New year, new business. A guide to creating your business plan for 2023.
Is a business plan on your radar for 2023? Perhaps you have one but it needs fine tuning. Maybe you need to create one. Whatever the status of your business plan, we’ve got you covered. Read on for a guide about how a business plan can help you take the next step toward making 2023 an impactful year for your business.
Why you need a business plan
Business plans are a lot like a roadmap for your business. You know where you want to take your business (franchise it, secure funding, bring on a new partner) but how to get there might not be as clear. Without any sort of plan to guide you, you may find that progress feels elusive — even when it’s not.
The exercise of creating a business plan puts structure around your passion and vision, providing a game plan for each stage of your business. Once you’re done, you’ll have a well documented (and researched) plan that details your short- and long-term goals and the actions and resources necessary to achieve them. Having a business plan may also leave you feeling more confident and energized now that you’ve solidified your vision.
The essential components every business plan needs
There are as many variations of business plans as there are opinions about which is the best format to follow. That said, most business plans follow one of two distinct approaches:
- Lean startup. These plans are for you guessed it, startups riffing off of products for which a market already exists. Lean startup plans are typically only a single page in length, summarize only the key elements of a business and can be written in as little as an hour. These plans are less common in an emerging small business or entrepreneurial space.
- Traditional. These are the OG of business plans. The kind that are very detailed, take time to write (days, even weeks — not an hour) and most often requested when there’s funding involved.
While it’s more than likely you’ll follow a traditional business plan, whatever format you follow, be sure it uses a logical structure. Your plan should be easy to follow and straightforward. Is your business non-traditional or wildly creative? That’s all the more reason to ensure your plan is well thought out, particularly when speaking with potential lenders and would-be investors.
These are the most common components to include in a business plan:
- Write an executive summary. If you’ve heard the term ‘elevator pitch’ before, this is that. The rule of thumb being, can you distill your business to a decision maker in the length of an elevator ride? Unless you’re headed up to Floor 450 of the Tokyo Skytree, you’ll need to be concise and keep it to no longer than a single page. Plan on including brief descriptions of your vision, business goals, what you’re selling and to whom, and where you’ll find your customers. Include financial projections and if appropriate, how much funding you’re asking for. If you’ve got a strong team supporting you, it doesn’t hurt to mention them as well.
- Describe your company. This section of your business plan answers ‘Who?’ and ‘What?’ by detailing who you are and what you plan to sell. For example, your ‘who’ might be that you’re a dog owner who had trouble finding a reliable trainer and consistent dog sitter for your new pet. And when you couldn’t find either, you became certified to do both. Now, you’re in business to offer this turnkey service to others. The latter is your ‘what.’
- Conduct market analysis. Show due diligence here. Prove to the reader that you know your customer’s pain points and motivations, why your product or service is better than what exists and that there is demand for it.
- Outline the management and organization. Share how your company is structured and who will run it. Are you an S corp, limited liability company (LLC) or sole proprietor? If you have others on your team, detail who they are, what they will be doing and their background.
- List your products and services. In this section of your business plan, it’s time to show and tell, literally. This isn’t the first mention of the products or services you’re offering but it is where you go into greater detail. Elaborate how your offering will appeal to your intended customers. If applicable, explain where you will source and manufacture your products, and detail any plans for new products or patents you plan on filing.
- Create a marketing plan. Don’t let this step overwhelm you — it can be easy to get in the weeds on this one. A good approach is to keep it simple while being realistic — some of the choices you make here (promotion, customer acquisition) will impact your budget. At a minimum, address the four P’s. Price: How much will you charge and why? Product: what you’re selling and how it’s unique. Promotion: how will you garner attention from your ideal customer? Place: where and how (aka ‘channels) will you sell your offering?
- Develop a logistics and operations plan. Do you need equipment, staff, suppliers or a building to produce your product? What about shipping and fulfillment? Do you have contingency plans for spikes in demand or seasonality? Demonstrating that you’ve considered these critical parts of your supply chain provides data (overhead, storage costs, etc.,) that will inform financial planning and decision making.
- Provide financial projections. There are three documents you can expect to include in the financial section of your business plan: income statements (revenue vs. expenses), balance sheets (assets and liabilities) and cash flow statements (revenue less any expenses). Don’t forget to factor in unexpected expenses as it’s better to be prepared than surprised. If you’re just starting out and don’t have this historical information, provide financial projections.
- Appendix. If after providing all the above you feel there are still documents that would prove valuable to your audience, this is the place to put them. Think illustrations or images of your products, legal notes, permits, patents, definitions, etc. Note the appendix is an optional section.
Tips for writing your business plan
It may feel obvious, but often, the most common mistakes in a business plan are the ones that can be easily prevented. (So that’s kind of good news, good news, right?)
Here are our top tips for making sure your business plan is as professional and promising as your actual business.
- Grammar and misspellings. Spell check and autocorrect are great but often wrong. Before you share your business plan, have a human you trust (other than yourself) review it first. Besides correcting grammatical missteps, ask them to read with an eye on cutting unnecessary content so you’re including only what is necessary. Conversely, did the plan leave them with any lingering or unanswered questions? If so, address them and review one more time.
- Ideal length. The average length of a traditional business plan ranges from 10-50 pages but there is no hard and steadfast rule. Ultimately, it's how you will use your plan that determines its final length. If you’re asking for funding (whether from an investor or traditional lender), your plan must demonstrate the viability of your business, illustrate that you understand the marketplace and are prepared. Investors want to feel confident they are making a sound investment that will yield positive ROI. If your business plan is intended for internal use, the length can certainly be shorter.
- Complex terms and exaggeration. As you explain your product or service, it might be necessary to use technical terms; however, keep in mind the goal for your reader is that they see the value of your offering, not its complexity. Write so that a layperson could understand and use simple language to explain complex concepts.
Sell but don’t oversell to the point of exaggeration. Overuse of superlatives like ‘best, greatest, excellent, supreme’ can sound more than a little disingenuous and also diminish your credibility.
- Incomplete or unrealistic financial information. Provide the supporting financial documentation or projections outlined above, being sure that the figures are accurate (check twice and check again). If you need help building a forecast, consider hiring a financial specialist. Also, don’t overlook using graphs and charts to tell the financial story of your business.
- Lack of an exit strategy. Don’t mistake planning an exit strategy as planning for failure. It’s anything but. For small and emerging businesses looking for funding, an exit plan gives investors and creditors confidence that your venture will prove profitable for them. And if the business should not succeed, a thorough exit strategy will address how you plan to limit their losses. The only time you wouldn’t need to include an exit strategy in your plan is if you intend to maintain ownership indefinitely and you are not looking for funding.
What do I do with my business plan?
Congratulations on your business plan. Now you have a tool that you can use to convince others that joining you as a business partner, working with you or investing in your business is a smart and exciting decision.
We want to know: Have you written a business plan already? If so, how did it go? If you’re working on one now, what sections are giving you the most trouble (maybe there are none!)
Let us know in the comments. Are there any lessons learned or helpful advice you’d like to share with the community? Let’s hear them! If you have a question or want clarification about business plans, we want to know that too! Sound off in the comments below.