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Writing a Business Plan
While it may be tempting to put off, creating a business plan is an essential part of starting your own business. Plans and proposals should be put in a clear format making it easy for potential investors to understand. Because every company has a different goal and product or service to offer, there are business plan templates readily available to help you get on the right track. Many of these templates can be adapted for any company. In general, a business plan writing guide will recommend that the following sections be incorporated into your plan.
The executive summary is the first section that business plans open with, but is often the last section to actually be written as it’s the most difficult to write. The executive summary is a summary of the overall plan that highlights the key points and gives the reader an idea of what lies ahead in the document. It should include areas such as the business opportunity, target market, marketing and sales strategy, competition, the summary of the financial plan, staff members and a summary of how the plan will be implemented. This section needs to be extremely clear, concise and engaging as you don’t want the reader to push your hard work aside.
The company description follows the executive summary and should cover all the details about the company itself. For example, if you are writing a business plan for an internet café, you would want to include the name of the company, where the café would be located, who the main team members involved are and why, how large the company is, who the target market for the internet cafe is, what type of business structure the café is, such as LLC, sole proprietorship, partnership, or corporation, what the internet café business mission and vision statements are, and what the business’s short-term objectives are.
Services and Products
This is the exciting part of the plan where you get to explain what new and improved services or products you are offering. On top of describing the product or service itself, include in the plan what is currently in the market in this area, what problems there are in this area and how your product is the solution. For example, in a business plan for a food truck, perhaps there are numerous other food trucks in the area, but they are all fast –food style and unhealthy so, you want to introduce fast food that serves only organic and fresh ingredients every day. This is where you can also list your price points and future products or services you anticipate.
The market analysis section will take time to write and research as a lot of effort and research need to go into it. Here is where you have the opportunity to describe what trends are showing up, what the growth rate in this sector looks like, what the current size of this industry is and who your target audience is. A cleaning business plan, for example, may include how this sector has been growing by 10% every year due to an increase in large businesses being built in the city.
Organization and Management
Marketing and sales are the part of the business plan where you explain how you will attract and retain clients. How are you reaching your target customers and what incentives do you offer that will keep them coming back? For a dry cleaner business plan, perhaps if they refer customers, they will get 10% off their next visit. In addition, you may want to explain what needs to be done in order for the business to be profitable. This is a great way of showing that you are conscious about what clear steps need to be taken to make a business successful.
Financial Projections & Appendix
The financial business plan section can be a tricky one to write as it is based on projections. Usually what is included is the short-term projection, which is a year broken down by month and should include start-up permits, equipment, and licenses that are required. This is followed by a three-year projection broken down by year and many often write a five-year projection, but this does not need to be included in the business plan.
The appendix is the last section and contains all the supporting documents and/or required material. This often includes resumes of those involved in the company, letters of reference, product pictures and credit histories. Keep in mind that your business plan is always in development and should be adjusted regularly as your business grows and changes.
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Your Guide to Writing a Business Plan
If you’re starting a new business, then you need an effective plan. Not only does this enable you to plan your company, but it also gives potential clients an insight into how your business works. A business plan is also vital if you want to attract investors or secure a loan from the bank. Drafting a business plan is a complex process, but it doesn’t have to be. This guide will ensure you create a definite plan to impress investors and clients.
When creating your business plan, there are some essential elements you must include. The Executive Summary provides a description of your business, and what you hope to achieve. People usually write at least one page, but leave their Executive Summary until last.
You’ll also need to detail what your business offers and define your target audience. This makes it easier for people to see whether your company has a chance of succeeding. The opportunity section is also an excellent way for you to see what competitors offer and how you can create a USP to stand out from the competition.
Appealing to Investors
Every business that wants growth and prosperity must ensure they promote themselves to potential investors. Business plans aren’t just about what the business is, but who is part of it too. Detail your current team members and explain what they bring to the company. Investors want to know they’re making a wise investment.
