As a business owner, time and money aren’t things you have to waste.
Yet, that’s exactly what will happen if you rush headlong into opening a business without first creating a small business plan.
Think about it: You wouldn’t decide to build a house without a blueprint or take a road trip without a map. Your business plan serves as the blueprint and map for your business. It’s a foundational document that entrepreneurs and small business owners can’t risk ignoring. Once you’ve worked on validating your business idea, it’s time to create a plan.
In this post, we’re going to explore why you should create a business plan for your small business, different types of business plans, how to create a business plan, and provide sample business plans.
Creating a small business plan.
Why do I need a plan for my small business?
Your small business plan is an essential document that helps you plan and start your business. It assists you with:
- Testing the practicality and feasibility of your business idea.
- Making it easier to secure funding and investors.
- Growing your business.
You might think of a business plan as a static document, something that once it’s written, you don’t have to touch again. Yet, that couldn’t be further from the truth. Think of your small business plan as a living document, one that grows and changes with your business. Many business owners find that they need multiple business plans as their business objectives change over time.
Your business plan allows you to formulate and plan out your goals in a way that’s both intelligible and trackable. As your business grows, you can refer back to it to make sure you’re hitting the milestones that you need to be achieving. Investors will also look to your business plan to determine if your business is achieving its stated goals and worthy of their investments.
How do I create a small business plan?
Different types of small business plans.
Before creating a business plan, you’ll need to identify the type of business plan that best suits your needs.
The US Small Business Association describes two different types of business plans: traditional or lean startup. The difference is that “traditional business plans are more common, use a standard structure, and encourage you to go into detail in each section. A lean startup business plan is “less common … They focus on summarizing only the most important points of key elements of your plan.”
It’s a good idea to create both types of business plans. A more traditional business plan acts as a working, living document, it’s something you refer to throughout the life of your business for guidance as you work toward your business goals. Lean startup business plans are a fantastic tool to have in your business arsenal, too. They can be used to determine potential interest in your business — share them while doing market testing to determine the viability of your idea or with investors when seeking funding.
What’s included in a traditional small business plan?
The SBA recommends that a traditional business plan include the following elements:
- Executive Summary.
- Company Description.
- Market Analysis.
- Organization and Management.
- Service or Product Line.
- Marketing and Sales.
- Funding Request.
- Financial Projections.
- An Appendix.
We know, that seems like a lot of information, but trust us when we say that this document is vital to the success of your business. The work you put in now to create a business plan will save you from unnecessary mistakes and risks in the long run.
Let’s look at the individual components of the traditional small business plan as described by the SBA so you know exactly what each section entails.
Your executive summary is the first part of your business plan because it summarizes the essence of your business.
Include basic information about your company like who leads it, your product or service, and high-level financial information if you intend on seeking financing. But keep in mind that brevity is the soul of your executive summary, so don’t get lost in the weeds.
This section allows you to go into more depth about your business and requires specificity. Describe the problem(s) that your business solves and your competitive advantages. And remember that it’s not just your business idea and viability that’ll attract interest, it’s also the people behind the scenes making things come together. Use this section to detail your team or the team that you will hire, the legal status of your business (if you’re up and running), and where you’re located.
This section is your time to shine so go ahead and tout the benefits of your business.
A market analysis is integral to any small business plan.
Your business isn’t operating in a bubble sealed off from the rest of the world. Unless your business idea is truly original, you’ll be competing in a crowded marketplace.
This section is your chance to explain the opportunities in your market and necessitates some competitive research. The SBA recommends expounding on market trends, and answering the following questions:
- What do successful competitors do?
- Why does it work?
- Can you do better? How so?
Organization and Management
Here’s your chance to go into detail about the people who are going to make this business idea a reality and the structure your business will take.
Investors and others will want to know about the legal status of your business — are you a registered LLC or do you plan on becoming one? Is it a partnership or are you the sole proprietor? If you don’t have a legal status yet, this is an opportunity to lay out what the plans are for gaining one and the type of legal status you’ll establish.
As we’ve mentioned, it’s not just about the type of business you’re starting, it’s also about the people making it happen. Think about including a chart of your organization detailing people’s responsibilities and what they bring to the table. You can even choose to include (or link to) the resumes or CVs of integral team members.
Service or Product Line
What are you selling? Here’s your chance to regale us with all the details about your products and/or services. In this section, be sure to answer the following questions and include the following information:
- What benefits do your products or services provide?
- Describe your product or service lifecycle.
- How will you manage your intellectual property (copyrights, trademarks, patents)?
- What’s your research & development (R&D) look like?
Marketing and Sales
Your marketing strategy isn’t going to be static. This section of your business plan will change and evolve as your business does. However, you’ll always want to include the following information in this part of your plan:
- How will you create and engender customer interest?
- How do you plan on retaining your customers?
- What is your sales process?
- Have you thought about your marketing funnel?
