Does your business need a small business plan? The short answer is yes! Whether you’re starting a business, or already have your business up-and-running, a business plan is important for growing your business. It acts as a guiding document to keep you on track toward your goals, and shows lenders that you have a strategy in place.
In honor of National Write a Small Business Plan month, take a deep dive into the purpose of a business plan, what’s included in them, and how to write the best plan for your business.
Why do you need a business plan?
Operating without a small business plan is like taking a road trip without a map – it could be interesting but it takes much longer, costs much more and causes avoidable hassles and headaches.
Similarly, if you don’t have a small business strategic plan, you don’t have anything to guide you. The purpose of a business plan is to:
- Communicate your small business goals and strategy for the future
- Calculate financial projections for your small business
- Compare your business’s strengths and shortcomings against your competition
- Strategize for critical issues and prepare for challenges and success
Another major benefit of a business plan is that you’ll have something to show lenders and investors that demonstrates you’ve done your research. Your business plan will show that you understand your markets and competition and know why your business is a viable and profitable venture.
What should you include in your business plan?
There are a few basic elements that should be included in your business plan, and you can tailor your plan to what fits your business best. Your business plan doesn’t necessarily need to be long. There’s no required page count, but you should keep the size of your business, your plans, and the audience in mind when creating yours. Here are the basic sections you’ll want to include when you write a small business plan:
Your executive summary is an overview of what’s in your plan. This gives potential lenders, investors, and others a summary of your business and should entice them to want to learn more. Ideally, it will only be one to two pages — any longer than that and you may be providing more detail than needed. Although the executive summary is at the beginning of your business plan, it’s the last piece you’ll write. You’ll use the brief summaries from other sections to put together this part.
Your company descriptions is exactly what it sounds like. You’ll include the basics like your business’s registered name, address, and important team members. You should also include a description of your products and services and how you’ll meet your customers’ needs.
Your mission and vision should be outlined as well. What’s the need that your business will address and how? What will be required for your operations?
Explain your business structure, how long you’ve been in business, your location, as well as short- and long-term business goals. You can also describe your brand and anything else that sets your business apart.
The length of this section really depends on your business. Make sure you’re providing enough detail so that your readers have a good understanding of the products or services you offer and how they meet the needs of your customers.
Industry and Competition:
This is one of the most important elements of a great business plan. The work it will take to create this section is also a good time investment in your business’s success.
Here is where you’ll outline the market and competitive research that you’ve done and describe your target markets. Take the time to organize a competitive analysis to outline your direct competitors and how your business compares in terms of products, services, and pricing.
This analysis will demonstrate how you’re different from your competitors and how you might better serve your customers’ needs. Highlight your competitive advantages and show how you’ll fill a gap in the market.
Knowing your target audience is so important for your business. After all, if you don’t know who’s most likely to purchase your product and services, you won’t be able to create a plan to deliver on their needs.
Defining your target audience dictates your strategy for marketing and sales. The best way to start is to create customer profiles. What are the demographics of your ideal customer? Who else can solve their needs? What are their motivations and pain points? You can include these profiles in your business plan to guide your strategy and show that you’ve done your research.
Marketing and Sales:
While word-of-mouth promotion is great for your business, you also need a marketing plan that focuses on a few channels to really ensure your target audience knows what you’re offering. Your marketing plan doesn’t need a multi-million dollar budget to support it. With so many online options available, you can create a cost-effective and engaging marketing plan that includes a website, social media and email contacts.
And if you need traditional outreach like advertisements in print or radio, having a plan in place will help you make better investments. Organize a budget for marketing and sales activities to use as a guide in promoting your products and services. And be sure to do some research on pricing and your return on the investment.
For example, if you’re going to invest thousands of dollars in a newsletter ad placement, make sure you know how many subscribers it has, what the average click-through rate is, and what success previous advertisers experienced. This will show that you know what you’re paying for and the potential return for your business.
Organization and Management:
This section is your opportunity to highlight the key players in your business. Here, you’ll present your qualifications like your experience and education. You’ll also detail information about your partners and day-to-day management.
Talk about ho is responsible for handling the various aspects of your business. Discuss what type of legal structure you’ve chosen and why.
If you’re working with any have mentors or advisors, or if you have affiliations (like memberships to Chambers of Commerce or industry-based organizations) you can outline those here as well. This information demonstrates that you’re working on developing your business and constantly learning as the owner of the business. Potential lenders or partners may find this helpful when deciding whether or not they’ll work with you.
When you’re just starting out your business won’t have a financial history. With some thorough research, and some help from a partner like the Small Business Development Center (SBDC), you can develop realistic financial projections and a budget to guide your growth.
Financial projections show your anticipated monthly revenue and expenses. Setting a budget will help you meet short-term financial goals and adjust your spending accordingly.
Using projections, you can see if your business will generate enough revenue and have enough cash early on. Underfunding is one of the leading reasons why small businesses fail, so this exercise can go a long way in investing in your future success. Your first-year financials should include your budget, and three-year financial projections.
If your business is already established, this is where you’ll need to include recent profit and loss statements, your balance sheet, and a cashflow statement. Using charts and graphs to support your figures makes it even easier for an outside party to get a clear picture of your financial standing.
What else can you add to make a great business plan?
The points above are the basics to cover in your business plan, and there are other steps you can take to really make it stand out. For one be descriptive in your copy but also concise. You want to provide enough detail to tell your business’s story and plans for the future, but not so much that the reader will be bogged down in the weeds.
It’s great to include images of your products, location, and other parts that are visually interesting. Visuals are great supporting pieces for the descriptions you’re providing in each section.
Once you have a good working draft of your business plan, ask professionals from local small business development centers (SBDCs) or SCORE to review it. These organizations are free resources who can pinpoint strengths and weaknesses to make your plan stronger.
And know that your business plan isn’t set in stone. It’s a living, breathing document that should be updated as your business and experience grow.
When you’re ready to take the next step, talk to Pursuit
A great business plan is a valuable tool to guide your business decisions from startup through growth. With your plan you can find and address issues early on, and demonstrate that you understand your business and what it takes to make it successful.
When you need funding to keep your business growing, lenders like Pursuit will review your business plan to better understand your plans. If the time is right for funding, talk to Pursuit! You’ll find more than 15 different loan programs that can help you reach higher and grow.