Invention and entrepreneurship are not only crucial for the economy, but one of the most satisfying adventures you can embark upon. In fact, 62% of adults believe owning your own business is a good career. However, despite what Hugh Jackman would have us believe, starting a business isn’t all singing, dancing, and elephants.
Shark Tank investor and cybersecurity system guru Robert Herjavec breaks it down a little more neatly. “Thinking of ideas doesn’t make you a successful entrepreneur—executing ideas does. You have to identify and quantify a real need for your product or service.”
That’s where your business plan comes in. At the very beginning, it could start as a few thoughts scratched onto a napkin written around the coffee shop logo or a cluster of sticky notes behind your computer screen. However, to successfully execute your product or service, it needs to evolve into a living, breathing document that houses crucial information for your business idea. That includes the vision of the business, what you want to achieve, financial goals, and keys to success.
Now that you know the “why,” it’s time to dive into the “how” with writing a business plan.
What Your Business Plan Needs to Cover
When was the last time you convinced yourself to do something? Maybe it was last week when you bought those shoes or TV you didn’t technically need, but liked anyway. Or asked out a cute stranger at a coffee shop. Maybe it was starting a business, which is why you are looking at this content.
Now let’s switch lanes. Could your business plan convince you to spend countless hours outlining a management module? How about investing your hard-earned (and potentially someone else’s) money into developing a product or service? This is the first step in writing a business plan.
Officially your business plan is a formal document, but the main objective is to provide a clear strategy of why your business would be successful. That includes providing concrete evidence with data, case studies, and research.
If you’ve already launched your business, a business plan is still a good idea. It’s a place to keep your business intentions up to date with customer data, upgrades to your product, and information about the ever-evolving marketplace. Stagnant business plans may hinder rather than help your business grow after launching.
Formulating Your Business Plan
Like a job interview or a wedding proposal, all business plans begin with several questions. And unlike the declaration of ‘you’ll never have a calculator in your pocket,’ the five Ws your elementary teacher taught you still come in handy. Who, What, When, Where, and Why (plus How) will help you get started with your business plan.
There are five common questions you want to address that will help provide context for the six topics you will cover:
What industry are you targeting?
Who are you targeting within that industry?
What pain points are you solving?
How will you solve the problem?
What will you do differently than your competitors?
Other questions you may want to consider include:
Where could your business fail, and how would you prevent it?
Where will your business be located?
What products, services, equipment, staff size will you need to run the business?
These are some of the average questions you want to address, but keep in mind that while each business plan comes from a similar foundation, how it’s built upon is different. If you find yourself asking more questions other than the ones listed, keep track and plan on answering those as well within your plan.
The Six Topics of Your Business Plan
A bagel shop’s business plan would be different from a tech company; similarly, your plan will be different from others. And while it’s ideal for your plan to fit the narrative of your business, it does need to include key factors. Here we will go over the six topics your business plan needs to include:
Business Description and Objective
Products & Services
Operations and Management
Creating a company from scratch isn’t easy, but developing a good business plan will help.
As the name suggests, the beginning of your business plan should start with a summary of your idea. The type of content you will want to include goes back to the five W’s.
What is your business?
What’s the purpose?
How will you get there?
Who is your target customer base?
Providing a quick financial overview is also helpful for potential investors. Include information such as existing loans, how you will get started, if you’re putting in your own capital, and what is your starting cash flow, etc. You don’t need to go into a complete financial roadmap (save that for topic number six). This section is meant to provide small call-outs to what’s to come in the outlook.
The summary also determines your business priorities, so you can decide what needs to happen first to get the ball rolling.
Business Description and Objective
Here is where you want to give a full breakdown of your business. Include information such as your founding story, your mission statement, the overall goals of the company. Also include identifying factors such as the type of business (sole, proprietor, LLC, etc.), are you established or a startup? What do your leadership and employee outlook consist of?
Understandably, unless your business already exists and you can expand upon your current operations, it can be tricky to nail down exactly how you want things to run. Keep that in mind that you can always readjust in the future. Make that possible by ensuring that your business plan always has room for better ideas, innovations, and adjustments.
Ideally, here is where you will spend the most time on your business plan. Performing market research and competitive analysis is critical to your business launch. Not to bring down the mood with scary statistics, but 20% (BLC) of small businesses will fail within the first year.
Why? According to CBInsights, because of a lack of need. Finding out whether there’s a viable market for what you want to sell is a crucial first step in laying out the five W’s for your plan. Thorough research includes an evaluation of customer demographics with accompanying analytics, purchasing habits of the targeted demographic (including age and gender), buying cycles, and being objective and honest with your findings.
If done well, the results of your market research will reiterate how your business will thrive in your targeted market and surpass competitors. If the results show there is not a need for your business, take time to reevaluate and potentially come up with a new business idea rather than trying to push something that the public may not want or need.
You will also want to consider your marketing strategy. How will you reach your audience? Will you use social media etc? For outside help, companies like Scorpion can get you on the right path to make sure your efforts are successful.
Here are some questions to ask yourself when conducting your market research.
Is the demand for your service rising or falling
Is the current size of the target market- stable, growing, or in decline?
