What is a Business Plan? Definition, Tips, and How To Write One

Why your Business Requires a Business Plan?

A business plan has a three-fold purpose: summarise the company's strategy for execution in the long term, secure business finance from investors or lenders, and forecast future business potential and demand. It outlines a company's approach to leading and managing the venture in compliance with the industry's best practices.

An accurate and professional business plan helps small companies secure funds from lenders and investors who need proof of potential progress and profitability. By researching current market conditions and trends, a business can take advantage of every opportunity to ensure growth. A business blueprint makes achieving objectives easier and attracting funding from lenders or investors.

How to Write a Business Plan?

A well-written plan of action has enormous value to a business enterprise. While you can download a business plan format online to create one, it produces generic results devoid of your company overview, industry details, and business goals. Since it does not distinguish a business from competitors, an entrepreneur must begin creating one by outlining the key elements of their business. These include the company description, executive summary, market analysis, marketing strategy, products and services, financial projections, etc.

Rather than following a particular business plan format or template, use only the sections that make the maximum sense for the business needs. Ideally, the main body should be around 15-25 pages. Here is an example of an effective business plan:

• The executive summary section should include the target customers, key issues, current solutions, competing products, USPs, etc.

• Company description should include company history, objectives, and mission statement, including the founding date, location, significant milestones, number of employees, executive leadership, flagship products, etc.

• Market research should include the target customers’ location, income, gender, age, education, profession, hobbies, etc.

• The competitive analysis section should include the competitors’ marketing investments, press coverage, customer service, sales and pricing, ranking, etc.

• The operating plan should include the company product's unique features, benefits, emotional customer payoffs, intellectual property rights, patents, etc.

• The financials section should include income statements, balance sheets, cash flow statements, profit & loss statements, liquidity ratios, frequency of invoice collection, etc.

Major Elements of Business Plan

While writing a business plan, try to fit all the basic information within a document of 15-25 pages. Crucial elements like patent applications consume a lot of space and may go into the appendices section. While no two plans are the same, almost all have similar key elements. Carefully design the plan to incorporate every focal point the lenders or investors deem attractive. Below are some common major elements of a business plan:

Executive Summary

The section outlines the business’s mission statement and information related to the company's employees, location, operations, and leadership. It gives a clear picture of the company’s goals and strategies. Therefore, it is a crucial section that creates a first impression on lenders, investors, and customers.

Business Description

The business description explains the firm’s structure, size and market position. Moreover, it describes the types of products and services the company offers. It also states whether the company is new or old. Most importantly, it includes the company’s USPs.

Market Research and Analysis

The section helps determine the business’s current position and potential for expansion. It evaluates the company’s promotions, investments, product distribution, and marketing aspects. In-depth market analysis also helps a firm combat competition, based on which its long-term success depends.

Competitive Analysis

Almost every industry has multiple players in the market. Even if a business owns a majority of the industry’s market share, it still has competition. The competitive analysis section takes an objective outlook on the industrial landscape and determines how the business fits into it.

Marketing and Sales Plan

The marketing and sales plan describes how the firm reaches consumers and attracts and retains its customer base. It must clearly outline the firm’s distribution channel through various marketing plans and media types to implement the campaigns.

Operating plan

Similar to a statement of purpose, the operating plan section explains an enterprise’s uniqueness to its customers. The section showcases how a firm can deliver superior products in less time and at competitive rates.

Financials

This is one of the most essential elements of a business plan. Since it primarily addresses lenders and investors, it must efficiently reveal a firm’s market analysis and financial policies. Sometimes, it also includes a 5-year financial report to demonstrate the company’s profits and past performances. The section showcases the firm’s current business strategies, total worth estimates, and future projections.

Appendices

The appendices section includes helpful information about the company that does not belong to any of the other sections. These include the resumes of the management team members, long-term financial goals, etc.

SWOT Analysis

The section identifies a business's strengths, weaknesses, opportunities and threats that are crucial to plan how to grow the business. The business must use this data to work on its weakness and devise the best strategy to overcome the threats. It helps balance the company’s external and internal environment.

