There are many reasons to write a business plan—it’s not solely the domain of entrepreneurs who want to secure funding to start or grow their business. Show
A business plan can help you clarify your strategy, identify potential roadblocks, decide what you’ll need in the way of resources, and evaluate the viability of your idea or your growth plans before you get started. Whatever your reason for writing a business plan, the task will probably still feel like a homework assignment. When you’re start a business, your to-do list is a mile long and filled with more immediately rewarding tasks, like taking product photos, creating ad campaigns, and opening social media accounts. Not every business launches with a formal business plan, but many founders find value in taking time to step back, research their idea and the market they’re looking to enter, and understand the scope and the strategy behind their tactics. That's where writing a business plan comes in. What is a business plan?A business plan is a document describing a business, its products or services, how it earns (or will earn) money, its leadership and staffing, its financing, its operations model, and many other details essential to its success. Why write a business plan?Investors rely on business plans to evaluate the feasibility of a business before funding it, which is why business plans commonly are associated with getting a loan. But there are several compelling reasons to consider writing a business plan, even if you don’t need funding.
If you’re looking for a structured way to lay out your thoughts and ideas, and to share those ideas with people who can have a big impact on your success, a business plan is an excellent starting point. Here’s what a couple of entrepreneurs said when we asked them how useful writing a business plan was for their business. “We had a marketing background, but not much experience in the other functions needed to run a fashion ecommerce business, like operations, finance, production, and tech. Laying out a business plan helped us identify the ‘unknowns,’ and made it easier to spot the gaps where we’d need help or, at the very least, to skill up ourselves.” —Jordan Barnett, Kapow Meggings “We own a bricks-and-mortar and ecommerce jewellery business that moved from Magento over to Shopify. We created a business plan for the move, just as we did with our original website and ecommerce business. Our business plan included an overview on why we were making the move, the issues with the current business, the benefits of moving to a new platform, the potential issues during the move, the main task, added costs, and a timeline. It really covered everything we felt was the most important. This business plan was given to everyone working on the project, from the photographers to the marketing team to the developers. This way we were all on the same page. It worked pretty well the first time, and even better this time around.” —Jeff Moriarty, Tanzanite Jewelry Designs How to write a business planThere are a few key things to keep in mind to help you write an effective business plan.
How to create a business plan outlineFew things are more intimidating than a blank page. Starting your business plan with a structured outline and key details about what you’ll include in each section is the best first step you can take. Since an outline is such an important step in the process of writing a business plan, we’ve put together a high-level overview you can copy into your blank document to get you started (and avoid the terror of facing a blank page). Here’s a sample business plan outline:
What to include in each section of your business planNow that you’ve got an outline in place, it’s time to fill it in. We’ve broken the outline down by section to help you build your plan step-by-step. Executive summaryA good executive summary is one of the most crucial sections of your plan—it’s also the last section you should write.
Company overviewThis section of your business plan should answer two fundamental questions: Who are you, and what do you plan to do? Answering these questions provides an introduction to why you’re in business, why you’re different, what you have going for you, and why you’re a good investment bet. Clarifying these details is still a useful exercise even if you’re the only person who’s going to see them. It's an opportunity to put to paper some of the more intangible facets of your business, like your principles, ideals, and cultural philosophies. Here are some of the components you should include in your company overview:
Some of these points are statements of fact, but others will require a bit more thought to define, especially when it comes to your business’s vision, mission, and values. This is where you start getting to the core of why your business exists, what you hope to accomplish, and what you stand for. To define your values, think about all the people your company is accountable to, including owners, employees, suppliers, customers, and investors. Now consider how you’d like to conduct business with each of them. As you make a list, your core values should start to emerge. Once you know your values, you can pen a mission statement. Your statement should explain, in a convincing manner, why your business exists, and should be no longer than a single sentence. As an example, Shopify’s mission statement is “Make commerce better for everyone.” It’s the “why” behind everything we do and clear enough that it needs no further explanation. Next, craft your vision statement: what impact do you envision your business having on the world once you’ve achieved your vision? Phrase that impact as an assertion—begin the statement with “We will” and you’ll be off to a great start. Your vision statement, unlike your mission statement, can be longer