There is no doubting the importance that a business plan plays in determining how successful your business is. While we know it’s not everything, it does lay the foundation for the business and backup the core idea with some details. Today we are going to dive into the details and look at the key components that need to be included in any business plan.
Look across the Internet and you will see countless websites outlining how to write a business plan, providing templates, tips and samples. While these can be great resources and give you a starting place, they aren’t going to give you a complete perspective. The only way to learn how to write a business plan is to do it.
When you’re writing a business plan, there are many approaches to take, but in the end it needs to accomplish certain objectives. These objectives can differ slightly depending on who you are writing your business plan for. As an example, if you are seeking financing, there might be more research and details needed in certain section than there would be if you were writing the plan for you and your business partner. No matter what the end objectives are, it is important that you know what you need to achieve before you start.
As you write the plan, you will probably seek input from a number of sources: consultants, accountants, friends, books, videos, etc. It is important to keep in mind that your business plan needs to weave together the pieces in a story, a story about your business. Therefore, it is advisable to make it authentic to you. Avoid writing with too much jargon or fluff, and write with some personal style. Keep in mind that people do have to read your plan – you don’t want them to fall asleep.
The length of a business plan can vary quite a bit from business to business, but in the end, brevity and clarity are the essentials. For a full plan, 20 pages is a good length to gun for (excluding appendices), but the real focus should be on the executive summary. It needs to be airtight and engaging, giving readers a snapshot of the business that they can get excited about.
Now we will breakdown what needs to be included in a business plan. Rather than try to explain each component in great depth, we will focus only on the key questions that we believe need to be answered in a complete business plan. Keep in mind that any plan always needs wiggle room for iteration, but a solid foundation needs to be in place. So here are the key components:
What is the vision and mission of the company, why does it exist?
What product/service is the company offering and what makes it unique?
Can the product/service be easily replicated?
Why couldn’t this have been done before?
Is there any IP (Intellectual Property) Protection in place?
What is the problem being solved?
What customer segment(s) is the problem being solved for?
How big are these customer segments and what are they willing to pay for a solution?
How much of the total market is legitimately reachable?
How does the company plan to create, deliver and capture value to the target market(s)? (Learn more about the business model here)
How will customers be acquired and what is the projected cost per customer acquisition (CPA)?
What is the company’s sales and marketing strategy?
What are the company’s key resources and activities?
Is the business model scalable?
What are the major market forces that are affecting the marketplace? (ie. customer demands, switching costs)
What macro trends are driving the industry? (PEST-E analysis)
What stage in the industry lifecycle are we at?
Who are the competitors and what do they offer?
On what dimensions do you compete on? (Draw a Competitive or Positioning Map)
What direction is the market heading towards in the future?
Why is this the group to get it done?
What experience do they have?
What are their capabilities?
What pieces need to be added in the future?
Strategy and Implementation
How will the company brand and differentiate itself?
How will the company maintain a long-term competitive advantage?
What special projects will the company be engaging as the business progresses?
What are the unique milestones that need to be hit in order to achieve success?
Draw a Gantt chart to illustrate milestones and special projects.
Financials – (build a financial model. Why?)
What are the major revenue streams and cost drivers?
How much capital is needed to get the company off the ground?
How do the per user economics break down? (margins and CPA)
When is the company expected to be cash positive and achieve breakeven?
What are the major milestones along the financial roadmap?
What types of returns can be generated?
Is there an exit strategy in place? (For investors)
What are the risks associated with the business?
What factors stand in the way of implementation?
What are the key success factors (KSFs) to counteract these risks and roadblocks?
These questions are meant simply to be a guideline for writing a business plan. It is not a complete list, but if you can provide good answers the majority or all of the above listed questions, then your business plan is solid.
A simple question can blow a gaping hole in any business plan, so it’s a good idea to start with key questions and look for answers. Writing a business plan can be a lot of fun, but stay out of the proverbial ivory tower. Don’t sit and wait for the perfect plan to materialize but be patient enough to fill in all the blanks.
At Lumos, we like to see movement, so do your due diligence and set the idea in motion.
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