What is a business plan and how to create one?
What is a business plan?
Let's have a look at what is a business plan: an argumentative document that aims to convince its reader to invest money in a company or a project. The plan must answer the following questions:
- Who are you (legal structure, ownership, location, etc.)?
- What do you sell (product, service)?
- Who do you sell to (customers)?
- How do you sell (distribution channels, marketing plan)?
- Who is the competition?
- What is the roadmap (milestones, timetable)?
- How is it made (manufacturing process, suppliers, technology, etc.)?
- What are the funding requirements (amount, source of financing)?
- What is the expected return on investment (cash flow forecast)?
What is a business plan in a standard format?
On top of understanding what is a business plan, let's see which structure it should follow:
- Executive Summary
- Company (who we are)
- Products and Services (what we sell)
- Market Analysis (who we sell to)
- Strategy (how we sell, who the competition is, what the roadmap is)
- Operations (how it is made)
- Financial Plan (what are the funding requirements, what is the expected return on investment)
- Appendix
Although there is a standard business plan outline, it is important to note that the plan needs to be tailored to both the project and the recipient.
Bespoke business plan
You're asking yourself what is a business plan, but remember that it is an argumentative document: it must prove that this project is a good one. The form of the business plan needs to reflect that and therefore the structure of the plan will vary slightly depending on the project.
The recipient of the business plan will decide to move forward with the project (or to drop it) based on its associated risks and rewards. The nature of these potential upsides and downsides depends on whether the recipient of your business plan is a bank, a shareholder, or a manager.
It is therefore key to have a clear understanding of the criteria that will be used by the recipient of your plan to make its decision before starting to write the plan. You can find more details on how banks and equity investors look at a business plan in this guide.
1 business plan = 2 documents
There are almost two distinct documents to understand what is a business plan: the executive summary and the rest.
The executive summary is the most important section, the objective is to get the reader excited about the project. It must also give a high-level answer to all of the questions mentioned above.
After reading the executive summary, and if the project looks interesting enough, the investor will then dive into some specific sections of the plan to get more details. The investor won't necessarily read the business plan cover to cover but will rather focus only on the sections that answer some of the questions he has on the project.
For more details on what is a business plan and how to write one, we invite you to read our full guide on how to write a business plan.
How do I write a professional business plan?
The business plan is the document with which you will present your business idea and try to secure financing from your bank or potential investors, so you need to make it impeccable.
If you are not used to writing business plans, a good solution would be to use online business plan software.
There are several advantages to using specialized software:
- You are guided through the writing process by detailed instructions and examples for each part of the plan.
- You can be inspired by already written business plan templates
- You can easily make your financial forecast by letting the software take care of the financial aspects for you.
- You get a professional document, formatted and ready to be sent to your bank.
If you are interested in this type of solution, you can try our software for free by signing up here.
Also on The Business Plan Shop
- How to write a business plan for a grant application
- How to write an executive summary
- How to do a market analysis for a business plan
- How to write a business plan for investors?
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