What is Business Plan for a Startup?
Sep 26, 2023
What is a business plan in simple terms?
“A business plan is a document that describes your business’s financial goals and explains how you’ll achieve them.”
I hope, it is easy to understand.
Let us go into a little bit more detail about how a business plan can help entrepreneurs.
A business plan, chalked out in a detailed manner will provide a road map for the business for the next three to five years.
A business plan is an important document aimed at a company's external and internal audiences…. like investors or financial institutions, customers, suppliers, employees, strategic allies, and most important the people who in the future, want to shoulder responsibilities as partners or stakeholders in your business.
The business plan presented to a potential partner includes in detail the ownership structure and clearly defines matters related to the power of control and accountability.
This business plan, if shared with potential investors or financial institutions, will evaluate the company’s standing based on the plan and can decide on future funding, if required by the business owner.
In short, a business plan is a fundamental document that any new business should have in place before the beginning of operations.
A good business plan should outline all the projected costs and possible pitfalls of each decision a company makes in its day-to-day operation.
If we go still further in details of a business plan, then we can say - the business plan should include an overview, and, if possible, details of the industry of which the business will be a part.
Investors and financial institutions should understand if the business plan can explain how the business will distinguish itself from its competitors and how is its sustenance model.
While it's a good idea to give as much detail as possible in your business plan, it's also important that a plan need to be concise to catch a reader's attention till the end.
Here the question may arise…. what should be the length of a business plan, ideally?
Well, the length of a business plan varies from business to business. However, on average, the business plan will run something between 15 to 20 pages, wherein you try to fit in all basic information.
Other than basic information, will take more space, and be added as annexures, to the main business plan.
Yes, no two business plans are the same. But, they will have common elements in the key parts of a business plan.
Every company- small or big- should have a business plan.
Ideally, the business plan is reviewed and updated periodically to reflect the company’s goals that have been met or have been changed.
Sometimes, a new business plan is created for an established business that has decided to move in a new direction.
Having known what, the business plan is all about, our next step is how to write a business plan.
There are a few key things to keep in mind while writing an effective business plan.
• Try to understand who is your audience?
• Define a clear-cut goal of your business
• Mention the company’s vision and mission
• Keep it short, concise, and to the point
• Keep the tone, style, and voice consistently throughout
The basic outline of a business plan should consist of the following details(remove)
1. Executive summary
2. Company overview
3. Market analysis
4. Product and services
5. Marketing plan
6. Logistic and Operational plan
7. Financial Plan
Now that we have got an outline of a business plan, what are the things to be included in each of the sections?
1. Executive Summary:
Your business plan’s executive summary should include:
Business concept. What does your business do?
Business goals and vision. What does your business want to do?
Product Description and differentiation. What do you sell, and why is it different?
Target market. Whom do you sell to?
Marketing plan. How do you plan on reaching your customers?
Current financial state. What do you currently earn in revenue?
Projected financial state. What do you foresee earning in revenue?
Finance. How much money are you asking for?
The team. Who’s involved in the business?
2. Company Overview
This section of your business plan should include answers to the two fundamental questions:
Who are you, and
What do you plan to do?
Answers to these questions will provide a clear insight -
• Why you’re in business,
• Why you’re different,
• What helps you to get going, and …
• Why you’re a good investment bet.
Other than this, some more components you should include in your company overview:
Your business structure (what it means -Are you a sole proprietorship, general partnership, limited partnership, or an incorporated… company?)
The nature of your business (manufacturing or service?)
Your industry segments
Your business’s vision, mission, and values
Background information on your business or its history
Business objectives, both short and long term
Your team, including YOU and key personnel and their remunerations
3. Market analysis:
It should include an overview of how big you estimate the market for your products, an analysis of your business’s position in the market, and an overview of the competitive landscape.
When we talk about the competitive landscape, what it emphasizes is that…your business will always have competition in the market, even with an innovative product you may have.
Your business plan should also clearly state if you’re entering an established market, with your first-row competitors, how you will plan to differentiate your products and business from theirs.
On the other hand, if you’re entering a market where you can’t easily identify your direct competitors, they are your indirect competitors—you need to mention those companies who are offering products that are direct substitutes for yours.
4. Products and Services:
Your products and services will be the most important section of your business plan.
Your Product and Service section should prominently describe your target customers.
For all your strategic decisions, your target customers should always be in your mind.
This information will vary based on what product or service you are engaged with, but you should be specific enough about whom you’re trying to reach in the market.
Once your products and services are listed, and you know who your customers are, your business plan should also include what value you bring to them. Listing of your products and services is for general understanding, however, your value proposition will make you different in the eyes of your customers, from your competitors.
5. Marketing Plan:
Your marketing plan is your direct communication with your customers.
Your plan should outline your current decisions and your future strategy, with a focus on the fact, that how you remain focused on your ideal customers to make them your perfect idea fit.
Marketing plans in general, include information about four key subjects.
Although Promotion can mainly be managed through advertisement, the other three subjects are equally significant and need strategic mention about them in your marketing plan.
6. Logistic and Operation plans:
Logistics and operations are the workflows of your business to convert your ideas a reality.
This section should clearly define your strong supply chain and strong contingency plans are in place, to cover any kind of potential uncertainty.
7. Financial Plan:
No matter how great your idea is, and regardless of the effort, time, and money you invest, your business lives or dies, depending upon your financial stability.
The level of detail required to be included in your financial plan will depend on who is your audience and what is your goal behind it, but typically you’ll have to include three major views of your financials:
• an income statement,
• a balance sheet, and
• a cash-flow statement.
It is also appropriate to include financial projections…depending upon the extent to which the financial plan is being detailed.
The business plan is a very broad subject.
I have tried to bring out all my startup experience and experience working with other startup founders and have attempted to cover all aspects of the business plan, in brief, to help all those who are already startup entrepreneurs or those who are aspiring to become a startup entrepreneur, this episode will serve them as a reference manual for Business plan.