November 24, 2021
Companies that start out with business plans are more likely to succeed. When you sit down to create a business plan, you have the opportunity to really think through and formulate how you are going to start the business, operate it and make it grow.
Whether you are going to write a formal business plan that you’ll use to get investors or if you just want to get your ideas down on paper, going through the process is something that should be on every budding entrepreneurs to-do list.
We will walk you through how to do it and will point you in the direction of some great templates that you can use as well. In this article, we discuss:
The short answer is yes, you do need to write a business plan for your online business. While many online businesses by nature do not require a lot of overhead, you may not be seeking investors or funding, which means you don’t necessarily need a formal business plan.
However, as you grow, there are situations in which you might need a business plan, such as opening a business account at a bank or increasing your credit limit. Even if you are never asked for your business plan, it will serve you well to have this roadmap of what you expect your business to look like over time.
Above all else, writing a business plan forces you to put pen to paper and flesh out exactly what the business will look like, which means you will need to think about the elements that go into creating a successful business and determine whether or not your idea is sustainable. While going through the process, you will inevitably discover areas of weakness that you will then be able to address, saving you additional costs (and heartache) later on.
Practically speaking, here’s how a business plan will help you:
A business plan will provide you with a structured plan, with all of the main points and relevant information about your business laid out in one place that you can easily share with potential investors, employees, or partners.
Depending on what type of business you are starting, your business plan may look slightly different. A corporation will need more detail and different financial documents than a sole proprietorship, for example. Unless you have been given specific requirements by a particular potential investor or loan provider, the choice is really yours in terms of how detailed you want your plan to be.
There are two generally recognized types or formats of business plans: the traditional business plan format is a longer, more detailed plan that is used to seek funding or other official purposes with heavy emphasis on the financials. The lean startup business plan format, on the other hand, is a condensed, often just 1-2 pages, plan that is usually used only for internal purposes.
Following is a review of the sections you should include in your business plan and the type of information that goes in each one. Most business plans begin with an executive summary (that you will probably actually write at the end) that is a short introduction highlighting the main points from within the plan itself.
Keep in mind that the sections described below are commonly used, but you should feel free to leave out ones that are less relevant or add other sections that are more relevant to your specific business and needs.
In the business overview section, you need to answer the questions of who you are and what you plan to do. When someone reads this section, they should be able to get an understanding of your business idea and what makes you different from your competitors.
This section should include basic information about your business structure, industry, goals and key personnel with more detail on your USP, the specific market problem that your business addresses and the solution you offer.
Identifying and describing your unique selling proposition is an important exercise and will help you clarify for yourself and anyone who reads your business plan exactly what you have to offer and why it’s better than anything else on the market.
As part of the process of identifying your USP, you will need to understand the market situation and specific problems or challenges that exist that you propose to solve. For example, if you are selling a specialty product online, you will want to research and prove that there is a current demand for that product but a lack of affordable options or lack of high quality items. This section should include some statistics and data analysis to back up your claims.
In this section of your business overview, you’ll describe the service or product that you plan to sell and how it serves as a solution to the market challenge you just described. You do not need to include a lot of technical details, but rather keep the explanation simple and to the point - here is what the business will offer and how it answers a need.
You can choose how detailed you want to be in describing your products and/or services. The level of detail may depend on how complex the product or service is and whether it is something brand new or an already proven concept. You might want to include pricing information in this section as well.
Understanding the market in which your business will operate is key to your success. Your business plan should include information about the demographics and habits of your target customers as well as market trends in the industry as a whole. In researching the market, you will get a good understanding of whether there is actually a viable and sustainable market for your business idea.
Some of the key questions to consider when writing this section of your business plan include:
Clearly defining your target market from the start will save you a lot of time further down the road. Here are some of the things to consider when defining and narrowing down your target market:
You also need to consider how you are going to get your product out to customers. Are you going to manufacture the product or work with suppliers? Or are you going to focus on drop-shipping? What systems will you put in place to ensure smooth operations and a clear path from a customer placing an order to receiving their product.
Of course, this section is less relevant if your company will offer a service and not a physical product, but as a service provider you may also want to consider whether you will meet clients in person or what your onboarding process will be.
Unless you are doing something super unique, you are likely to have competitors in your field. A competitive analysis is an important component of your business plan and will help you identify opportunities to fill in the gaps where competitors are falling short. You can also learn from what your competitors are doing well and try to do the same and better.
