Have grand plans for a start-up? Before you quit your job and throw all your energy into starting a business, you should establish a vision of where you want your business to go and how you’re going to get there.
In our opinion, your business plan doesn't need to be a 30-page MBA thesis. In fact, your plan should be no more than five pages (the shorter the better).
The purpose of this business planning exercise is to get you thinking about all the important pieces that make a business feasible and profitable. This will help shed light on all the key areas of a business that you might have not considered. You’ll get clear on your vision, understand the market you’re jumping into, and have a roadmap for how it’s really going to work.
It’s not good enough to just think about the numbers: you need to run them. Does your plan add up to profitability?
Why do I need a business plan?
The value of a business plan is actually in the process of writing it. It forces you to do the research on your competition and really think about the market you’re in. You need to run some numbers and analyze your pricing and expenses. You need to understand and anticipate challenges you may face.
Harvard Business Review writes, “Entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical non-planning entrepreneurs.” This may be because of the plan itself, or the characteristics of people more likely to write a plan. But one thing’s for sure: showing up and writing your plan boosts your chance of success.
If you need to raise capital from a bank or investor, a good business plan is required. HBR adds, “Better-financed startups are more likely to succeed.” Your business plan will become the blueprint for your pitch to potential investors.
What should my business plan include?
In our ebook, “The Path to Starting Your Own Business,” we outline eight sections for your business plan.
- A description of the problem your customers have.
- How your product or service solves that problem.
- Business model. How are you going to make money?
- Marketing plan. Your marketing plan should explain who your potential customers are, what the market opportunity is (i.e. how many potential customers you anticipate) and how your product will solve their needs.
- Competitive analysis. Who else is providing something similar and how are you going to do it better?
- Management plan. What is the legal structure of your business? What management roles are required to succeed?
- Financial projections. How will you get revenue? How many customers will you have? What expenses will you have?
- Barriers to entry and funding required. What are key obstacles or challenges to your business plan? What will it take for the business to get going?
Business plan vs strategic plan
A business plan is really for starting your business, or for banks and investors when raising money to grow your business. It explains what you want to do and where you want to go.
A strategic plan outlines how the leaders implement the strategy to get the company where it wants to go.
The one-page strategic plan
Once you’ve gone through the process of writing your business plan, distill it all down to a one-page strategic plan (also known as the OPSP). The OPSP is your clear-eyed summary of your business, why you exist and what your plan is. When you are talking to your team — or potential investors — this is your go-to document.
The Growth Institute suggests, “A good One-Page Strategic Plan can help you achieve results…because it brings better alignment, accountability, and execution in your organization.”
Your OPSP should outline:
- Your core values
- Your purpose
- Measurable targets for the next 3 to 6 years
- Your goals for the next year
- The actions you will take to meet your goals
- How you will celebrate or reward meeting those priorities
- Who is accountable for what
- Strengths, weaknesses and trends
How do I create a business plan?
There are plenty of good business plan templates out there that you can use as a basis for your plan.
Another option is to use business plan software. Software will prompt you with the right questions, and help you build financial projections and investor presentations that look professional.
Read more of our Starting a Business articles that may be helpful to you as you grow your small business.