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As a business owner, it’s imperative that you plan the activities of your business thoroughly. A business plan document comes in handy and useful in such times. Whether you are an entrepreneur, MSME, start-up or an established business, developing a business plan is essential. It charters a clear roadmap for your business across finance, operation, sales and marketing, IT infrastructure, human resources and other functions, making it possible for all stakeholders to be aligned and work towards the common goals.
In this post, we will understand the meaning of a business plan, the different types and key components. We will also look at how to write a business plan for start-ups and small businesses, and share a basic business plan format that you as a MSME owner can refer to.
Business plan definition
Let us first understand what is a business plan?
A business plan is a strategy document that outlines the roadmap of the business for the next few years (e.g., next 3 to 5 years). It highlights its goals and objectives and the strategies to achieve them. It contains details on its purpose, target market, customers and competitors, product development, go-to-market strategy, financial projections, organisation structure, management team and more. In most cases, it comes with an executive summary that contains the key points of the complete plan.
A business plan moreover is a dynamic document – that is, it should be updated from time to time based on current state, forecasts and market needs.
What are the different types of business plans?
There are different types of business plans that you can refer to. The most common 4 types of business plans include:
- Startup business plan: This is often a new business plan, i.e., for a business that is new and starting out. This plan should contain details about the company, mission/vision statement, goals, management team, products/services, market potential, customers, competitors. Financial potential and projections are vital if looking for investors. Details on market research, customer immersions and learning, should also be included. (Also read: Manufacturing business ideas for SMEs in India)
- Entrepreneurship business plan: As the name suggests, this document is for the entrepreneur. This is a comprehensive document, detailing about your company, product, services, marketing plans, market research, customer segments, operations and logistics management, financials and more. This may also include details on company registration, type of company, funding required/funding availed, debts and more. (Also read: How to register as a micro business)
- Business growth plan: A growth plan is essentially a document that provides and overview on how the company aims to expand. There is no standardised growth business plan template as it varies on the goals of the company. For instance, an MSME business plan may include details on how to expand to new markets and acquire customers. This would include details on marketing strategies, marketing collaterals, offers and discounts, sales enablement material etc.
- Strategic business plan: This can be used by new and established business. This is a top-level overview of the company’s targets and goals and key metrics, success criteria and strategies to achieve them. Ideally it should contain the activity schedule with a brief of team/department responsibilities and contributions.
How to write a business plan?
Writing a business plan is not an easy task. It requires meticulous planning, detailing, and understanding of diverse aspects of the business. It is also unlikely that investors will not see through a poorly-conceived business plan that does not project viable ROI.
Though you can find a business plan sample online for your reference, the secret to writing a winning business plan is to: write, rewrite, edit, rewrite. That is – work on it a number of times, till you are satisfied with the outcome.
In the next section, we have shared a standard business plan format that you can follow when preparing a business plan. The main content of a business plan includes:
1. Executive summary
A one-page document, the executive summary is what gets read first. It provides an overview of the company, its mission and vision, value proposition, product and/or services, and the highlights of the strategic plan for market launch, growth and expansion, product enhancement or any other.
Pro tip: This part is written last but read first and is the decider if investors will schedule a meeting with you or not.
2. Company overview
Similar to an ‘About Us’ section it provides an overview of the company – history, management team, milestones etc. It also provides details on company name, location, logo, tagline etc. – all of which will be vital for branding in business. This section should also highlight what makes you unique from your competitors.
3. Problem statement, opportunity and solve
Investors will pay attention to this section – the business problem and solve. Most start-ups fail to demonstrate clear solutions to existing problems. Solutions should be simple, easy to adopt, and accessible by all (i.e., the target audience).
A business plan example in this case would be that of ‘Uber’. The problem statement – it is time consuming and inconvenient to hail a taxi with hands. The solution – an application to book a taxi ride from home to destination, using technology.
This section should propose value and merit in your business idea, product and services. You may also include a section on:
- How your product/service works
- The technology used
- The pricing strategy and model (add competitor pricing here)
- A brief on SCM, operations and distribution
Details on each can be included in the relevant sections or Appendix.
(Also read: Low-investment business ideas for MSMEs)
4. Market size and target customer research
Market size is a vital piece of information – it gives readers an idea of the potential your business idea has. And accordingly your company’s valuation is done. For instance, the logistics market in India was valued at US$ 250 bn in 2021 (Source: India Brand Equity). As such, if you are a new logistics company, this data is vital as it shows readers the future potential and market opportunities.
