What is a business plan?
A business plan is an important document every business should have, whether brand-new or long-established. It introduces the company and provides detailed information on the corporate goals, financial situation, target markets and funding sought.
Although a business plan is typically geared towards an external audience, such as potential investors or financial institutions, internal stakeholders – like the executive team – and potential collaboration partners also benefit from reading your business plan.
Having a business plan is more likely to set you up for success than operating without one.
Related: Grow Your Business
Why do you need a business plan?
Having a sound business plan has many advantages for a company – and is, in fact, a must-have for any serious business. Let’s look at some reasons why.
A business plan is a great tool for:
- mapping out your goals and direction: having a clear overview of the status quo and a roadmap of where you want to be down the track will help you – and other stakeholders – better visualise your company’s main goals and objectives
- managing your business more effectively: once you’re clear on your goals, a business plan will help you devise a strategy to get there and utilise the right resources as appropriate; it’ll also help you adapt more easily as your business grows
- seeking finance: acquiring funding can be challenging – but having a strong business plan will make this mission so much easier, as it’ll show potential investors and bankers where you are now, where you plan to be and how you’re going to achieve this
- securing joint ventures: partnerships with other companies, especially big players, are more likely if you can present a well-thought-out business plan
- attracting top talent: you want to attract the best staff, so you’ll need something to show them what your organisation is all about and what you have to offer, especially if you’re a start-up
- gaining a competitive advantage: it’s surprising how many companies operate without a business plan when studies have shown that ‘possession of a formal business plan was significantly associated with higher gross revenues and growth in sales’; use this fact to your advantage and enjoy an edge over your competitors by drafting a strong business plan for your organisation.
All of these aspects clearly illustrate why developing a sound business plan is so important.
Related: 10 Steps to Starting a Business
How to write a business plan
Writing a business plan may seem daunting, but there are a number of tried-and-tested steps you can follow to make the process easier.
Here’s your step-by-step guide on how to write a business plan:
Start your business plan with an executive summary. This is perhaps the most important section of any business plan, especially if you are seeking investment. An executive summary is a succinct and engaging overview of the contents and summary of the key points of your entire business plan.
It is often the only section busy investors or executives will read, so it must grab their attention and contain all the major points you want them to know. Keep in mind that this section is usually written last once you’ve completed all the other parts of your business plan.
Business structure and vision
Describe how your business is set up – e.g. is it a sole trader, partnership, company or trust business structure? – and detail the ownership percentages. Also write about your company’s history and its vision for the future based on your goals.
This will familiarise readers with your company and make them understand your corporate values and what’s important to you.
A SWOT analysis can be helpful for all businesses, but startups and other new businesses benefit especially from carrying out one. A SWOT analysis tells you your company’s Strengths, Weaknesses, Opportunities and Threats. Consequently, you’ll know in what areas you are doing well and where there’s room for improvement.
The results of your SWOT analysis will provide valuable information to potential investors and help you decide on a strategy for your business.
This is the section for detailing what exactly you are planning to achieve and by when. List your short-, medium- and long-term targets and ambitions.
Are you planning to launch new products or services? Does your company want to tap into new, international markets? Explain all of these aspects here.
Products and services
Here, you explain what products or services your business offers. Describe how they work, how they are manufactured or provided, how you sell and distribute them, and who your target customers are.
Any registered patents or trademarks are also worth mentioning and will boost your worth in the eyes of potential investors.
Show that you know your target market and make it clear that you know what you’re doing. Include any market research and analyses that you’ve carried out, and describe what kinds of underdeveloped markets or untapped market potential you have identified.
You can also include an analysis of your competitors here and emphasise what you will do better.
Financial analysis and projections
Any strong business plan needs to include a financial analysis and metrics that tell your reader where your business is financially. This section should include standard reports such as:
- a balance sheet with all your assets and debts,
- a profit & loss statement,
- your net profit margin,
- the accounts receivable turnover ratio, and
- your cash flow statement, so potential investors can see what transactions are made and where you are spending your money.
Your financial analysis section also needs to cover your projected turnover, expenses and estimated profit for the future. Don’t be shy when it comes to including eye-catching charts and graphics – these will grab your target readers’ attention and make them read on.
Explain how exactly you would use any incoming funding. For example, would funding help you develop and launch a new product or manufacture larger quantities of your existing products? Mention it here!
You don’t want to risk putting potential investors off because your business plan is riddled with typos or careless errors. Once everything is done, make sure you carefully proofread it to make it as flawless as possible.
You may want to consider hiring a professional proofreader to ensure the best possible result and make a great impression. It will likely be more than worth it!
Creating a business plan template
A business plan template is a document with a standard outline and structure that includes all the headings and the content under each heading that should be included, and in which order. Having such a template means everyone in the organisation can refer to it and nothing essential will be inadvertently omitted.
If you get stuck or feel you need a little help with drafting your business plan, you can hire a consultant to assist you. To save those costs, you can also obtain a business plan template from your local business association or draft your own template. Have a browse online, and you may find a range of free business plan templates too, which may help you get started. The Australian Government, for example, offers a free business plan template for download.
Of course, you can also pat a professional advisor to put together your business plan template for you. This is a one-off expense that will leave you with a document that you can use over and over as your business grows. And, naturally, you can adapt your template as needed over time.
After reading this guide, you should be in a strong position to create a business plan that works and helps you achieve your business goals or secure financing. Refer back to it any time!