Your current finances and financial forecast are also essential aspects of your business plan. Look at your products, how much you’re selling them for and what kind of profit margin you expect to gain. It’s also vital you detail your outgoings and look at how various economic situations could affect your finances.
Writing a Winning Executive Summary
There are problems in every market, and a successful business solves that problem. If you can show how you’ll be able to offer solutions in your business plan, you’ll appeal to investors. Choose your target audience based on research and ensure you show your research. There are many ways to conduct market research including defining SOMs, SAMs and TAMs.
TAM stands for Total Available Market and comprises everyone you want your product to reach. Your Segmented Addressable Market (SAM) is a specific portion of the market you’ll target. This is important because it shows you’re able to direct your product at the right people and not just everyone. Your SOM (Share of the Market) is what you feel you’ll gain with your product.
How to Determine Pricing
Pricing your product is one of the most challenging things you’ll have to do. There are many things to consider, such as how much it’s worth and making sure you don’t charge unrealistically. Many new businesses believe undercharging is the best way to go, but doing this can undermine your company’s authority and cause fewer people to be interested in investing.
Market-based pricing involves looking at your competitors and evaluating their prices. Which company has the most customers? How does their pricing match others? These are all vital aspects you should consider. Remember, customers expect quality and a fair price, so make sure you combine the two.
Investors and banks want to know that you’ve considered what the future will hold for your company. When you write your business plan, be sure to take into account how you see the company growing, what you’ll do to ensure it thrives and that you understand the potential risks. Banks and investors want to know that you can build a business and are aware of the obstacles you’ll have to overcome.
Starting your own business doesn’t have to be difficult. If you ensure you produce a robust business plan, it can be an exciting process. Your business is part of your future, so start by outlining your goals and look forward to seeing results.
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What should a business plan include?
1. the executive summary, 2. a description of the business, 3. the market(s) the business will operate in, 4. a swot analysis.
5. Management team and personnel
6. The products or services offered
8. A financial plan
The contents of a business plan
This is placed as number one on our list of components of a business plan , but it can easily be the final stage. That's because sometimes it's easiest to write your summary after you've covered all the other details.
A great summary is one of the key features of a business plan. It serves as an overview of your entire business and the elements surrounding it.
Be sure to outline succinctly the 5 "W"s (Who, What, Why, When, Where) as well as the mission statement . Think about why you started the business along with where you would like it to be in the future, how will you get there? Your mission statement is the start of creating a culture that people in your organisation will live and work by.
This section should contain details of things such as your goals and the customers you will service. What are the products and services you will offer to your customers? You'll need to provide an overview of them and how they will address customers' needs and wants?
You've come up with this great business idea , but how will it do in the market? Or, more importantly, what is the market for it? How well do you know the market? What does a typical buyer look like, what is their income level? Does the business have the hallmarks of disruptive innovation ?
This is the time to research and determine who your target market is and ask specific questions that relate to your product or service. Put you idea to the test. What have others done before you and what can you do differently and better? Analyse what information you've uncovered and outline it's potential impact in your plan.
Create a detailed list of your strengths, weaknesses, opportunities and threats. This needs to be done with an open and honest approach, keep emotions out of it, focus on being objective when analysing your business and those of your competitors.
Any strengths you uncover will represent internal, positive factors in your business that are within your control. Weaknesses are also internal, but are negative factors that need to be improved.
Both opportunities and threats are external factors. While opportunities will potentially positively impact on your business, threats represent negative factors beyond your control. For example, are there high barriers to entering the market? Does a competitor have the market cornered due to brand loyal customers? These could harm your enterprise, so you need to strategise for it in your plan.
5. The management team and personnel
Who will run the business, who are the directors in the business? What are the skills of the management team and how do their different responsibilities make maximum use of their abilities. What is the chain of command in terms of decision making?
Also use this section to identify how the management team, and taking on employees will help maximise strengths, while addressing identified weaknesses to help improve the business.
