What is a Business Plan and Why Do You Need One?

When most people think of writing a business plan, they envision a long, extensively detailed document with masses of data and financial forecasts. While that may be the requirement for people seeking outside funding, a business plan doesn’t have to be that complicated to be effective. It provides the blueprint for how you intend to build your business, so the plan only has to be as long as you need, depending on the size of your business. Use your own business plan to map out your goals, action plans and financials while significantly increasing your chances for success.

Why create a business plan?

The most common use for a business plan is for new and existing businesses to get funding from a bank or loan organization. This is where you’ll end up needing that long document that supports all aspects of your plans and explains why you believe they’ll succeed. Writing a business plan of this nature can be an ordeal and can slow down the start of your business, but it’s a necessity if you need someone else to loan you money.
Both online and offline business owners often create business plans on a yearly basis to get themselves organized for the next year. It’s a way of taking stock of progress, examining what’s working, and laying out goals and plans for the year to come. Almost all very successful business owners will tell you that they create business goals and action plans on a regular basis, sometimes as often as once a month since markets can change quickly.

In addition, if you have been struggling in your business or are considering something new, the entire process of creating a business plan will help you see where you can be most profitable. It will also tell you where you are going wrong and need to change.

What are the key components of a business plan?

Most business plans are comprised of the following parts. If you are creating a proposal for a business loan, you’ll be given more precise requirements. But for small business planning purposes, these components should be sufficient:

1.   Description of your business model and target market.

What kind of business are you implementing and who are your target customers?

2.   Unique Value Proposition.

What do you have to offer that makes you different from everyone else? Why should people buy from you?

3.   Business goals.

What are your specific, measurable goals that you want to achieve and when?

4.   Marketing Plan.

What marketing strategies will you put in place and what is their timeline?

5.   Action Plan.

What are the tasks you need to complete and when?

6.   Financial forecast and budget.

How much is all of this going to cost on a monthly basis, and what kind of revenue do you expect? How long will it take to break even and make a profit?

When should you create a business plan?

A business plan is a living, breathing document that will grow and change along with your business. When first starting a new business, your business plan helps determine if you have a good, financially viable idea. At the beginning of each year, it helps you to plan out your goals and strategies. Of course, if you need to raise money, people will want to see a detailed plan.

However, remember that you need to revisit your business plan regularly. As market conditions shift, laws or regulations change, or you aren’t seeing the results you expected, it’s time to adjust your plan. Use it as your guide and refer to it often as you plan each week, but don’t let it restrict you.

Your business plan serves as your blueprint for success and everyone running a business can benefit from creating one, whether you are working online or offline. It doesn’t have to be the long, formal document that many business organizations prescribe. Instead, let the level of detail be determined by how complicated your business is and whether you need outside funding.