Business Plan Basics For Newbies

Photo by Nick Morrison on Unsplash

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I'll be honest with you. Business plans are not the sexiest topic to be writing about. But just because something is not sexy, doesn't mean it's not important. Business plans, while not sexy, are definitely an important tool that every entrepreneur should learn about it.

Have you ever watched a movie where the main character was anxiously waiting for a loan officer to let them know if they were approved for a business loan? The one piece of paper that the loan officer always seems to have is the main character's business plan. That one document literally sets the tone for that character's entire storyline. However, in the real world, things are not as different. A good business plan will set the tone for an entrepreneur's business. It may be the difference between becoming a billion-dollar unicorn or just another failed business.

What is a business plan and why is it important?

If you are going to start a business, then you will eventually need to create a business plan. A business plan is a document that describes a business’s core activity, objectives, and how the business will achieve its goals. When someone creates a business plan, they primarily have two goals.

1. Create a dedicated plan or roadmap for how the business will operate.

2. Attract potential investors and secure funding for the business.

There are hundreds of different business plan templates available on the internet, but the trick to any good plan is to know the audience who would read it. Business plans fall into two realms: traditional plans and lean startup plans.

Traditional Business Plans

Traditional business plans are the most common and most asked for by investors. These plans are typically very structured and very detailed. If you were getting a business loan from a bank or trying to get funding from a traditional investor, this is typically the type of business plan you would use. These types of plans are never short and are usually over 10 pages long.

A traditional plan will most likely have a format that focuses on these areas:

• Executive summary

• Company description

• Market Analysis

• Corporate organization and management

• Service or Product Line

• Sales

• Funding request

• Financial projections

For an example of a traditional business plan, check out this one from the SBA.

Lean Startup Business Plans

Lean startup business plans have their own structure, but they are not as detailed as traditional plans. They are usually only 1 to 5 pages long and focus primarily on key elements of the business. Here are some of the elements that this plan will focus on:

• Executive summary

• Key partnerships

• Management team

• Business value

• Cost structure

• Customer relationship and demographic

• Revenue

For an example of a lean startup plan, check out this one from the SBA.

For more tips on Business plans, check out SBA.gov.