Finally, which of the UK's business structures will you choose to operate through?
- Limited company
- Limited liability partnership
In this section you need to detail what will be produced and how it will be sold. You should explain how your product or service will meet a particular need in the marketplace, and how you'll get customers returning to make repeat purchases. Repeat custom is after all the lifeblood of many a good business.
Who will you rely on, in terms of suppliers, to help you assemble your products? What intellectual property, patents or copyright do you own, or might you be at risk of potentially infringing?
What is the branding to your business? What are the key messages you want to communicate with your target market and how will you go about reaching them? How will you achieve market share and at what cost in terms of your budget?
8. Let's talk money: A financial plan
Ideas are great, but how will you make them a reality and sustain a viable business. Creating a financial plan will give you the opportunity to address your financial concerns and talk money, think about start-up costs, financial projections , funding and investor pitches.
You'll need to list how much your start-up will cost, everything from stationary to leases should be outlined and balanced against your financial projections.
Don't fear change, your business plan isn't written in stone
It’s important to remember that your business plan isn’t written in stone. This is a document that you and your staff can improve and update as the business grows and changes. Your plan should be reviewed regularly.
Consider implementing a monthly review to track progress or make adjustments to your strategy. Accountability and motivation are key in making sure your goals are met, think about the people involved and what can you do to keep them inspired.
This post was created on 26/06/2018 and updated on 18/02/2022.
Please be aware that information provided by this blog is subject to regular legal and regulatory change. We recommend that you do not take any information held within our website or guides (eBooks) as a definitive guide to the law on the relevant matter being discussed. We suggest your course of action should be to seek legal or professional advice where necessary rather than relying on the content supplied by the author(s) of this blog.
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What Is a Business Plan?
Understanding business plans, how to write a business plan, common elements of a business plan, how often should a business plan be updated, the bottom line, business plan: what it is, what's included, and how to write one.
Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.
A business plan is a document that details a company's goals and how it intends to achieve them. Business plans can be of benefit to both startups and well-established companies. For startups, a business plan can be essential for winning over potential lenders and investors. Established businesses can find one useful for staying on track and not losing sight of their goals. This article explains what an effective business plan needs to include and how to write one.
- A business plan is a document describing a company's business activities and how it plans to achieve its goals.
- Startup companies use business plans to get off the ground and attract outside investors.
- For established companies, a business plan can help keep the executive team focused on and working toward the company's short- and long-term objectives.
- There is no single format that a business plan must follow, but there are certain key elements that most companies will want to include.
Investopedia / Ryan Oakley
Any new business should have a business plan in place prior to beginning operations. In fact, banks and venture capital firms often want to see a business plan before they'll consider making a loan or providing capital to new businesses.
Even if a business isn't looking to raise additional money, a business plan can help it focus on its goals. A 2017 Harvard Business Review article reported that, "Entrepreneurs who write formal plans are 16% more likely to achieve viability than the otherwise identical nonplanning entrepreneurs."
Ideally, a business plan should be reviewed and updated periodically to reflect any goals that have been achieved or that may have changed. An established business that has decided to move in a new direction might create an entirely new business plan for itself.
There are numerous benefits to creating (and sticking to) a well-conceived business plan. These include being able to think through ideas before investing too much money in them and highlighting any potential obstacles to success. A company might also share its business plan with trusted outsiders to get their objective feedback. In addition, a business plan can help keep a company's executive team on the same page about strategic action items and priorities.
Business plans, even among competitors in the same industry, are rarely identical. However, they often have some of the same basic elements, as we describe below.
While it's a good idea to provide as much detail as necessary, it's also important that a business plan be concise enough to hold a reader's attention to the end.
While there are any number of templates that you can use to write a business plan, it's best to try to avoid producing a generic-looking one. Let your plan reflect the unique personality of your business.
Many business plans use some combination of the sections below, with varying levels of detail, depending on the company.
