“If you fail to plan, you are planning to fail!” is a quote often attributed to Benjamin Franklin, and this mindset can also be applied in the context of business development. Business planning is one of the most important activities conducted during the early stages of a company’s development, as well as in later stages, depending on the company’s goals.
We bring you an overview of the actions that need to be taken during the preparation phase of a business plan, along with a summary of the components that a good business plan must contain. This includes examples of best practices and common mistakes entrepreneurs tend to overlook when drafting a business plan.
Why do I need a business plan?
In addition to reducing risk and increasing the efficiency and quality of business operations, a well-developed business plan has significance beyond internal use. A detailed and well-crafted business plan can attract private investors and secure bank loans, as many government and EU grants require a business plan as part of the application process. Therefore, one of the prerequisites for financing a business is having a business plan.
Steve Jobs and Steve Wozniak used a business plan to secure initial funding for Apple. Their first investor, Mike Markkula, invested $250,000 for a one-third stake in the company, thanks to their visionary plan.
In addition to securing funding, a business plan can guide development and define vision, help align business and technical goals, choose strategies, assess the feasibility and sustainability of a business idea, manage risks, and improve organization efficiency.
Examples of pages from Apple’s business plan for the Macintosh
Types of business plans
Before starting planning, it’s important to be aware that business plans can vary depending on their purpose and the level of detail and structure of the content. Some of the most common types of business plans include the main (“startup”) business plan, internal plan, operational plan, strategic plan, growth plan, and business plan for securing lines of credit, among others.
Purpose:Intended for new businesses to attract investors.
Content: Detailed description of the business idea, market analysis, sales and marketing plan, financial projections.
Application:Presentation to investors or banks to secure initial capital.
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Airbnb: Brian Chesky and Joe Gebbia used a detailed business plan to attract investors for their accommodation-sharing idea. The business plan included market analysis, potential users, and financial projections, which helped them secure initial funding. |
Purpose:Used within the company for strategic planning and tracking progress.
Content: Operational plans, departmental goals, growth strategies, resource allocation.
Application: Management team uses it for decision-making and guiding operations.
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Google uses internal business plans to manage various departments and projects within the company. For example, the development of new products such as Google Maps and Google Drive required detailed internal plans for resource allocation and progress tracking. |
Purpose:Focuses on internal operations and operational processes.
Content: Detailed procedures and measures for daily operations, task allocation, quality control.
Application:Used to guide daily activities and ensure operational efficiency.
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McDonald’s uses operational business plans to ensure consistency and quality of its products and services worldwide. These plans include detailed procedures for food preparation, inventory management, and customer service. |
Purpose: Long-term planning and setting goals for the future of the company.
Content: Mission and vision, strategic goals, market analysis, SWOT analysis, growth plans.
Application:Management team uses it to define long-term directions and strategies.
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Tesla’s strategic business plan, under the leadership of Elon Musk, included long-term goals such as developing electric vehicles, expanding production capacity, and building a network of Superchargers. This plan has been crucial for Tesla’s growth and success in the global market. |
Purpose:Planning the expansion of existing business operations.
Content: Analysis of new markets, plans for increasing capacity, financial projections for new projects.
Application:Used to attract additional capital or for internal planning of expansion.
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Starbucks used an expansion business plan to enter new markets, such as China. The plan included market analysis, adapting products to local tastes, and strategies for branding and marketing. |
Purpose:Securing loans from banks or other financial institutions.
Content:Detailed financial plan, risk assessment, repayment plan, market analysis.
Application:Prepared for banks or credit institutions to demonstrate the ability to repay the loan.
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An example of this type of business plan can be found in the early days of McDonald’s when Ray Kroc created a business plan to secure financing for purchasing the land on which the McDonald’s restaurant was built. Ray Kroc later became the majority owner of the McDonald’s franchise. |
Difference Between a Business Plan and a Business Model
To avoid any confusion, it is important to emphasize the distinction between a business model and a business plan. A business model is a framework that defines how a company creates, delivers, and retains value. It focuses on key components such as the value proposition, target markets, revenue, and costs.
On the other hand, the term business plan describes a detailed document outlining how a company plans to achieve its goals. It covers all aspects of the business, including market analysis, marketing strategies, financial projections, and operational plans.
Smion has been extensively addressing this topic for over 10 years – read more!
Starting Business Planning and Data Collection
What Every Business Plan Must Include
Although there is no standardized format or universally agreed-upon content for a business plan, all business plan documents generally inform the reader about very similar concepts. Below are the components of a business plan that must not be omitted.
Description: A brief overview of the business.
