There are a number of key elements that all business plans should include.
- Business plans, which range from 30 to 50 pages in length, play an important role in the growth of a business.
- Entrepreneurs may get started writing a business plan by including key elements.
- If a traditional business plan feels too overwhelming, you may draft a lean business plan.
Writing a business plan, if you haven't done it before, can initially seem like a daunting task. According to the U.S. Small Business Administration (SBA), the recommended length of a business plan should be between 30 to 50 pages.
Do you still feel nervous trying to figure out what you should include in this document? A great rule of thumb is to remember that a business plan plays an important role in the growth of your small business. This document acts as your startup's blueprint. Blueprints tend to be very detailed, but are also open to revisions once the initial paperwork has been drafted. Your business plan helps establish a foundation for the startup. It allows you, and potential investors, to better understand the feasibility of the business and the vision and mission you have for its future.
Whether you're starting a company for the first time or revising an existing document, it's fairly simple to put together a well-written business plan. Let's take a look at the key elements included in a traditional business plan. We'll also examine if your business is better suited for drafting a lean business plan.
Traditional business plans
Traditional business plans are the aforementioned 30 to 50 page documents. These plans usually cover the following elements in-depth.
- Executive summary
- Business description, concept and strategy
- Market analysis
- Industry analysis
- Organization and management
- Financial projections
- Funding request
Open your business plan with a table of contents that includes page numbers. This will allow you to better outline and break down, section by section, what the reader can expect to find in the document. From there, you may move into a brief (1 to 2 pages) executive summary about your business. An executive summary should be able to answer the following questions.
- Who are you?
- What does your business do?
- Which industry is the startup in?
- Where do you conduct business?
- What's your projected start date?
- How does the company make money?
- Why are consumers interested in your offerings?
Additionally, you may include a value proposition statement that details the value your company brings to its market.
Business description, concept and strategy
Sometimes referred to as a company overview, this section takes a closer look at the nature of your business. Consider the overview aspect of this section as you answer the following questions:
- Where did the idea for your product/service come from?
- How does your product/service work?
- What makes this product/service unique in its market?
- How does this product/service benefit potential and current customers?
- What strategy will you use to reach your business goals? (This is particularly key to address if your startup is still in its development stages and needs a timeline for its goals.)
By now, your startup has conducted enough research and utilized census data to understand which individuals make up your target market. Use the market analysis portion of a business plan to define your target demographic. Create consumer personas to identify distinguishing characteristics, demographics, and the needs of your target market. Then, outline a strategy for how your business will attract, capture and retain this audience. Think about which media will you use to reach them.
As time progresses, you may find a growing audience in another market, like Gen Z, that may be interested in your offerings. Revise this section, and create new consumer personas as needed to better understand the needs of your existing and future audience.
Now that you understand who makes up your target market, you should have just as thorough an understanding of your industry's competition. Every business has direct competition, which your startup should know about at a glance. They also have indirect competition, which may pose challenges to your business in the future. Understand what the direct and indirect competition is currently offering to their consumers. What are their price points? How do they serve their customers? Why would consumers choose their offerings over your own? How do they engage with their customer base? You may even utilize social media platforms, like Facebook and Instagram, to better understand how they reach consumers.
Additionally, the SBA recommends creating a competitive analysis of your overall industry. Your startup should be able to create its own strengths and weaknesses assessment. A strength assessment, for example, analyzes your ability to satisfy the customer needs and establish staying power as a brand. The weakness assessment determines how your business maintains its brand loyalty as technology changes and in the event of a downward economic condition.
Organization and management
This section of the business plan outlines the company's organizational structure and ownership. Outline the names of the startup's owners and their percentage of ownership. Detail how they are involved in the company and their background information, including the date they were hired, position title and responsibilities, and resumes. Keep this section updated over time, particularly as you hire more individuals for new roles.
There is a great deal of information that needs to be covered in the financial section of a business plan. It is strongly advised that you provide honest details. If you are unsure of how much your business is actually making, the SBA advises conducting a review with a professional accountant.
If you want to attract investors or request funding for your business, you'll need financial projections that show your startup is profitable. These projections may be outlined in tables and charts that detail your company's cash flow. Additional areas to detail include:
- Profit and loss statement (or projected P&L statement).
- 12-month income statement.
- Sales forecast.
- Expenses budget (usually within a 24-month timespan).
- Projected balance sheet.
- Break-even analysis.
- Balance sheet for at least three fiscal years out into the future.
Why do you need to include all of this information? Many businesses seek to attract investors for a bit of extra capital. Investors will want, and need, to review their current and existing financial data. Doing so ensures that they are investing in a business that can earn a profit and that the business owner themselves has established good credit.
This request identifies the exact amount of funding your startup needs from investors to get started. Make sure the request is exact, not a guess or rough estimate. You will also need to outline how the money will be spent and the manner in which it will be spent. Additionally, it's also a good idea to detail how you will approach financial situational plans in the future. What if you decide to sell your business or go public with your company? Investors will need to understand your strategic approach for dealing with these situations.
This space is dedicated to all other items your startup may have that do not quite fit anywhere else in the business plan. Just to name a few documents, these may include:
- Letters of incorporation.
- Trademark registrations.
- Industry studies.
- Partnership agreements.
Lean business plans
Lean business plans are often ideal for entrepreneurs that need to quickly outline their startup's structure. These plans are much shorter than traditional business plans – sometimes no more than a few pages. A lean business plan will cover these aspects of starting a business:
- Value proposition. A clear statement that describes the value your business brings its respective market.
- Key partnerships, resources and activities. This details information about your current business partners, and any strategies you're using to gain a competitive advantage and create value with your audience.
- Customer segments, channels and relationships. This goes back to a traditional market analysis. You should be able to define your target market and audience as well as detail how you will reach and engage with them.
- Revenue streams. Simply put, this is a list of the streams that your business uses to make money.
There isn't a right or wrong answer to whether you should choose to draft a traditional or lean business plan. You can always start off with a lean business plan and transition to a traditional plan, making edits as necessary.
Regardless of the format, however, remember that your business plan must be structured in a concise and objective manner. As time progresses, you'll be excited to see how many goals you have met, and will keep meeting, in business.