This section will inform how you make your financial projections and decisions, so don’t skimp on your market and sales research. Try making market research a continuous habit so you always have your finger on the pulse of what’s happening in the market and can adapt accordingly.
Will you seek funding for your business? If so, make sure this section of your business plan is thorough. Details and specificity will help you make your appeal.
Detail your funding requests and requirements:
- How much will you need over the next few years? Think of this as a five-year funding plan.
- How will you use the funding you receive (salaries, equipment, materials, marketing, etc.)?
- What are the terms under which you seek funding?
- The type of funding you’re seeking, i.e. debt or equity.
- How you plan to pay back the funds you receive.
This section of your business plan is meant to back your funding requests but is essential to your plan even if you aren’t seeking funding.
If you don’t have an established business you should include what you believe your prospective financial outlook to be. This means including (data-driven) income forecasts, big expenditures, and balance sheets. If you have an existing business, this is information you should have available. If that’s the case, include your actual cash flow, income, balance sheets, and expenditures.
If you’re seeking funding, this information should support and match your requests. Don’t forget to mention any collateral that can help make your case for receiving a loan.
If possible, use graphs and images to help support the information you include in your financial projections.
Your business plan appendix should include any information that supports your small business plan and funding requests. Here are some things to think about including:
- Resumes and/or CVs.
- References and letters of reference.
- Credit history(ies).
- Licenses, permits, or patents that you have.
- Legal contracts.
- Examples of your product — photos or links to digital demonstrations should suffice.
And there you have it — a thought-through and effective guide to creating your traditional business plan!
Now, let’s see what a leaner, startup business plan looks like.
What’s included in a lean startup small business plan?
Why would you consider creating a leaner business plan for your small business? A lean business plan is perfect for you if your business idea is simple, you plan on changing your business model, you’d like to start your business quickly, or if you want a shorter, condensed business plan to share with others.
Once again, we’re going to look to the SBA, a trusted institute, to help us understand what a lean business plan looks like and what type of information should reside therein. Keep in mind that since this is a lean startup plan, it should be kept succinct and to the point.
The SBA recommends that your lean startup business plan include the following elements:
- Key Partnerships.
- Key Activities.
- Key Resources.
- Value Proposition.
- Customer Relationships.
- Customer Segments.
- Cost Structure.
- Revenue Streams.
We understand that this might not appear to be leaner than a traditional small business plan, but you’d be surprised — stick with us as we dive into it to learn what it entails.
Who is going to help you achieve success with your business? Think strategically: Will you have partners? Who are your manufacturers and suppliers? Succinctly explain these partnerships in this section.
How is your business going to gain a competitive advantage over other businesses in the same market? Is it your sales model? Your technical expertise and tools? Those who read your business plan will want to know what your plan is for gaining an advantage over the competition —no one wants to support or invest in a risky business.
What resources will you use to create value for your customers and your business? Whether it’s your team, available funds or capital, patents and trademarks, or third-party business resources, list them here.
Your unique value proposition should describe what differentiates you from other competitors in your market. What value does your business bring to the table that others don’t? Describe it clearly and concisely.
What will your interactions with customers look like? Will you offer personalized services or automated? Think about the first touchpoint someone will have with your business through to the last. You can use your marketing funnel to help inform this section of your business plan.
You can’t please everybody. That’s as true in business as it is in everyday life. Use this section to describe your ideal customer and target market as that’s who your business will be designed to help.
Where will you promote and market your business? Where will you have a business presence and communicate with customers? (Hint: it should be where your customers are.)
What is your business or company going to focus on: reducing your overall cost of operations or maximizing your business value? After thinking through your business strategy, detail it here, and don’t forget to include any significant costs you’ll encounter along the way.
How is your business going to make real, tangible revenue? If you’re a retail business then you’ll likely be making direct in-person or online sales. If you’re opening a gym or yoga studio you may charge subscription fees. Either way, potential investors want to know how you plan on making money so they can rest assured their investment isn’t a waste.
And there you have it, folks — a succinct guide to creating a lean startup business plan.
Example Small Business Plan Templates
It’s one thing to read about creating a business plan and another to see what one looks like in practice. If you’re intimidated at the thought of creating a business plan from scratch, don’t worry, there are plenty of templates to help.
Here are two business plan examples provided by the Small Business Association that’ll guide and assist you as you start writing your own plan:
What happens after you create a small business plan?
First off, congratulations on completing your small business plan!
Now that you’ve created your plan and laid the foundation for your business, it’s time to put it into practice. As your business evolves and grows, make sure to revisit your business plan. This plan is a living document and a great guide to helping you understand what business goals you’re achieving and where you may need to improve your performance.
Don’t forget to revisit your business plan regularly to make sure it’s updated as your business changes and adapts to the market.
We wish you the best of luck with your business and don’t forget that we’re here to help! If your business is ready to get online and create a digital presence, we’ve got you covered. Let us know if you have any questions or comments below!