating leads or traffic to a website or store, is one of the most important functions of any business. In this section of the plan, provide details of the intended marketing of the business. Describe the key messages and channels used for generating leads and promoting the business. This section should also describe any sales strategy.
How do you market your products and services to your customers?
What are your sales channels, or the places where you will sell your products? If you’re selling online, your online store is a sales channel. If you also have a physical store, that’s another sales channel.
What will you do to market your business?
If you plan on buying advertising, list the types of advertising you plan on doing here.
A financial plan is one that brings all the elements of a business plan into concrete terms. Up to this point, the target market, target customers, and pricing have all been identified. These items, along with assumptions, will help estimate the company’s sales forecast. The other side of the business will be the expenses involved. This is important on an ongoing basis to see when the business is profitable. It is also important to know what expenses will need to be funded before customer sales, or the cash they generate, is received.
At a minimum, this section should include estimated start-up costs and projected profit and loss, along with a summary of the assumptions being made with these projections.
Budget and sales goals: How much do you think you will sell and how much is it going to cost you to make your product or deliver your service? What other key expenses will you have when your business is up and running? What sales goals do you need to reach for your business to be a success? Don’t sweat the details to start and just think in broad strokes to get a rough idea of how your business will work financially. You can refine the details later.Overall, the business plan can be as detailed or as brief you want. There is no hard rule on the length of the business plan. My only advice is to have a business plan in place that you can refer to or discuss with your stakeholders.