than a single sentence, but try to keep it to three at most. The best vision statements are concise. Finally, your company overview should include both short- and long-term goals. Short-term goals, generally, should be achievable within the next year, while one to five years is a good window for long-term goals. Make sure all your goals are S.M.A.R.T.: specific, measurable, attainable, realistic, and time-bound. Market analysisIt’s no exaggeration to say your market can make or break your business. Choose the right market for your products—one with plenty of customers who understand and need your product—and you’ll have a head start on success. If you choose the wrong market, or the right market at the wrong time, you may find yourself struggling for each sale. This is why market analysis is a key section of your business plan, whether or not you ever intend for anyone else to read it. It should include an overview of how big you estimate the market is for your products, an analysis of your business’s position in the market, and an overview of the competitive landscape. Thorough research supporting your conclusions is important both to persuade investors and to validate your own assumptions as you work through your plan. How big is your potential market?Potential market is an estimate of how many people potentially could buy your product. While it’s exciting to imagine sky-high sales figures, you’ll want to use as much relevant independent data as possible to validate your estimated potential market. Since this can be a daunting process, here are some general tips to help you begin your research:
Some sources to consult for market data include government statistics offices, industry associations, academic research, and respected news outlets covering your industry. SWOT analysisA SWOT analysis looks at your strengths, weaknesses, opportunities, and threats. What are the best things about your company? What are you not so good at? What market or industry shifts can you take advantage of and turn into opportunities? Are there external factors threatening your ability to succeed? These breakdowns often are presented as a grid, with bullet points in each section breaking down the most relevant information—so you can probably skip writing full paragraphs here. Strengths and weaknesses—both internal company factors—are listed first, with opportunities and threats following in the next row. With this visual presentation, your reader quickly can see the positive and negative internal and external factors that may impact your business. Here’s an example. Strengths
Weaknesses
Opportunities
Threats
Competitive analysisThere are three overarching factors you can use to differentiate your business in the face of competition:
To understand which is the best fit, you’ll need to understand your business as well as the competitive landscape. You’ll always have competition in the market, even with an innovative product, so it’s important to include a competitive overview in your business plan. If you’re entering an established market, include a list of a few companies you consider direct competitors and how you plan to differentiate your products and business from theirs. For example, if you’re selling jewelry, your competitive differentiation could be that, unlike many high-end competitors, you donate a percentage of your profits to a notable charity or pass savings on to your customers. If you’re entering a market where you can’t easily identify direct competitors, consider your indirect competitors—companies offering products that are substitutes for yours. For example, if you’re selling an innovative new piece of kitchen equipment, it’s too easy to say that because your product is new you have no competition. Consider what your potential customers are doing to solve the same problems your product solves. Products and servicesYour products or services will feature prominently in most areas of your business plan, but it’s important to provide a section that outlines key details about them for interested readers. If you sell many items, you can include more general information on each of your product lines; if you only sell a few, provide more detailed information on each. Customer segmentationYour ideal customer, also known as your target market, is the foundation of your marketing plan, if not your business plan as a whole. You’ll want to keep this person in mind as you make strategic decisions, which is why an overview of who they are is important to understand and include in your plan. To give a holistic overview of your ideal customer, describe a number of general and specific demographic characteristics. Customer segmentation often includes:
This information will vary based on what you’re selling, but you should be specific enough that it’s unquestionably clear who you’re trying to reach—and more importantly, why you’ve made the choices you have based on who your customers are and what they value. For example, a college student has different interests, shopping habits, and price sensitivity than a 50-year old executive at a Fortune 500 company. Your business plan and decisions would look very different based on which one was your ideal customer. Marketing planYour marketing efforts are directly informed by your ideal customer. Your plan should outline your current decisions and your future strategy, with a focus on how your ideas are a fit for that ideal customer. If you’re planning to invest heavily in ads on Instagram, for example, it might make sense to include whether Instagram is a leading platform for your audience—if it’s not, it might be a sign to rethink your marketing plan. Most marketing plans include information on four key subjects. How much detail you present on each will depend on both your business and your plan’s audience.
