The Business Plan

A business plan is a written description of your business's future. Entrepreneur Asia Pacific
(n.d.) defines is as a written document describing the nature of the business, the sales and marketing
strategy, and the financial background, and containing a projected profit and loss statement.

Business plans can help perform a number of tasks for those who write and read them. They're
used by investment-seeking entrepreneurs to convey their vision to potential investors. They may also
be used by firms that are trying to attract key employees, prospect for new business, deal with suppliers
or simply to understand how to manage their companies better.

So what's included in a business plan, and how do you put one together?

Simply stated, a business plan conveys your business goals, the strategies you'll use to meet
them, potential problems that may confront your business and ways to solve them, the organizational
structure of your business (including titles and responsibilities), and finally, the amount of capital
required to finance your venture and keep it going until it breaks even.

According to Entrepreneur Asia Pacific (n.d.), a good business plan follows generally accepted
guidelines for both form and content. There are three primary parts to a business plan:

• The first is the business concept, where you discuss the industry, your business structure, your
particular product or service, and how you plan to make your business a success.

• The second is the marketplace section, in which you describe and analyze potential customers: who
and where they are, what makes them buy and so on. Here, you also describe the competition and how
you'll position yourself to beat it.

• Finally, the financial section contains your income and cash flow statement, balance sheet and other
financial ratios, such as break-even analyses. This part may require help from your accountant and a
good spreadsheet software program.

Breaking these three major sections down even further, a business plan consists of seven key
components:

1. Executive summary

2. Business description

3. Market strategies

4. Competitive analysis

5. Design and development plan

6. Operations and management plan

7. Financial factors

In addition to these sections, a business plan should also have a cover, title page and table of contents.
Why is a Business Plan Important?

Jared Lindzon (2019) stated that a well-written business plan is an important tool because it
gives entrepreneurs the ability to lay out their goals and track their progress as their business begins to
grow. Formulating a business plan should be the first thing done when starting a new business. Business
plans are also important for attracting investors so they can determine if your business in on the right
path and worth putting money into.

Lindzon (2019) said that business plans typically include detailed information that can help
improve the business’s chances of success, like a market analysis, competitive analysis, customer
segmentation, marketing, logistics and operations plans, cash flow projection and an overall path to
long-term growth.

Though it may sound tedious and time-consuming, business plans are critical to success. To
outline the importance of business plans, here are 10-reasons why you need one for your small
business.

1. To help you with critical decisions. Building a business plan allows you to determine the answer to
some of the most critical business decisions ahead of time. Creating a robust business plan is a forcing
function—you have to sit down and think about major components of your business before you get
started, like your marketing strategy and what products you’ll sell. You answer many tough questions
before they arise. And thinking deeply about your core strategies can also help you understand how
those decisions will impact your broader strategy.

2. To iron out the kinks. Putting together a business plan requires entrepreneurs to ask themselves a lot
of hard questions and take the time to come up with wellresearched and insightful answers. Even if the
document itself were to disappear as soon as it’s completed, the practice of writing it helps to articulate
your vision in realistic terms and better determine if there are any gaps in your strategy.

3. To avoid the big mistakes. According to the Small Business Administration, only about half of small
businesses are still around to celebrate their fifth birthday. While there are many reasons why small
businesses fail, many of the most common are purposefully addressed in business plans. However, the
exercise of creating a business plan can help you avoid these major mistakes. Whether it’s cash flow
forecasts or a product-market fit analysis, every piece of a business plan can help spot some of those
potentially critical mistakes before they arise.

4. To prove the viability of the business. Many businesses are created out of passion, and while passion
can be a great motivator, it’s not a great proof point. Planning out exactly how you’re going to turn that
vision into a successful business is perhaps the most important step between concept and reality.
Business plans can help you confirm that your grand idea makes sound business sense.

5. To set better objectives and benchmarks. Without a business plan, objectives often become
arbitrary, without much rhyme or reason behind them. Having a business plan can help make those
benchmarks more intentional and consequential. They can also help keep you accountable to your long-
term vision and strategy, and gain insights into how your strategy is (or isn’t) coming together over time.
6. To communicate objectives and benchmarks. Whether you’re managing a team of 100 or a team of
two, you can’t always be there to make every decision yourself. Think of the business plan like a
substitute teacher, ready to answer questions anytime there’s an absence. You and your staff can always
consult the business plan to understand the next steps in the event that they can’t get an answer from
you directly. Sharing your business plan with team members also helps ensure that all members are
aligned with what you’re doing, why, and share the same understanding of long-term objectives.

7. To provide a guide for service providers. Small businesses typically employ contractors, freelancers,
and other professionals to help them with individual tasks like accounting, marketing, legal assistance,
and as consultants. Having a business plan in place allows you to easily share relevant sections with
those you rely on to support the organization, while ensuring everyone is on the same page.

8. To secure financing. If you’re planning on pitching to venture capitalists, borrowing from a bank, or
are considering selling your company in the future, you’re likely going to need a business plan. After all,
anyone that’s interested in putting money into your company is going to want to know it’s in good hands
and that it’s viable in the long run. Business plans are the most effective ways of proving that and are
typically a requirement for anyone seeking outside financing.

9. To better understand the broader landscape. No business is an island, and while you might have a
strong handle on everything happening under your own roof, it’s equally important to understand the
market terrain as well. Writing a business plan can go a long way in helping you better understand your
competition and the market you’re operating in more broadly, illuminate consumer trends and
preferences, potential disruptions and other insights that aren’t always plainly visible.

10. To reduce risk. Entrepreneurship is a risky business, but that risk becomes significantly more
manageable once tested against a well-crafted business plan. Drawing up revenue and expense
projections, devising logistics and operational plans, and understanding the market and competitive
landscape can all help reduce the risk factor from an inherently precarious way to make a living. Having
a business plan allows you to leave less up to chance, make better decisions, and enjoy the clearest
possible view of the future of your company.

Questions Every Business Plan Should Answer

Keira Abbamonte (2018) stated that as a rule, business plans are very tactical. They outline clear
steps and goals to take your business from idea to growing company. A business plan should aim, more
broadly, to address a handful of overarching questions. These are the questions you need answers to
and the answers that investors, lenders, and other readers of your business plan are looking for.

• Why are you in business? Talk about your mission. What drives you and the business— beyond
revenue and profits?

• What does the market look like? Discuss who your potential customers are, and what pain
points they have that only you can solve. Analyze your competition— their business, their performance,
and their weaknesses. How does your business idea fit into the market in relation to them?

• What will you do? Detail how your business is different from what’s out there. Explain what
you’ll offer, how you’ll solve customer problems, and how the market will respond to your business.
How will the industry change when you enter it?
 • How will you grow? This is where you’ll specify financials, projections, and where you expect
the company to be in the future. You should also include plans for how the business will scale. Who will
you need to hire and what will their responsibilities entail?

• What do you need? Finish with your ask. Talk about what you need (financial investment, a
loan, a partnership, etc.), how you’ll use it, and what you’re offering in return (equity, collateral, etc.).
Where will that investment take your business? Answering those five questions helps to clarify what
your business is and why you and your company are uniquely qualified to take the current market by
storm. That helps potential investors, partners, and employees understand the value of working with
you. Whether you’re asking the audience for time, money, effort, or something else, they’re more likely
to buy into your venture if there’s a clear-cut path from plan to operations to profit. Answering the
questions above helps draw that path and answer the most important of all questions: What’s in it for
me?

Using your own words and understanding, answer the following: