What is in a Business Plan?
The Business Plan is a comprehensive business document that includes problem definition, market analysis, strategic development, product/service description, organizational planning, financial modeling, and a marketing strategy.
What is a Business Plan?
A Business Plan is a document describing the goals, strategies, and development plans of an enterprise. The Business Plan evaluates business development opportunities, secures financing for ventures, and serves as a critical metric in assessing the potential success of a business.
What are the Business Plan functions?
Business Plan functions provide invaluable support in several business areas. Here are some of the key functions a business plan serves:
A Business Plan enables strategic decisions about market opportunities: This is achieved by outlining business goals, drawing up the strategy to reach them, defining the target market, and forecasting the finances.
Business Plans detail the company’s vision and strategy: It is used as a comprehensive document to illustrate the company’s path and planned methods of achieving its goals.
A Business Plan monitors business progress: It serves as a management tool for making informed decisions about resource allocation, and aligning investments and efforts with the strategic objectives of the business.
Business plans assess the viability of a business idea: It evaluates the competency of the management team and the potential return on investment, making it a key document for potential lenders and investors.
A business plan measures the potential success of a business: Through market research, competitor analysis, and detailed financial projections, business plans provide insights into potential profitability and long-term sustainability, acting as a predictive tool for the business’s future.
A business plan comprises of several critical components, including an identification of the problem, a thorough market analysis, strategy development, product or service descriptions, cost analysis, financial and pricing models, marketing strategies, and descriptions of the organization and management. It should also include a detailed operational plan, along with a schedule and budget.
Business plan tools like Stakeholder Analysis, CAGE Analysis, SWOT Analysis, Competitive Cases, Risk Assessment, Entry Model, Pricing Strategy, Marketing Research, and Porter’s 5 Forces are crucial in providing insights for strategic decision-making and risk mitigation, helping businesses to understand the market, competition, potential risks, and opportunities, thus increasing their chances of success.
Types in Business Development
Business plan types that can be used in the context of business development depend on the organization type and structure, as well as on the specific use and purpose. In practice, these are the most common business plan types used for business development:
Startup Business Plans: for new businesses and includes details about the company’s vision, mission, product/service description, market research, marketing and sales strategy, organizational structure, and financial projections.
Strategic Business Plans: a high-level document that outlines a company’s overall direction, including its mission, vision, and strategic objectives. It also includes strategies for achieving these objectives.
Internal Business Plan: for the use of company stakeholders, providing details about projects, deadlines, and future company growth. It doesn’t typically go into as much detail about the business itself since its audience already understands the company’s operations.
Growth or Expansion Business Plans: used when a business plans to expand into new markets or add new product lines. It includes information about market research, marketing strategies for the new market, and financial projections based on the expansion.
Feasibility Business Plan: used when a company is testing out new products or services. It includes information about the market, the competition, and the operating expenses, and provides forecasts of how much revenue the new product or service could generate.
Operations or Annual Business Plan: provides a detailed outline of the company’s goals for the upcoming year, and how it plans to achieve them. It includes information on budget, operations, staffing, and other resources.
What do different types of business plans have in common?
Different types of business plans have similar structures and contents, such as descriptive parts and analytical sections. This means that in practice, once learned to write a business plan it can be applied to different types of business plans.
What are the contents?
Business plan contents are the descriptive and analytical parts:
- The descriptive part of the business plan includes an executive summary of information on the goals and strategy of the project, a description of the product launch or service, a marketing plan, and information on the company’s management and organization.
- The analytical section, on the other hand, includes detailed calculations on the profitability of the venture, such as the income statement and NPV (Net Present Value) analysis. A good business plan template should include at least two analyses, such as a SWOT, 7S Model, Stakeholder, or Porter’s 5 forces analysis.
A business plan descriptive part should answer key questions such as:
- what is the purpose of the venture,
- what is the product, and how and whether it meets the needs of customers
- what is the cost of implementing the project,
- what are the target groups,
- what is the size of the market and what are the barriers to entry
- and what is the expected profit and expected period of return on investment
- how the company will generate leads
- what distribution will look like and how much it will cost
- what aftersales and customer retention will look like
- what is the marketing campaign plan
- what are the possible growth scenarios
- what are the risks and ways to minimize them
- what are the strengths and weaknesses of the company
- what are the opportunities and threats arising from the market environment
The analytical part of a business plan often termed the financial section, should offer detailed financial projections for the coming years of the company’s operations.
Revenues, costs, and gross and net profit: These key financial indicators give investors or lenders a clear view of your business’s profitability. Revenue projections show the sales you anticipate your company will achieve, while cost estimates highlight the expenses involved in achieving those revenues. The gross and net profit figures indicate your company’s ability to generate profits after accounting for costs.
Risks and their mitigation: Every business plan should anticipate potential risks, whether they’re financial, market-related, or operational. Identifying these risks and detailing strategies to mitigate them can demonstrate to potential investors that the business is robust, well-planned, and prepared to face challenges.
Break-even point: The break-even analysis is critical because it helps identify when the company will be able to cover all its expenses and start generating profit. It’s a crucial figure that potential investors will want to know as it gives a timeline of when they might expect a return on their investment.
Business Plan Methodology
A business plan’s methodology encapsulates all the steps and analyses required to achieve the plan’s objectives, complete with a schedule and budget. By following this methodology, the resulting business plan ensures internal consistency, comprehensive inclusion of necessary information, and customization according to the specific needs and goals of the company. This detailed, organized approach forms the foundation for successful business planning and execution.
In practice, a Business Plan Methodology scheme has the following steps:
- Definition of the problem to be solved by the new venture
- Analysis of the market
- Consideration of alternatives and selection of options
- Analysis of the implementation of the venture (CAGE, 5 Forces, Competitive Cases, Risk Assessment, Stakeholder, SWOT, Entry Model)
- Cost analysis
- Financial and pricing model
- Marketing strategy
- Description of the products or services
- Description of organization and management
- Operational plan
- Schedule and budget
- Summary of assumptions and conclusions
Business Plan Tools
The business plan methodology requires the use of various tools. These tools, such as SWOT Analysis, CAGE Analysis, Competitive Cases, Stakeholder Analysis, Risk Assessment, Entry Model, Pricing Strategy, Market Research, and Porter’s 5 Forces, among others, provide the necessary frameworks and methods for conducting thorough evaluations and formulating effective strategies. These tools help to analyze the market, competition, potential risks, and opportunities, which are crucial in devising a comprehensive and effective business plan.
The following business plan tools list includes tools that aid in strategic decision-making and risk mitigation, leading to increased chances of business success:
Stakeholder Analysis: This tool is critical for identifying and understanding the parties who have a significant impact on the success of a venture. Involving key stakeholders early on can greatly enhance the chances of a business plan’s successful implementation.
CAGE Analysis: The CAGE (Cultural, Administrative, Geographic, and Economic) framework is a valuable tool for assessing cultural differences between markets, especially when a company is considering international expansion. It helps businesses identify potential opportunities and barriers in foreign markets.
SWOT Analysis: SWOT (Strengths, Weaknesses, Opportunities, and Threats) is a strategic planning tool that helps businesses identify internal and external factors that may affect their success. It’s widely used in business development to shape strategy.
Competitive Cases: Analyzing competition in the market is a fundamental part of any business plan. It allows a business to understand the competitive landscape and position itself effectively.
Risk Assessment: Risk assessment helps identify potential threats and opportunities, making it a crucial tool in planning a business venture. It aids in determining the venture’s chances of success and actions required to mitigate risks.
Entry Model: This tool is used to plan the method of entering a new market. It can assist in determining the most suitable approach, such as direct investment, licensing, strategic alliances, etc.
Pricing Strategy: Developing a pricing strategy is an important part of a business plan, as it determines how a company will set prices for its products or services considering multiple factors such as cost, competition, and market demand.
Market Research: This process helps collect and analyze information about the market, customers, and competitors, which is vital for tailoring products and services to meet customer needs and expectations.
Porter’s 5 Forces: This tool is used to analyze the competitive dynamics within an industry. It assesses the bargaining power of suppliers and customers, the threat of new entrants, the threat of substitute products, and the degree of competitive rivalry.
Business Plan Essentials
Business plan essentials underline the market viability, growth potential, and team competence – all crucial considerations for developing a successful business plan. Follow these business plan essentials to increase the plan’s effectiveness and the business’s likelihood of success:
Identify your market niche: In the context of a business plan, identifying a market niche involves finding a specific segment of the target market where your offer can uniquely meet customer needs, and where supply currently falls short of demand. This niche should be sufficiently large to justify investment and promise potential return. Understanding this niche will help align your business’s offerings with market needs, thereby increasing the likelihood of success.
