Congratulations on your decision to start a new business. Right now, you’re probably feeling a mix of exhilaration and fear, often shifting from one to another, as you recognize how great your company can be — but also how much you don’t know about running a company.
And, that’s why we’re writing this article and providing you a downloadable sample business plan to follow, as you draft your own.
Some people have the impression that a business plan is only used to secure funding, but that’s just one application. A great business plan also helps you think through the capital you will need to run your business, when you can expect to be profitable, the resources you will need to build your business, how you differentiate your product or service among competitors and so much more. Even if you’re not looking to seek investment right now, you should still build out a business plan. You can always modify it later to include sections on investment and exit strategies.
We’ll take a close look at what to include in each section. A business plan includes the following basic components:
Thinking through a business plan is hard work, so grab a pen, notepad, and a gallon of coffee. And, if you want to use the example plan to follow along, you can download it here.
Let’s get started.
When defining the market opportunity for your business, you’ll want to think beyond the reasons you love your company and believe in its future success. Instead, you want to look at all the products and services similar to yours — products and services people are currently buying that you can make your customers through a better offering to fit their needs.
You will want to review the size of the market by researching the industry. Depending on your industry, you’ll want to research analyst reports, industry-specific publications, government agency reports, etc. You’ll want to review data that is as unbiased and credible as possible, so reports from analysts like Gartner and Forrester or government agencies are your most trusted resources.
There is nothing better to help you build your business strategy like knowing your competition. Think of the customers you have or plan to have. Think of the money they spend on services like yours. Now, start researching those products and services and study those companies. Look at how they talk about their services. Look at who they use for testimonials on their website. Research their products, their pricing, their management structure, their customers — everything you can find on them.
Then, find competitors within your geography or market area. Find their locations and visit them. Talk to the people there. Look at their customers and pay attention to what they’re buying. If you don’t have a physical location you can visit, pick up the phone and ask to speak to sales, or watch a demo or take a trial or their product or service. You will always be connected immediately to someone responsible for sales.
Take the time to talk to them. Ask them about their product/service, and listen closely to how they present their solution. Sign up for their newsletters, follow them on social media, and note how they approach their relationship with consumers.
Competitive advantage is what makes your company better to a particular buyer than your competitors. Once you’ve analyzed your competitors and found their blindspots in how they’re serving their customers’ needs, then you think of how your solution is different.
Competitive advantage is not that your company has a unique value proposition to all customers of your competitors. It’s how your solution is unique to a specific group of buyers. Those are the buyers you position your messaging around because those are the customers who are likely to leave your competitors and spend their money with you instead.
The solution overview should be the easiest part of the business plan for you to write. You know what your solution is about. You know how you want to price and present it, and through your competitive research, you now know how your offering compares to the competition and who your target buyer is.
This section is a quick overview to provide reviewers of your business plan a little deeper understanding of what you solution is and how it’s different from your competitors. You’ll explain your solution more completely in a later section of the business plan.
Most entrepreneurs wear multiple hats and are responsible for both sales and marketing efforts, with sales typically taking priority, since revenue coming in keeps the business running. But, you’ll want to spend time thinking about your future customers who are more likely to come to you through marketing. This section isn’t just about customers to keep the lights on right now. It’s also about your future customers who will keep your company healthy for the foreseeable future. Provide a summary of how you plan to get the word our about your company, find new customers, win customers and keep customers. If you or anyone in leadership at your company has sales or marketing experience, this is a good section to highlight that experience.
This section is where you provide more information about your offering. If investors have come this far in your business plan, then they have seen enough to understand your approach and are interested enough to start digging deeper. This is where you provide additional details about your product or service, any intellectual property you own, and how it uniquely addresses the needs of prospects and buyers of products like yours.
Although this area is important to potential investors, it’s also helpful to entrepreneurs who are not seeking investment. Our research has shown, small business owners are personally responsible for an average of 4.2 roles. Thinking through everything you do, what you do well, and what you are currently doing but is not your area of expertise can help you build out your future plans for adding the skills and knowledge you need to continue growing your company. Consider what you think will most benefit your company in terms of employees, leadership, and potentially board members who can provide everything from advice to key introductions to people within their network.
This is one of the most important areas of a business plan for any entrepreneur, and you will want to be conservative in your projected revenues, while overestimating your expenses. Take all the expenses and revenues you’ve had so far and look closely at your projected sales for the next three years.
By being overly conservative with your revenue projections, you cover yourself for unexpected situations that keep you from focusing on getting new customers. And by overprojecting your expenses, you are prepared for those worst-case scenarios when the roof leaks, you need new equipment, you have a bigger tax burden than expected, or you suddenly have to hire a bunch of new people with little notice. This is your insurance that when Murphy’s law hits, you’ll still be in business.
If you are seeking investment, you will want to complete this section, detailing how much money you think you’ll need to cover things like renting space, buying equipment, hiring, advertising, etc. You’ll want to explain how much you need, what you’ll use the investment for, and how long that money will last.
Although this is typically a section to show investors how you plan to make their investment rewarding for them, it’s also a good section to think about, even if you never plan to seek funding. When you think through how long you really want to run this business and what you want to get out of it (taking time from friends, family, and the career strides you could be making working for someone else), this section focuses you on what you want to get from all the sacrifices you will be making as an entrepreneur.
This is a great section to help you communicate to people who ask you, “Why would you want to do that?” This section gives you a clear understanding of what you want to get out of your company and when. And, when you reach decision-points with your company, this single focus can help direct your choices.
If you haven’t already downloaded the business plan example, you can get that here and use it to think through your own company.
And, if you find yourself struggling to complete certain sections like financial projections, because you don’t have easy access to data on your previous deals or those you’re working on, then you may want to sign up for a free trial of Essentials to see how Essentials gives you easy-to-access and even easier to understand insight into your company’s present and future.