What is a Business Plan? Definition, Tips, and Templates
More than 50% of small businesses fail in their first year, making sure a business plan is clear, detailed, and well-thought-out is a vitally important first step.
To get any company off the ground, a business plan is undoubtedly crucial. You need it to secure funding, document your business plan, outline your financial projections, and turn your idea into a reality.
Entrepreneurs, business owners, business acquirers, and business school students all need business plans. But … what exactly is a business plan?
In this article, we’ll explain what a business plan is, why you need one, and what you should include in yours.
What is a business plan?
A business plan is a documented strategy for a business that highlights its goals and its plans for achieving them. It outlines a company’s go-to-market plan, financial projections, market research, business purpose, and mission statement. The business plan may include key staff members who are responsible for achieving the goals.
Business Plan Template [Download Now]
Are you working on your business plan? Use a business plan template. A great business plan template provides aspiring entrepreneurs with a sense of what a business plan is, what should be in it, and how it can be used to establish and grow a business.
What is a business plan used for?
The purpose of a business plan is three-fold: It summarizes the organization’s strategy in order to execute it long term, secures financing from investors, and helps forecast future business demands.
Purposes of a Business Plan
A business plan is likely to be drafted for one or more of the following reasons:
1. Securing financing from investors.
Due to its content, a business plan is used to source capital because it discusses how businesses succeed, break-even, and turn a profit. Entrepreneurs use this document to show potential investors and lenders how their capital will be put to use and how it will help them succeed.
All banks, investors, and venture capital firms will want to see a business plan before handing over their money, and investors typically expect a 10% ROI or more from the capital they invest in a business.
2. Documenting a company’s strategy and goals.
A business plan should leave no stone unturned.
Business plans can span dozens or even hundreds of pages, affording their drafters the opportunity to explain what a business’ goals are and how the business will achieve them.
Potential investors should see that entrepreneurs have thoroughly explained their marketing, sales, and operations strategies – from acquiring a physical location for the business to explaining a tactical approach for marketing penetration.
3. Legitimizing a business idea.
Everyone has a great idea for a company – until they put pen to paper and realize it’s not exactly feasible.
Business plans are an aspiring entrepreneur’s way of proving that a business idea is actually worth pursuing.
Entrepreneurs likely come across a few hiccups as they document their go-to-market process, capital requirements, and expected return on investment, and that’s what a business plan is for: to guide them through these hiccups.
A business plan ensures that an entrepreneur has all their ducks in a row before presenting their idea to the public and assures readers that whoever wrote the plan is serious about the idea, having put hours into thinking of the business idea, fleshing outgrowth tactics, and calculating financial projections.
4. Getting an A in your business class.
As a matter of fact, there’s a chance that you’re here for business plan ideas for your class’s Business 101 project.
We suggest you read this post on How to Write a Business Plan. It provides a section-by-section breakdown on how to write your plan.
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