Look for the market opportunity: This refers to identifying the potential for a product or service to succeed within a given market. If the market niche is rapidly growing, if your knowledge and technology are sufficiently advanced to allow rapid market entry, and if there are manageable barriers to entry, then there’s a viable market opportunity. Recognizing these elements allows you to proceed confidently with writing a business plan.
Find the right people: This is about assembling a team with the skills, experience, and capability to execute the business plan effectively. Investors often pay great attention to the management team, as the team’s quality can significantly impact a venture’s chances of success. Therefore, detailing the qualifications and experiences of key team members in the business plan is crucial.
Can business plans be used for go-to-market strategy?
Yes, business plans can be used as a foundational component of a go-to-market (GTM) strategy. While a traditional business plan provides an overall roadmap for the business, a go-to-market strategy focuses specifically on how a company will bring its products or services to market and acquire customers.
Business plan template for go-to-market strategy
A business plan for go-to-market includes thorough planning and understanding of various elements that will drive a product/service to market. Here are some key components that should be included in both descriptive and analytical sections:
Executive Summary: This should briefly encapsulate the overall business plan and should be written in a compelling manner to engage potential investors or partners.
Company Overview: This provides general information about your company, including your business structure, company history, type of business, location, and the product or service you are bringing to market.
Product/Service Description: Here, you describe your product or service in detail, explaining how it works, its applications, and its unique selling points that set it apart from competitors.
Target Market: This part should include a detailed description of your ideal customer, including their demographic, geographic, psychographic and behavioral characteristics.
Marketing and Sales Strategy: This outlines your approach to reaching your target market, including your marketing, advertising, and sales plans.
Business Model: This describes how your company creates, delivers, and captures value, i.e., how you make money.
Partnerships and Resources: Detail any strategic partnerships or key resources your business will leverage to effectively reach the market.
Market Analysis: This should include detailed research about your target market size, trends, growth rate, and key customer segments. It also involves identifying key competitors, their strengths and weaknesses, and your competitive advantage.
SWOT Analysis: This analysis outlines the strengths, weaknesses, opportunities, and threats to your business. Strengths and weaknesses are usually internal to your business, while opportunities and threats typically relate to external factors.
Customer Analysis: This involves understanding customer needs, preferences, and behaviors, as well as any factors that influence their buying decisions.
Pricing Strategy: Your strategy for pricing your product or service should be based on careful analysis, taking into account factors like cost, competition, and customer willingness to pay.
Sales Forecast: This section predicts the number of units of your product or service you expect to sell, typically on a monthly basis for the first year and annually for the next few years. This helps estimate revenue and guide inventory management.
Financial Projections: This part includes projected income statements, balance sheets, and cash flow statements for at least the next three to five years.
Risk Analysis: This section details the potential risks your business might face, such as regulatory changes, market volatility, or supply chain disruptions, and outlines strategies for managing these risks.
Business Plan Example
The following business plan example outlines a SaaS lead generation and SEO company. It includes all essential elements of a business plan, and provides calculations for revenue, expenses, gross profit, net profit, and Net Present Value (NPV), along with explanations for each. All these elements provide a clear and comprehensive view of the proposed business, which would be valuable to potential investors and stakeholders.
Business Plan Descriptive Part
- Executive summary of the venture – a brief description of the SaaS lead generation and SEO company, including an introduction of the project’s main contractors
- Company description – indicating owners, source of funding, management, legal status, location, type and hours of operation, products and services, suppliers, production, accounting
- Business model – lead generation and SEO customer benefits offered, customer segments, distribution channels, customer relationships, key activities and resources, key partners, revenue, and costs.
- Marketing – marketing research, SWOT, barriers to growth, 4P marketing mix, competitive analysis, pricing strategy, advertising
- Calculations – income statement for the first 5 years of the venture, detailed cost analysis, NPV
- Risk of failure – main risks and ways out
- Team – presentation of the main performers of the project, their experience, and skills, description of roles and responsibilities, team development plan
- Assumptions and conclusions – a summary of the project, drawing conclusions based on analysis and calculations, identifying opportunities and threats to the project
- Schedule – dissecting the stages of project implementation over the first 5 years, including the main goals and objectives, responsibilities for each stage
- Budget – a detailed breakdown of costs and revenues over the first 5 years, consideration of the main sources of funding, planned investments, and expenses.
Business Plan Calculation
The table shows the revenue, expenses, gross profit, and net profit of a SaaS lead generation and SEO company in the first 5 years of operation. In the first year of operation, revenue is 100,000 and expenses are 50,000, resulting in a gross profit of 50,000. After deducting income tax of 30%, we get a net profit of 35,000. In subsequent years, revenue and net profit increased, indicating the growing success of the company.