The length of a business plan can vary greatly from business to business. Regardless, it's best to fit the basic information into a 15- to 25-page document. Other crucial elements that take up a lot of space—such as applications for patents—can be referenced in the main document and attached as appendices.
These are some of the most common elements in many business plans:
- Executive summary: This section introduces the company and includes its mission statement along with relevant information about the company's leadership, employees, operations, and locations.
- Products and services: Here, the company should describe the products and services it offers or plans to introduce. That might include details on pricing, product lifespan, and unique benefits to the consumer. Other factors that could go into this section include production and manufacturing processes, any relevant patents the company may have, as well as proprietary technology . Information about research and development (R&D) can also be included here.
- Market analysis: A company needs to have a good handle on the current state of its industry and the existing competition. This section should explain where the company fits in, what types of customers it plans to target, and how easy or difficult it may be to take market share from incumbents.
- Marketing strategy: This section can describe how the company plans to attract and keep customers, including any anticipated advertising and marketing campaigns. It should also describe the distribution channel or channels it will use to get its products or services to consumers.
- Financial plans and projections: Established businesses can include financial statements, balance sheets, and other relevant financial information. New businesses can provide financial targets and estimates for the first few years. Your plan might also include any funding requests you're making.
The best business plans aren't generic ones created from easily accessed templates. A company should aim to entice readers with a plan that demonstrates its uniqueness and potential for success.
2 Types of Business Plans
Business plans can take many forms, but they are sometimes divided into two basic categories: traditional and lean startup. According to the U.S. Small Business Administration (SBA) , the traditional business plan is the more common of the two.
- Traditional business plans : These plans tend to be much longer than lean startup plans and contain considerably more detail. As a result they require more work on the part of the business, but they can also be more persuasive (and reassuring) to potential investors.
- Lean startup business plans : These use an abbreviated structure that highlights key elements. These business plans are short—as short as one page—and provide only the most basic detail. If a company wants to use this kind of plan, it should be prepared to provide more detail if an investor or a lender requests it.
Why Do Business Plans Fail?
A business plan is not a surefire recipe for success. The plan may have been unrealistic in its assumptions and projections to begin with. Markets and the overall economy might change in ways that couldn't have been foreseen. A competitor might introduce a revolutionary new product or service. All of this calls for building some flexibility into your plan, so you can pivot to a new course if needed.
How frequently a business plan needs to be revised will depend on the nature of the business. A well-established business might want to review its plan once a year and make changes if necessary. A new or fast-growing business in a fiercely competitive market might want to revise it more often, such as quarterly.
What Does a Lean Startup Business Plan Include?
The lean startup business plan is an option when a company prefers to give a quick explanation of its business. For example, a brand-new company may feel that it doesn't have a lot of information to provide yet.
Sections can include: a value proposition ; the company's major activities and advantages; resources such as staff, intellectual property, and capital; a list of partnerships; customer segments; and revenue sources.
A business plan can be useful to companies of all kinds. But as a company grows and the world around it changes, so too should its business plan. So don't think of your business plan as carved in granite but as a living document designed to evolve with your business.
Harvard Business Review. " Research: Writing a Business Plan Makes Your Startup More Likely to Succeed ."
U.S. Small Business Administration. " Write Your Business Plan ."
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6 essential elements of a good business plan
Entrepreneurs, executives and venture capitalists discuss how to craft a business plan that will impress investors and be a good road map for your company.
Whether you are just starting out and need startup investment or are looking to expand your business and raise capital, a business plan is a must. Indeed, a business plan is not only essential if you want to get people to invest in your idea, it can help you articulate what it is you hope to accomplish with your business – your mission, goal(s) and values – and plot the company’s growth trajectory.
However, to be successful, a business plan cannot just be a bulleted list of an entrepreneur’s thoughts and musings, hopes and dreams. It needs to be a serious business document with the following six elements.