Key Points: Mission and vision, description of products or services, target market, key financial information.
Mistakes to Avoid: An overly long summary, lack of clarity, or too much technical detail.
Description:Research on the industry, market size, target market, and competition.
Key Points: Market trends, demographics of the target market, competitive analysis, market opportunities and threats.
Mistakes to Avoid: Superficial analysis, neglecting competitors, lack of data.
Description:Detailed information about the company, mission, and vision.
Key Points: Company history, business model, mission and vision, legal structure.
Mistakes to Avoid: Incomplete information, unclear mission and vision.
Description: Organizational structure and team.
Key Points: Management structure, biographies of key team members, responsibilities and tasks.
Mistakes to Avoid: Inaccurate information about the team, omitting key members.
Description:Plan for reaching the target market.
Key Points: Marketing goals, promotional strategies, distribution channels, marketing budget.
Mistakes to Avoid: Unrealistic goals, inadequate promotional strategies, neglecting the budget.
Description: Description of the products or services offered.
Key Points: Detailed description of products/services, unique features, development plans.
Mistakes to Avoid: Lack of detail, neglecting differentiation from competitors.
Description: Budget, financial projections, and funding requirements.
Key Points: Balance sheet, income statement, cash flow projections, financial needs.
Mistakes to Avoid: Unclear or unrealistic budget, neglecting risks, lack of data.
Description: Additional information supporting the plan.
Key Points: Supplementary analyses, biographies of key individuals, technical specifications, legal documents.
Mistakes to Avoid: Too much or too little information, lack of relevant attachments.
Description: Identification of key risks and opportunities for the business.
Key Points: SWOT analysis, risk management plans, potential growth opportunities.
Mistakes to Avoid: Ignoring potential threats, unrealistic opportunities.
Description: Detailed plan for implementing strategies and activities.
Key Points: Timeline, key activities, responsibilities and tasks.
Mistakes to Avoid: Unclear timeline, lack of specific activities.
Starting Business Planning and Data Collection
Before writing a business plan, it is important to understand the value through developing a business model, as the business model helps lay the foundation for the entire operation. Creating a business model allows for rapid testing and adjustment of various aspects of the business before diving into detailed planning.
Next comes the detailed development of the business plan – a document that outlines how the business model will be implemented in practice.
Data Collection
To start planning, essential assumptions and input data are required. Methods for gathering data on the target market include surveying the target group, focus groups, and analyzing purchasing habits. The goal is to collect demographic data, consumer behavior, needs, and preferences.
For market analysis, data on market size, trends, segmentation, and competition are collected. This information is obtained through secondary research (reports, studies), surveys, interviews, and market analytics.
In financial projections, it is crucial to be aware of startup costs, operational expenses, expected revenues, and financial needs. These are estimated through the analysis of similar businesses, consultations with financial experts, and gathering quotes to forecast costs.
Competition is analyzed through market research and SWOT analysis. The information sought includes details on main competitors, their strengths and weaknesses, market share, and strategies.
Product and service development is an essential part of the business plan. Information that must be defined includes product/service specifications, unique selling points, pricing, etc., which are determined through prototype development, market testing, and collecting user feedback.
The operational plan covers production processes, logistics, and resources. Information needed for this part of planning is gathered through the analysis of industry standards, consultations with operational experts, and capacity assessments.
The marketing strategy includes promotional channels, marketing activities, and budget. It is defined after market analysis, testing marketing campaigns, and assessing ROI.
Business Planning and Regulations
It is also important to adhere to legal and regulatory requirements, such as licensing, regulations, and standards, which can be determined through consultations with legal experts, researching regulatory bodies, and monitoring legislative changes.
Therefore, some of the possible methods for assessing and gathering data include primary and secondary research, competition analysis, market testing, and consultations with experts. Regardless of the type of business, at least one of these methods will be necessary for collecting data to create a business plan.
Common Mistakes Entrepreneurs Make When Creating a Business Plan
The listed common mistakes below should be viewed as warnings to avoid making the same errors, thus minimizing the likelihood of predictable mistakes when creating your plan. On the other side of each card, a tip is provided to help avoid potential issues.
Get in Touch
A business plan assumes a solid business model, includes information on all essential aspects of the company’s operations, and serves for various internal evaluations as well as external communications (with the aim of raising financial resources). It is crucial to gather high-quality information to avoid common planning mistakes.
You can be assisted by examples of business plans, numerous agencies, artificial intelligence, business incubators, and Smion.
If your business focuses on entrepreneurship development and providing support to startups, and you want to organize a workshop on business planning or further share concepts that will be valuable to your clients, contact us!