Organisation Description

The section is the entire business overview that includes basic information like the founding date, type of entity, state of registration, etc. If the business operates in multiple states, highlight them in this section. It also summarises the company's history, giving a solid foundation overview.

Importance of a Business Plan to Grow Your Business

A detailed business plan provides a bird's-eye view of an establishment's framework. Therefore, it is crucial for any organisation. Here are a few ways a solid action plan offers a significant advantage to your business:

• Maximising Resource Allocation: Using an efficient plan, business owners can effectively organise and allocate their company resources to impact their reputation and performance. Whether planning to open a new office, change the production line, or recruit fresh staff, a proper business strategy will help you understand the result of your actions and make a business estimate.

• Setting Landmarks and Objectives: A proper plan helps a company set realistic goals and assign the time and resources to meet them efficiently. It ensures long-term profitability while letting the business set benchmarks for goal achievement.

• Enhancing Capability: You need an efficient plan to turn your business concepts and ideas into reality. Although the method is unique for each company, the business blueprint works as an excellent guide to advertise, market, and promote products.

• Better Decision Making: You must make several crucial decisions while running a business, including what to sell, where to pitch, what to charge, and where to locate. A well-thought-out plan lets an organisation anticipate the challenges and find solutions to the issues in time.

• Fixing Past Mistakes: Businesses create plans while considering past failures and flaws. It includes what worked for them and what didn’t, helping them save money, time, and resources. It helps them learn lessons from the past, offering them an opportunity to avoid pitfalls in the future.

• Attracting Lenders and Investors: With an in-depth overview of the business structure, validity, and objectives, investors and lenders can build confidence in the firm and encourage them to finance.

Different Types of Business Plans

These are the common types of business plans most businesses will find helpful:

1. Strategic Plan: A part of the establishment’s foundational ground, it caters to the company’s internal strategies while categorising its weaknesses, strengths, threats, and opportunities to optimise profits.

2. Start-up plan: Specifically meant for new businesses, it describes the firm’s products and services, market analysis, staff management, and a detailed finance spreadsheet to convince lenders and investors.

3. Operations Plan: Also called the annual plan, it details a business’s strategies and day-to-day activities to achieve its targets.

4. Feasibility Plan: It evaluates the company’s prospective customers, estimates the venture's profit and loss possibilities, and forecasts a product’s potential to sell in the market, profit margin, and duration for yielding the expected results.

5. Expansion Plan: If you plan to expand your business structure or production, you will need this business plan to frame your fundamental guidelines and steps. Whether you aim at external or internal growth, a business expansion plan will help you analyse the activities and allocate resources for higher production, staffing, finance, etc.

Conclusion

An efficient business plan explains the business concept and determines its prospects of success. The more it is detailed, the more successful it is in convincing business finance providers like Hero FinCorp. When writing a business plan, you can benefit significantly from internal team feedback, a solid template, and extensive research. You can download a business plan format to get started. We at Hero FinCorp quickly approve Business Loans applications of entrepreneurs with clear goals for availing finance and a repayment plan for paying the EMIs.

Frequently Asked Questions

1. What Does the Business Plan Include?

An effective business plan commonly includes the company’s executive summary, business description, market analysis, operations and management, financial plan, and other crucial aspects.

2. Are Business Plans Highly Visual?

Since a business action plan is backed by data, it includes several charts, diagrams, and tables to communicate better. It gives reviewers like lending institutions clarity and speed while making their decisions.

3. What are the 7 Steps of a Business Plan?

Research, goal setting, company profile, company description, marketing plan, revision, and motivation are the seven steps of creating an effective modus operandi for a small business.

4. What are the Types of Business Plans?

Depending on their purpose and extent, business plans can be of different types, including strategic, start-up, operations, feasibility, and expansion plans. The type of plan you create depends on your purpose and objectives.

5. What is a Business Plan and Its Importance?

A business plan is a document that outlines a company's goals, purpose, and objectives related to finance, expansion, and marketing. A good plan can be a game-changer for businesses seeking finance from lenders or investors. It convinces finance providers that the company has growth potential and will earn good revenue to generate high returns or ensure timely repayment.