By DeVry University
If you are interested in entrepreneurship or business management, you probably already know that a business plan is an important document for any organization. But what exactly is a business plan, what is its purpose and how should one be written? Here is what you should know.
What Is a Business Plan?
Think of a business plan as a road map for your organization, which defines its goals and objectives and explains how the business will meet those goals. It’s a comprehensive document that covers operations, finances and marketing strategies.
A business plan is a living document. It should grow and evolve along with your company. Your business plan helps shape your company’s growth strategies, but it must also adapt as you learn real-world corporate lessons and fine-tune your organizational objectives.
Different Types of Business Plans
Technically, there are many different types of business plans designed for various purposes. A few of these include:
- Feasibility: A feasibility business plan is a relatively short document that focuses on whether a potential business idea is viable. It defines the product or service, identifying the target market and analyzing the potential profitability.
- Start-up: This type of business plan lays out all the details regarding a new business venture. It describes the company and its core products or services, analyzes the market, identifies the initial management team and offers financial projections.
- Operations: An operations plan is an internal document that goes into more detail with regards to the operational aspects of the business. It sets goals and milestones and lays out employee job descriptions.
- Growth: A growth plan focuses primarily on the financial aspects of the company. It includes detailed financial reports and projections for the future. If the business needs to raise capital, the growth plan specifies how much is needed, how it will be used and the anticipated return on investment (ROI).
- Strategic: A strategic business plan is more or less the equivalent of a start-up plan, only for an established business. It covers all the key areas of the start-up plan, along with the company’s mission and vision statements and an implementation schedule for core business strategies.
Although there are many different types of business plans, you don’t need to sit down and write each one from scratch. Instead, each plan naturally flows into the next. You can use the information gleaned from your feasibility study to draft your start-up plan, pull out the operations and growth plans from there and ultimately rework your start-up plan into a strategic document as your company gains traction.
When Do I Need a Business Plan?
Since your business plan is the roadmap that guides your business, it is advisable to have one at your fingertips when making key corporate decisions. Particular situations that typically demand a business plan include:
- Testing your business idea
- Laying out how your start-up will work
- Applying for business financing
- Attracting partners or investors
- Changing directions, such as refocusing on a different core product or service
How to Create a Business Plan
Writing a business plan is both an art and a science. At one time, business plans were highly formalized documents. Today, they can be a bit more casual, though it remains important to make sure you follow the traditional format. Carefully edit and proofread to make sure your plan is the best it can be. According to the United States Small Business Administration (SBA), these are the sections included in a typical start-up or strategic business plan:
Although this is the first section, consider writing it last. The executive summary briefly describes the company’s mission, core product or service, location, management team and employees. It should also include top-level financial data.
This section lays out the benefits that your company brings to the market, its target audience and its unique competitive advantages. This is the best place to brag about what makes your company a strong addition to the marketplace.
Here you will go deeper into your target market, as well as your competitors. What does the existing market look like? What are companies doing currently to solve the problems you have identified? What works and what doesn’t? What can you do better than your competition?
Organization and Management
This section lays out your company’s legal and operational structure. Is it a sole proprietorship? A partnership? An LLC, a C corporation or an S corporation? Who is in charge of which departments? Drawing an organizational chart can help potential investors or partners visualize how your company operates. Include resumes or a brief description of each key leader’s strengths and experience.
Service or Product Line
Go into detail about exactly what your core product or service is. Explain the product lifecycle. Talk about the benefits. If you hold a patent or a copyright, include a copy. If you are working on research and development, discuss that process and the results you hope to achieve.
Marketing and Sales
This section describes your plans for attracting and keeping customers. Advertising is a part of marketing, and it’s fine to include some advertising strategies here. But marketing also includes tools such as public relations, media planning, sales techniques and even customer support, which you can learn about with a specialization in sales and marketing. The clearer you can make your marketing plan, the more helpful it will be.
If you are seeking venture capital or other funding, this is the place to describe your request. Spell out how much money you need for the next five years and what you plan to do with it. Also, decide whether you want a loan or an investment based on equity and the terms you are looking for.
These are an important part of your business plan, so create a detailed financial plan for the next five years, including projected income statements, cash flow statements and balance sheets. If you have an established business, include copies of these documents for the past three to five years. Adding charts and graphs can help draw a clearer picture of your company’s finances. Learn about these concepts with a bachelor's degree specialization in finance.
This is the place to attach any supporting documents or extra materials, such as permits, licenses, contracts or letters of reference.
Ready to Take the Next Step?
If you’re interested in business, consider earning your bachelor’s or master’s degree or a graduate certificate from DeVry University. Our flexible online, on-site and hybrid programs let you earn your degree from anywhere, even if you are working full-time.