1. Executive summary
“An executive summary is the ‘elevator pitch’ of your business plan,” explains David Mercer, founder, SME Pals , a blog dedicated to helping entrepreneurs. “More often than not, landing a new investor relies on hooking them with a great elevator pitch. Without grabbing their attention, your business plan, no matter how well researched and presented, may not stand out enough.”
The executive summary should, in brief, describe the “problem you are going to solve, and why that problem needs to be solved right now,” by you, says Peter Arvai, CEO, Prezi presentation software. “If you aren’t able to communicate that deeper purpose to others, you will have a very hard time convincing investors to fund your idea and people to join your team.”
Tip: Write the Executive Summary last, after you’ve done all your research and put everything down on paper.
[ Related: 12 tips for creating a must-read business blog ]
2. Description and bios of your leadership/executive team
“The entrepreneur should clearly demonstrate what they are bringing to this venture – the idea, the technical ability or the passion,” says Hossein Rahnama, founder & CEO, Flybits . “Investors want to understand how you will execute using your personal strength.”
You should also “talk about the leadership team,” says Andrew Witkin, CEO, StickerYou . “If the leadership team has a previous track record of building and delivering businesses, this should be highlighted. Business plans serve multiple purposes, but one of them is to build trust, and the team is as important as the product to potential investors and partners.”
“Investors bet on jockeys, not horses, and knowing about who will execute on an idea is key to an investor making an investment decision,” says Richard J. Foster, president, Foster Management & Holdings. “Very frequently I’ll see multiple companies with the same idea, but the one to invest in is the one with the team who has the experience and the credentials to succeed. Having the best idea with the wrong team is a recipe for failure, but proving that your team is the [right] one to execute [your idea] can make all of the difference.”
3. Description of your product(s) or service(s)
“When developing a business plan, it’s crucial to clearly [explain] the need your product or service is trying to address,” says Elena Filimonova, senior vice president, global marketing and strategy, CGS . “Your business plan should highlight how the product or service will address the need, what is unique about your offering and why it would be difficult to replicate. To do this, you should outline key differentiators, features and why the product or service is something that stands out in the market.”
[ Related: 11 ways to build your online brand ]
4. Market/competitive analysis
“Every business plan should have a section that defines the target sales market – who you are selling to,” says Victor Clarke, owner, Clarke Inc. “This is the part that requires considerable research into areas such as industry sales data related to the service or product you are selling and trends within the industry. You should look at competitors and see who they are targeting, look at your current customer base and create a profile of an ideal customer or client for your product.”
“For a business plan to be effective and attractive to investors and partners, you must be able to provide tangible data and information that supports the notion that your demographic is strong and growing, and that market trends support the continued need for your service or product offering,” says Brock Murray, cofounder & COO, seoplus+ .
[ Related: 7 attributes of a successful CMO in the digital age ]
“Sequoia Capital has a great framework that every business plan should use: separate your Total Addressable Market (everyone who conceivably needs your product category), Serviceable Addressable Market (everyone who needs your specific product or service, limited by factors like where you can do business) and Serviceable Obtainable Market (the portion of the market you can realistically capture),” says Christopher S. Penn, vice president, Marketing Technology, SHIFT Communications . “For example, lots of companies say everyone is a customer, and while that may be a TAM, if the company has only one salesperson, their SOM is significantly smaller. VCs and investors especially want to understand what’s realistically obtainable, and splitting out your addressable markets… shows them you’re not just presenting pipe dreams.”
Also be sure to “include a competitive analysis section,” says Bryan Robertson, founder & chief revenue officer, Mindyra . “Every business has competition, so it’s a good idea to research companies in your industry who are fighting for the same customers. You should include specific details about their strengths and weaknesses. This forces you to become very familiar with your market. It also encourages you to think of ways to differentiate your business [from] the competition.”