What is equally important is your target audience. This section of the business plan should highlight details of your ideal customer – demographic, location, buying habits, etc.
5. Competitor analysis and market research
It’s likely that you have competitors. Being aware of them, their offering, pricing points, marketing strategies and market share will enable you to build better strategies. It will also help you to design your USPs and stand out from competitors. This will also likely build confidence among your investors in investing in your business.
For example, when the eCommerce giant ‘Amazon’ offered ‘Prime’ to its customers, the idea was simple – pay a nominal amount for super fast deliveries (i.e., same day or next-day delivery). It was not the only eCommerce player in the market, but it distinguished itself and gained competitive advantage over competitors through the promise of quick-deliveries.
It is equally important to do market research therefore – a proper SWOT analysis for customers, competitors, market size, and more to evaluate what works in your favour and what works against you.
6. Marketing, sales and operations plans
If your are writing a new business plan or a startup business plan, a go-to-market strategy is essential. Your investors need to understand how you plan to market your products/services and reach your target audience. In the end, it’s the business revenue and ROI that matters to investors (and even lenders). So, defining a sales strategy is equally necessary. For instance, customer acquisition and engagement can be a marketing strategy that investors would want to see.
Operations management plans should also be included. Based on the nature of your business, this may include activities right from procurement, to designing a raw material sourcing strategy, inventory planning, logistics and distribution, SCM, vendor and supplier management and more.
7. Financial planning and forecasting
This is the part your investors and lenders will look at in detail. If your business is a startup, then this section should give financers visibility on your business’s financial growth potential. It should include costs across all components – production, raw material, business operations, salaries, marketing, etc. and projections on annual turnover and profits.
On the other hand, if your business has been in operation for some time (e.g., 2-5 years) and you are looking at growth (hence investment), this section should also include details on:
- Profits and losses, revenue and turnover, and net profit
- Debts and borrowing, assets, liabilities, and current ratio
- Spends and expenses, gains, dues and accounts receivables
Your investors are essentially looking for your business’s ability to repay and make them profits. Pay attention to accurate details. Ideally, projection for the next 3-5 years in desirable (add charts, graphs and visual elements here).
8. Funds requirements and allocation
Whether you are seeking a business loan or investor or not, this section should be written out for your internal and external teams. This section of the financial business plan outlines how much funds your business requires, how it aims to invest the funds, the timelines and how soon to expect returns.
For instance, if you are seeking a business loan from banks or NBFCs, you will have to repay the EMI in time to avoid defaults. That is, the repayment amount and timelines are fixed.
However, if you are getting investor funding, it’s more about how your company is performing (profits, revenue, market share etc.) that will matter.
Why you need a business plan?
So, here’s the fundamental question – Why do you need a business plan? Especially if yours is a bootstrapped business and does not require funding?
The importance of a business plan cannot be overemphasised. Whether you are a start-up or an established business, a business plan enables you to document your ideas. Some of the benefits of having a strategic business plan are:
- Clarity on business’s present state and future growth roadmap
- Pitch to financers/investors for funding
- Build on a business idea (remember, a business plan is a dynamic document and should be updated from time to time)
- Analyse performance and making improvements
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FAQs – Business plans for start-ups and SMEs
In this section we take a look at some of the frequently asked questions on business plans, its key components and how to make a business plan.
How to make a business plan presentation?
- Include the important points only i.e., 5 to 10 main aspects
- Keep it short (10-15 slides), easy to read (bullets, images, graphs), to-the-point (20-30 mins)
- Business name, logo, contact details, tag line, social handles
- Management team details (short 2-3 sentences about key members, designation and contact details)
- Problem statement and solution
- Products and services (mention product USPs and overview)
- Market size, competitors, customers (and main strategies)
- Revenue model and business financial plan (basic revenue/financial details)
- Proposal (i.e., funding requirements)
How to write a business plan introduction?
- Details on the business – its products and services, value propositions
- About the business – its history, how it originated, founding members and current team
- Key distinguishing factors – its highlights, USPs and what sets your business apart from competitors
- Target audience – who are its ideal customers, markets they can be found (e.g., buyer persona)
- Current business performance and way ahead – brief about financials and what the business’s growth funnel looks like