A business plan is a road map aimed at translating a good idea into a good business. In its simplest form, a business plan is a guide that outlines the goals of your business and details how you plan to achieve those goals. It is a tool that allows you to evaluate the feasibility of a project before actually commencing the activity, in particular, from a commercial point of view, by establishing the potential costs and revenues. It also provides a useful operational guide for the early stages of management activity.
The layouts and structures of a business plan may vary, but generally a plan will include a description of the company and its structure, the management team, the services or products it offers, an overview of the market and competition, financial analysis and forecasts.
The relevance of specific parts of the plan will depend on the end-users. For instance, information about the management team will be important for investors while the financial history of the company would be of interest to lenders.
It may seem counter-intuitive, but the executive summary of your business plan should be the last part of the document that you write. The executive summary will appear as the first two to five pages summarising your value proposition: what your company does, how it will generate income and why customers will want to pay for your product or service. Therefore, it is important that this is finalised after you have a very clear idea of the whole project.
A central focus of the plan should be the marketing strategies you intend to deploy. You must be specific about the means you will use to reach your target customers and the message you are going to present to the marketplace, so as to convert prospects into paying customers.
Even superior products have experienced trouble gaining traction in the marketplace, just because they were launched without the right combination of message and means of communication. This leads to another important consideration: the management team. Investors want to align themselves with a management team which they believe has the capability of successfully executing the strategies outlined in the plan. The objective of the plan is to convince the reader that the management team is composed of people of good character and a robust track record.
Financial information is an essential component of the plan and must highlight the economic and financial forecasts the company is making. Investors want to see whether the management team has backed up its projections with sound assumptions based on hard data obtained from industry sources or whether they are simply guesswork. In a business plan, financial projections do not need to be voluminous or excessively complex. Rather, they need to be clear and reasonable, while being exciting from a return on investment point of view.
Many people think of business plans as being important only for starting a new business or applying for business loans. However, business plans are also vital for running a business. Whatever the scope of the business plan, this should always be concise but exhaustive and easily understood by non-experts. The information provided must be credible and based on estimates that are reasonable and verifiable. The document must also highlight the challenges the company might face. No business plan should be considered as final.
On the contrary, it should always be considered a work in progress, characterised by the need for constant review, revision and adaptation of the initial hypotheses upon which the project was originally based.