5. Financials (how much cash you need and when you’ll pay it back)
“Make sure that the plan goes into exacting detail about how much startup capital will be needed, where it will come from and how it will be paid back,” says Bruce Stetar, executive director, Graduate Business Programs, SNHU . “Equal importance should be given to how you [plan to] pay back capital as how you acquire it. Investors want to know when they will see a return. Failing to plan adequately for capital acquisition and payback is one of the chief reasons that new businesses fail.”
“Whether you’re hoping to receive funding to build a brick-and-mortar shop or a technology venture, you must have your numbers straight,” says Erica Swallow, founder & CEO, Southern Swallow . “For tech entrepreneurs, I’m a big fan of the startup financial model template developed by startup investor David Teten, in collaboration with a couple of colleagues. Based in a nearly fully-automated Excel worksheet, it enables early-stage entrepreneurs to map out their financial plan, without being too overwhelming. It’s the best startup financial model I’ve encountered over the past five years.”
6. Marketing plan
“It is critical to have a plan [for] how you are going to spend your marketing budget,” says Deborah Sweeney, CEO, MyCorporation . “Assess different options (paid search, salespeople, flyers, [social media], etc.) and the associated ROI with each.”
“The plan should cover both sales and advertising strategies and costs,” says Stetar, as well as customer acquisition costs. “Be conservative here since you will look good if your over achieve but it will cost you investor confidence if you under achieve.”
A successful business plan is one is easy to read and follow
You need to make your business plan easy to read and follow. “There’s nothing more daunting than to receive an all-text business plan, 30 pages in length,” says Swallow. “Keep your potential investors engaged by including product and user photos, team headshots, colorful headings, financial graphs, charts, tables, anything to make reading more of a pleasure. Even bullet points help.”
Indeed, “don’t underestimate the importance of visuals,” says Arvai. “Researchers have found that presentations using visual aids are, on average, 43 percent more persuasive than those without.”
Finally, before you go public with your plan, “have trusted mentors and expert peers look over it [and give you] their feedback,” says Sam Lundin, CEO, Vimbly . “Having [someone] review your business plan [before you present it to investors] is crucial.”
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Tim berry on business planning, starting and growing your business, and having a life in the meantime., 8 factors that make a good business plan.
This is the first of four answers to interesting questions. Yesterday I got an email from an MBA student asking me four questions. It’s part of his research. I balked at first, because I think I’ve answered these questions before, on this blog, or on my other blogs, or at www.bplans.com , or planasyougo.com . Then I realized that answering these questions is blogworthy. So here is the first of four:
What makes a good business plan?
Here’s the hard part, right at the beginning: the value of a business plan is measured in money. That’s hard for me at least, maybe not for you, but for me. As a genuine ex-hippy baby boomer entrepreneur, I like touchy-feely do-gooder measurement systems. But that’s not the real case. Like just about everything else in business, the value is money. Money in the bank.
The actual calculation is pretty hypothetical. You take the money in the bank with the business plan and subtract money in the bank without the business plan, and that’s the value. One of the two is just a guess. But there it is, a cold hard (although hypothetical) number.
With that in mind, here are some of the qualities of a good business plan, in order of importance:
1. It fits the business need
We simply can’t look at business plans as generic. You have to start with whether or not the plan achieved its business purpose. Some plans exist to get investment. Some are supposed to support loan applications. Those are specialty uses, that apply to some business situations, while almost all businesses ought to develop management-oriented business plans that exist to help run the company, not to be presented to outsiders.
Obviously form follows function. The business plan used internally to manage the company doesn’t have to polish and present the company to outsiders, so it probably lives on a network, not on paper. But the plan as part of high-end startup looking for VC or angel investment does in fact have to present the business to outsiders. These are very different plans. Some of them have sales objectives, selling an idea, and a team, and a market, to investors. Some have a support objective, reassuring a lender about risk, usually with assets. My favorite business plans are about managing: starting and growing a company. A plan that might be great at selling the company might be bad at supporting a loan application, or for managing a company.