Your competitor analysis should focus primarily on your direct competitors who are operating in the same space as you. Here are some key questions you will want to answer about each competitor:
It may take a bit of detective work to uncover all of the information you need. A good place to start is with their websites, and you can also check out their social media and brick and mortar stores if they have them.
As part of your competitor analysis, you’ll likely uncover new ways that you can differentiate your own business - perhaps you can offer a cheaper price or focus on a different market niche.
A SWOT analysis is a great way to really take a look at what’s great and not-so-great about your company. To complete this type of analysis, you look at internal strengths and weaknesses and external opportunities and threats to your business. The SWOT analysis is then laid out in a grid so that it’s very easy to see where your challenges and potential opportunities lie.
a Business Plan blackboard
You need to have a marketing plan in order to let the world (or your target market anyway!) know that your business exists and is ready to serve. A comprehensive marketing plan includes both paid advertising as well as public relations and digital and content marketing.
Creating marketing campaigns will be closely tied to who your target market is and what your competition is doing. This is also the section in which you can consider your brand and how you want to show up in the market and be perceived by your customers and potential customers.
In addition to deciding what the messaging is that you want to convey via your marketing campaigns, you will also need to consider how you are going to spread that message. Important questions to consider as you develop your marketing strategy include:
Finally, there are 4 key components of most marketing plans that you may also want to include in this section:
If you are a sole proprietor, your whole management team description may be just about you! It’s still important to share your experience and what gives you the skills and knowledge to run this business. Of course, if you do have partners or employees helping you run and manage the business, this is where you can also include information about them and their backgrounds.
You can also use this space to plan for the future and think about the type of management structure you will need or want in place as your business grows.
The financial analysis section is the most important when it comes to pitching investors or asking for a loan. This is where you will present a financial picture of your business - the start-up capital you need and a description of your costs and income projections. The financial analysis section, in essence, tells the story of your business through numbers and should align with the narrative that you’ve shared in the previous sections.
The financial analysis section of your business plan should include some combination of the following financial documents:
If you’re feeling overwhelmed by the thought of having to write a business plan, do not worry! There is a treasure trove of sample plans and templates you can customize and use all over the internet. We suggest checking out Bplans or Venngage for easy-to-use templates.
You can also simply open up your favorite note-taking app or word processor, use the sections described in this article as a guide and just start writing!
Although it is a proven fact that entrepreneurs who create a business plan are more likely to succeed, not every business plan is a guaranteed success. There are few common mistakes that you can easily avoid to ensure that you put your best foot forward in your business plan and set yourself up for the best chance of success:
You should create a business plan before you officially launch your business. It should, in fact, be one of the first things that you do once you decide that you want to start a business. If you’ve already passed that point and are already running a business, then there is no time like the present to get that business plan on paper!
There is no standard required format for a business plan and you can structure it and design it however you like. There are, however, plenty of templates and samples online that you can use to make sure that you are covering all of the major information and presenting it in a way that is easy to read and understand.
Business plans are used mainly to help you clarify your own plans for starting and growing your business, to help understand the capital and financial needs that you have, and to secure funding from investors and/or lenders.
Depending on the stage of your business and your goals, you may want to choose between a longer or shorter business plan. There are also business plans for different scenarios with the 4 main types being: mini-plans that are a very short overview; presentation decks that present the business plan as a slideshow for viewing by potential investors, lenders or partners; working plans that serve as a roadmap and that get updated periodically; and what-if plans that focus on contingency plans if the unexpected happens.
Most business plans will contain the following 5 elements:
The most important part of a business plan is different for different audiences. For investors and lenders, it’s the financial statements. For you, as the business owner, it may be the competitor analysis or your market analysis or any other section depending on your specific goals and priorities.
A good business plan is somewhat subjective and depends on the reader. But a good rule of thumb that applies no matter what is that the plan should be clear and concise. It’s highly unlikely that anyone is going to read a business plan that is 50+ pages long. If you do need to include more information, you can always add appendices, but the bulk of the material should be somewhere in the 5-10 page range.
In addition, a good business plan is a dynamic document. Don’t just create it once and then leave it in a drawer (or saved on your desktop). Use it, edit it, revisit it, treat it as the roadmap to success that it’s meant to be.