Promotion may be the bulk of your plan, since you can more readily dive into tactical details, but the other three areas should be covered at least briefly—each is an important strategic lever in your marketing mix. Logistics and operations planLogistics and operations are the workflows you’ll implement to make your ideas a reality. If you’re writing a business plan for your own planning purposes, this is still an important section to consider, even though you might not need to include the same level of detail as if you were seeking investment. Cover all parts of your planned operations, including:
This section should signal to your reader that you’ve got a solid understanding of your supply chain, and strong contingency plans in place to cover potential uncertainty. If your reader is you, it should give you a basis to make other important decisions, like how to price your products to cover your estimated costs, and at what point you plan to break even on your initial spending. Ready to create your online store? Start your free trial of Shopify—no credit card required.Email addressStart free trial Financial planNo matter how great your idea is, and regardless of the effort, time, and money you invest, a business lives or dies based on its financial feasibility. At the end of the day, people want to work with a business they expect to be viable for the foreseeable future. Here’s a spreadsheet template that includes everything you’ll need to create an income statement, balance sheet, and cash-flow statement, including some sample numbers. You can edit it to reflect projections, if needed. Income statementYour income statement is designed to give readers a look at your revenue sources and expenses over a given time period. With those two pieces of information, they can see the all-important bottom line, or the profit or loss your business experienced during that time. If you haven’t launched your business yet, you can put together a forecast of the same information. Balance sheetYour balance sheet offers a look at how much equity you have in your business. On one side, you list all your business assets (what you own) and, on the other side, all your liabilities (what you owe). This provides a snapshot of your business’s shareholder equity, which is calculated as Assets - Liabilities = Equity Cash-flow statementYour cash-flow statement is similar to your income statement, with one important difference: it takes into account when revenues are collected and when expenses are paid. When the cash you have coming in is greater than the cash you have going out, your cash flow is positive. When the opposite scenario is true, your cash flow is negative. Ideally, your cash-flow statement will help you see when cash is low, when you might have a surplus, and where you might need to have a contingency plan to access funding to keep your business solvent. It can be especially helpful to forecast your cash-flow statement to identify gaps or negative cash flow and adjust operations as required. Here’s a full guide to working through cash-flow projections for your business. Download your copy of all three templates to build out these financial statements for your business plan. Planning gives you a solid foundation for growthA business plan can help you identify clear, deliberate next steps for your business, even if you never plan to pitch investors—and it can help you see gaps in your plan before they become issues. Whether you’ve written a business plan for a new business or for growing your current company, you now have a comprehensive guide and the information you need to help you start working on the next phase of your business. Business Plan FAQsWhy do I need a business plan?A business plan can help you streamline your idea and break it down into multiple smaller projects. For example, if you wish to start a clothing store, your business plan can begin to evaluate designs, the amount of money you will need, and what your margins might be. It will also prevent you from feeling overwhelmed. What do I include in a business plan?A business plan should cover the high-level summaries of what you’re trying to achieve. Start off by outlining your goals and vision. After that you can move on to your customer persona, estimated size of market, competitive landscape, and go-to market strategies. Business plans help keep you focused on the goal and a foundation on which you can build on. How long should a business plan be?While there is no set limit to a business plan, we don’t recommend that you go above 15 to 20 pages in length. Feel free to include figures, statistics, and financial projections but a business plan is only as good as its implementation strategy. Simply put, you want to avoid the analysis paralysis problem that affects many aspiring entrepreneurs. Topics: How to Start a Business Shopify Essentials Join 446,005 entrepreneurs who already have a head start.Get free online marketing tips and resources delivered directly to your inbox. Email addressSubscribe No charge. Unsubscribe anytime. Thanks for subscribing.You’ll start receiving free tips and resources soon. In the meantime, start building your store with a free 3-day trial of Shopify. What are the appendices in business plan?The appendix is used to provide supporting documentation for key components in your business plan, such as financial statements or market research. The appendix is also a great place to put any other tables or charts you didn't want to put in the main body of the business plan.
What are the 4 main parts of a business plan?The 4 Key Components of a Business Plan (and Why They're Important). Executive summary.. Marketing plan.. Key management bios.. Financial plan.. What should not be included in a business plan?Seven top business plan mistakes:. Not making one. As an entrepreneur, surely you're more excited about doing the thing you want to do that writing a plan about it. ... . Being unrealistic. ... . Poor executive summary. ... . Too long. ... . Not backing up what you say. ... . Not focusing on the team, and your role as the head. ... . Sloppy mistakes.. What should be included in an appendix?The Appendices should follow the References/Bibliography unless your Appendices include citations or footnotes. Appendices can consist of figures, tables, maps, photographs, raw data, computer programs, musical examples, interview questions, sample questionnaires, etc.
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