So point one, what makes a good business plan, is that it fits the business need. Does it achieve the business objective?
At this point it’s hard to avoid going into branches. I’m going to resist the temptation to write about what people look for in investment-related plans, and then the plan for lenders, or the operational plan. There are a lot of branches on that tree. Factors like readability and ease of navigation and covering all the main points depend a lot on whether those qualities affect achieving the plan’s business objective.
So it’s entirely possible to have an excellent business plan that’s never been printed, that isn’t edited, that contains only cryptic bullet points that only the internal management team understands.
And it’s also possible to have a well written, thoroughly researched, and beautifully presented business plan that’s useless.
2. It’s realistic. It can be implemented.
The second measure of good or bad in a business plan is realism. You don’t get points for ideas that can’t be implemented. For example, a brilliantly written, beautifully formatted, and excellently researched business plan for a product that can’t be built is not a good business plan. The plan that requires millions of dollars of investment but doesn’t have a management team that can get that investment is not a good plan. A plan that ignores a fatal flaw is not a good plan.
3. It’s specific. You can track results against plan.
Every business plan ought to include tasks, deadlines, dates, forecasts, budgets, and metrics. It’s measurable.
Ask yourself, as you evaluate a business plan: how will we know later if we followed the plan? How will we track actual results and compare them against the plan? How will we know if we are on plan or not?
While blue-sky strategy is great (or might be, maybe), good planning depends more on what, when, who, and how much.
4. It clearly defines responsibilities for implementation
You have to be able to identify a single person will be responsible for every significant task and function. A task that doesn’t have an owner isn’t likely to be implemented. You can go through a business plan and look to see whether or not you can recognize a specific person responsible for implementation at every point.
5. It clearly identifies assumptions
This is very important because business plans are always wrong. They’re done by humans, who are guessing the future, and humans guess wrong. So business plans must clearly show assumptions up front because changed assumptions ought to lead to revised plans. You identify assumptions and keep them visible during the following planning process.
6. It’s communicated to the people who have to run it
At this point we leave the discussion of the plan itself, as if it were a stand-alone entity, and get into how the plan is managed. The first five points here are about the plan. You can deal with them as the plan develops. This and the following two are about the management of the plan.
I know that’s kind of tough, because it means that a plan that isn’t managed isn’t a good plan. But I can live with that.
So a good plan is communicated. Up above, where I suggest that the qualities of writing and editing are not essential for all plans, and I reference cryptic bullet points that only the team understands: I stick with that here. If only the team understands them it, it can still be a good plan; but it has to be communicated to that team.
We’re judging the plan by the business improvements it causes; in some sense, by the implementation it causes. So people in charge have to know and understand the plan. Plans in drawers, or locked on a single computer, only work when it’s a one-person organization and nobody else has to know the plan.
7. It gets people committed
Here too it’s about the process surrounding the plan, more than the plan itself. The plan has to have the specifics in point 3 and responsibilities as in point 4, but the management has to take them to the team and get the team committed.
For the one-person business that’s easier, but still important.
Definition of commitment: in a bacon and egg breakfast, the chicken is involved, and the pig is committed.
8. It’s kept alive by follow up and planning process
Sadly, you can have all seven of the above points, and if you drop the ball — the plan in the drawer syndrome — then the plan still isn’t a good plan. It has to bring the planning process with it, meaning regular review and course correction.
No business plan is good if it’s static and inflexible. Planning isn’t about predicting the future once a year and then following that predicted future no matter what. Planning is steering and management. It takes a process of regular review and course correction.
I found this article very informative as the planning is first and one of the best steps to consider in businesses.
It was interesting to learn about how a managed plan is a good plan and it can be communicated with the team and develop the plan. I can imagine that a business could benefit from having a plan for their business and know if it is feasible to grow a business around this time. It could be really useful for a business to make sure that they will be able to grow while keeping track of the right data.