How is the health of the overall industry?
How will you differentiate yourself from competitors?
Is that method cost-effective?
What is the demand like for your product (If applicable)
What is the projected growth and future potential of the company?
A competitive analysis should be the backbone of your market research. This is where you (and your investors) start to get clues on whether your business has a chance to not only survive but thrive. Honest research should be shown here. Investors want to see that you’ve considered every scenario and have a thoughtfulness to possible contingencies.
Products & Services
As far as Oscar acceptance speeches go, consider this is your moment. This topic is where you want to showcase your service or product. No one but yourself knows about your product or service, so be as thorough as you can. As I said, this is your “ta-da” moment, so make it count.
Unpack all the data you have about it. Include information like, is there anything like it in the market currently? If so, how will yours be better? What’s the timeline for launch? Go over pricing information such as operation plans (will you operate at a lower cost to obtain a profit margin?) and how will you acquire your product?
Investors will want to know the roadmap to development. Provide your research on how your product will be assembled, where the parts are coming from, and at what cost to you. Provide context of a backup supplier should you lose your current one.
Out of the 253 recently successful pitches on Shark Tank, one thing all the business ideas had in common was that the “product or business was relevant.” Both your market research and product & service section should highlight the relevance of your business.
As an entrepreneur, it’s important to make sure there is a need for your product before you launch.
Operations and Management
Now that you’ve highlighted the “what,” it’s time to focus on the “how.” This is where you lay the groundwork for the everyday workings of your business. Usually, the information you will want includes organizational structure, how manufacturing will work, who will run it, how many employees you will need, and how your inventory will be managed.
One of the biggest struggles for new businesses is securing top talent to come aboard. Include your strategy in this section of what you will do to meet your staff requirements. If you have already secured employees for your company, highlight them here and include what they bring to the table.
Operations and management help shape your dream into a reality. It deals with the nitty-gritty of the business, otherwise known as the “legwork.” It’s one thing to think of an idea, but implementing it into a successful business is another. This section should inspire a “let’s get to work” attitude for you and your support.
Now you add your financial outlook and let’s just say, don’t hold anything back. Make sure you provide all documentation relevant to your business. You’ll want to include income statements that outline annual net profits and losses, cash flow requirements to launch, and a balance sheet that shows your financial liabilities and assets.
Remember when Fezzik forgot to mention his holocaust cloak when Westley was brainstorming their rescue of Buttercup? You don’t want investors scratching their heads, saying, “why didn’t you list that among your assets in the first place.” Include everything that will affect the financial plan in any way.
Your cash flow will be the result of your total expenses ( material, direct labor, overhead costs, marketing, research, and development, etc) subtracted from your total income (cash sales, receivable, assets, etc). Just like how Operations and Management provide a blueprint of the everyday workings of your business, this section shows financially how it will be possible.
Bring it All Together
Remember these six topics are what you want to include in your business plan but feel free to make it your own. Some entrepreneurs prefer to add a summary at the end to tie everything together. Others add a documentation section to include information on any trademarks or patents they’ve acquired or highlight any newly-acquired investors. The important thing to remember is you need to make it well-rounded and encapsulate all your relevant information. Highlight what makes your company unique, include all the necessary facts, and add to it even after you’ve launched.
If you still need help coming up with an outline, you can look over examples of business plans, and utilize existing templates such as this one to give you a place to start.
Best Practices for Pitching
As you prepare your business plan and get ready to pitch to investors, there are some general rules of thumb to remember. Make sure your business plan is detailed—investors will ask hard-hitting questions, and you want to be prepared to answer them.
If it applies to your company, provide a product demonstration. If it’s service-based, take it for a test spin with consumers. You want the data to back up your claim, and you will most likely collect valuable pain point information during trial usage. You must showcase how you will make money, how your product or service works, and how you will execute your plan.
Be confident in yourself and what you’re showcasing. Your hard work and efforts will be evident in your presentation.
Words of Wisdom from a Few Sharks
When brother physicians Dr. Richard Amini and Dr. Albert Amini entered the shark tank of the hit investor show, their presentation ended with them barely treading water. The pitch was meant to showcase their social media platform “RoloDoc, but rather than snaring a shark, they inspired Mark Cuban to refer to the idea as the “worst pitch ever”—a sentiment echoed by fellow shark Barbara Corcoran. According to Cuban, “the problem was they didn’t have a business. All they had was a list of buzzwords. So they liked to use ‘security and ‘encryption’ and ‘email’ and ‘social media,’ and the more questions I asked, the less they had in response.”
Their biggest downside? They hadn’t developed the product and attempted to use it before trying to get an investment. It’s important to remember that writing a business plan is one thing, but you still need to take your idea for a test spin. Investors can tell if you haven’t cleared away the cobwebs and done some homework before your pitch.
As you go from idea to development, remember writing a thorough business plan can potentially be the difference between failure and success. As tire guru and fellow entrepreneur, Harvey Firestone said, “If you have an idea, you have the main asset you need, and there’s no limit to what you can do with your business and your life.” With a solid business plan in your lane, you have the wheels to go anywhere.