*An income tax rate of 30% has been assumed.
|Year||Revenues||Expenses||Gross profit||Net profit|
|1||100 000||50 000||50 000||35 000|
|2||120 000||60 000||60 000||45 000|
|3||150 000||70 000||80 000||60 000|
|4||180 000||80 000||100 000||75 000|
|5||210 000||90 000||120 000||90 000|
Business Plan Profitability
The table shows the net profit of a SaaS lead generation and SEO company and the net value of future profits (NPV) for each year of operation. In the first year of operation, the net profit is 35,000 and the NPV is 34,568. In subsequent years, the net profit and NPV increase, indicating the increasing attractiveness of the investment. The NPV is calculated by subtracting an amount from the net profit, which, at a return on investment of 10%, gives the equivalent amount of money in a given year.
*An investment return rate of 10% was assumed.
|1||35 000||34 568|
|2||45 000||41 711|
|3||60 000||48 892|
|4||75 000||55 961|
|5||90 000||62 857|
The formula for calculating NPV for the Business Plan
NPV = Net profit / (1 + rate of return on investment)^n
- Net profit – the net profit of the SaaS lead generation and SEO company in a given year
- Rate of return on investment – the rate of return expected by the investor, the example assumes 10%
- n – the number of the company’s year of operation, e.g. for the first year n=1, for the second year n=2, etc.
Example calculation of NPV for the second year of the company:
NPV = 45,000 / (1 + 0.1)^2 = 41,711
The NPV for the company’s second year is 41,711.
Can a business plan be used for growth hacking?
Yes, business plans are used in growth hacking as a crucial part of business planning, especially in high-tech marketing and startup environments. Growth hacking refers to strategies focused specifically on rapid business growth. These strategies often involve unconventional marketing experiments and product development tactics aimed at boosting user acquisition, engagement, retention, and revenue.
Business plan template for growth hacking
A business plan template for a growth hacking strategy includes following information:
- Product/Service Description: Growth hackers often focus on creating products that are inherently shareable or that improve with more users, sometimes called network effects.
- Marketing and Sales Strategy: This would include unconventional or innovative strategies aimed at acquiring and retaining customers at a low cost. This might involve social media campaigns, referral programs, viral marketing, content marketing, or partnerships.
- Market Analysis: Growth hackers need a deep understanding of their market to identify growth opportunities and underserved customer segments.
- Customer Analysis: Understanding your customers, especially your most engaged or profitable customers, is critical for growth hacking. You want to identify what attracts these customers, how they use your product, and how you can find more customers like them.
- Pricing Strategy: Some growth hackers might use pricing strategies to drive growth, such as freemium models, discounts for annual subscriptions, or referral incentives.
- Sales Forecast and Financial Projections: These should take into account your growth hacking strategies and the expected rate of growth.
- Risk Analysis: Growth hacking can sometimes involve risks, such as focusing too much on growth at the expense of product quality, customer service, or profitability.
Business Plan: Key Takeaways
A business plan is a crucial tool for entrepreneurs and managers, which helps outline business goals, strategies, and financial forecasts. It assists in assessing a viability of a business idea and its potential for success.
The primary functions of a business plan include strategic decision-making, detailing company vision and strategy, tracking business progress, assessing business idea viability, and measuring potential success.
A business plan template consists of both descriptive and analytical parts, providing information on goals, strategies, products or services, marketing, management, organization, and detailed financial analysis.
The business plan creation process involves identifying the problem the new venture aims to solve, conducting a market study, considering and selecting options, assessing the venture’s implementation, performing cost analysis, developing a financial and pricing model, and outlining a strategy.
Key elements of a business plan include problem definition, niche analysis, strategy development, offer description, organizational planning, a financial model, an operational plan, and a strategy.
Essential tools used in business plans creation include Stakeholder Analysis, CAGE Analysis, SWOT Analysis, Competitive Cases, Risk Assessment, Entry Model, Pricing Strategy, Marketing Research, and Porter’s 5 Forces.
Business plan essentials underline market viability, growth potential, and team competence. They involve identifying your market niche, looking for market opportunities, and finding the right team.
A business plan’s financial section should include detailed projections for revenues, costs, gross profit, and net profit, along with the break-even point and potential risks.
A business plan’s profitability is demonstrated by a continuous increase in net profit and the net present value (NPV) of future profits, indicating the increasing attractiveness of the investment.