Thanks Oleg, nice post, short and right on point. Thanks for quoting me. Tim
Thanks for reading the post and sharing your comments.
When I was 20 years old I started my own business. I didn’t really saw the purpose to make one until later I suffered. Thanks for the article it will help other adventurous individuals.
Mgonzo I’m sorry if you don’t have easy web access, that makes life difficult; but there is so much free information available on the web about good business planning that nobody I know would have the time to sift through it all and send you that in email. I recommend you go immediately to bplans.com, the site you were on when you posted this comment, and click around to see the thousands of pages of information on business plans, including 550+ complete sample plans, including all the numbers in the appendices, available there. Also, my last book on business planning is available, complete, with all graphics, at http://planasyougo.com . And my previous book on business planning is available, complete, with all graphics, at http://hurdlebook.com
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It’s really a matter of how real the plan is. There are lots of business plans that end up in trash-cans because the targets are not doable and bring dispersal instead of focus. I agree with Tim especially on the point that targets do have to be communicated to people who are responsible for them… Why would I spend my time on writing something that is not going to work?
thanks for the article tim berry it realy helped me in my assingment .Continue doing the good works GOD BLESS YOU
Hi Tim – I really enjoyed reading your piece. We write a business plan every year and it ends up stuffed in a drawer – the only time we bring it out again is to revise it the following year. Do you think it is the constant review process that helps to make it more relevant to the day to day management of the business?
Hi Tim – I have a silly question in regards to #7. I love to rationalize phrases and I don’t quite get the definition of commitment. “in a bacon and egg breakfast, the chicken is involved, and the pig is committed” Why isn’t the chicken committed? If not, there’s no egg. No?
Carol: the pig is dead. The chicken will lay another egg tomorrow.
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SELF MOTIVATION IS ANOTHER KEY PRINCIPLE TO A SUCCESS OF BUSINESS
Thanks Joseph. I think that’s true, but this post is about factors that make a good business plan. Would you say that a good plan increases self motivation? Should the self motivation be part of the plan?
i think in life as a person you need to plan what ever you want to do cos a life witout planning is incomplete. what do you think guys!!!
Excellent information. I really agree with your approach. It’s very ‘organic’ as it takes the nature of what really happens into account while still relying on numbers and tracking to manage the plan’s DNA. Planing is the perceived assumption but it must change as it gets implemented to fit the real world.
[…] high-level guidelines on what business plan should look like, read Tim Berry’s post entitled: 8 Factors that Make a Good Business Plan. If you are interested in understanding the art of managing change, read Tim Berry’s book The […]
Henri, I recommend a monthly plan vs. actual review once a month, which would result in revisions and corrections as needed (watching whether assumptions have changed); and an annual refresh on strategy and markets and such; plus additional revisions when major changes occur. Tim
How often should you review your business plan
1. Why is it that a Break-Even plan for the business was not mentioned at least explicitly? 2. Also, there should something that compares the plan with actual progress made. For instance, if it’s a Bus plan writing then it should compare number of actual plans prepared(N1) say in a quarter and the number(N2) in the business plan. It should say “Hey!!!! It is off by 15 (N2-N1=15)in this quarter.Lost $30000!! Take care great men and women!!” Thanks
Asoke, re your specific points:
- Because a break-even plan isn’t as important as the points I do mention.
- I appreciate your thought there with that one, because of course I agree, but I’m confused with why you thought it should be added. Don’t you think plan vs. actual is included with point 3, “It’s specific. You can track results against plan,” and then point 8 “It has to bring the planning process with it, meaning regular review and course correction?”
@Jess: “more simply”
@Jess: re simpler, I appreciate the comment What would you like to be more specific, so maybe I can help? I’m always in favor of simple. Is there a specific point, or maybe more than one, you’d like me to try to rephrase? Tim.
this needs to be put a bit more simpler
Informative and logical article . Thanks for writing and publishing . I think business plans is just for effective utilization of enterprise’s investment in effective scheme of business
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