Though a business plan is a useful tool for any business, e-residents sometimes choose to submit one when applying to open a business bank account.
A business plan is your opportunity to convince an audience about the efficacy of your product or service and the market opportunity. Essentially, your business plan should answer whether your idea will be profitable.
Writing a business plan forces you to review everything about your business at once, from value propositions and risks to team and financial plans to keep you focused on reality rather than dreams.
How to format
There is no single format for writing a business plan, so the following material is meant to simply act as a guide based on our team's experience and research from publications like Harvard Business Review, Entrepreneur and various government agencies.
Keep your audience and what you're trying to accomplish with your business plan in mind - you should adapt the format and information included to meet these needs. Unlike this article, you should keep your business plan short and easy to read.
You probably don't need a 50-page document containing innumerable financial projections, but you do need a realistic overview of the key elements of your business.
- Executive Summary: What you do
- Market Analysis: Research on your industry, market, and competitors
- Team: Your business and management structure
- Service or Product: The service or product you offer
- Execution: Your marketing and sales strategy
- Funding Request (optional): How much money you’ll need for the next 3-5 years
- Financial Analysis: Data like fixed costs, pricing or balance sheets
- Closing Summary: A recap of your business and how your request will help you grow
Executive summary
Every business plan should start with an executive summary that introduces your audience to your company. After reading your executive summary, your audience should understand what your company does and why you believe it's a good idea. You should include a company description and the unique value proposition of your service or product.
A value proposition is a relatively short statement that communicates why someone should do business with you rather than your competitors and makes the benefits of your service or product crystal clear from the start.
Here's an exercise to help you define your value proposition:
My (product or service) will help (target audience) (do what). My profits will be generated from (what). My offering differs from the offering of my competition (how).
A different exercise, but one that may be valuable at this stage, is to define brand positioning. Brand positioning will be core to your marketing as it essentially provides a more emotional value proposition.
For (target audience), (your company) is the only (frame of reference) that (key selling point) because (reason to believe).
Target audience: Core customers to whom your company is intended to appeal. Represents your intended audience. The more specific the better. It’s a common beginner mistake to consider everyone to be your target customer.
Frame of reference: Market context, product category in which you compete.
Key selling point: Most compelling unique benefit your company can claim relative to competition.
Reason to believe: Most convincing proof your company is the solution, the "how" your company can deliver what it claims to deliver. Why you are best.
Most companies also have a mission statement based on the values they have chosen to weave throughout their culture, often from the start. Your mission statement should be able to describe your values in less than 30 seconds.
For larger companies, a mission statement helps management make daily strategic decisions in a way that keeps them aligned with company values. For example, if one of your core values is transparency, your employees are likely to demonstrate and appreciate transparency with one another.
If you are a one-man company, try creating a mantra instead. Watch Guy Kawasaki’s video to learn how.
Market analysis
SWOT analysis is a well-known method to map your strengths, weaknesses, opportunities and threats.
For a starting entrepreneur, strengths could be your team, technology or sufficient finances. A unique offering is also a strength. Weaknesses could be a lack of resources or knowledge or high costs to get started. Opportunity, for example, could be access to new markets. A threat could be a lack of potential customers.
Write down 3-10 strengths, weaknesses, opportunities and threats. With weaknesses and threats, think through potential solutions to mitigate them.
Try tackling this task as a 5-day challenge.
Opportunity
Based on your SWOT analysis, dive deep into why you’re tackling this opportunity and why others should be excited about it. This section should also describe your target customer.
This is a chance to bring real data from a 3rd party into the equation to provide outside validation that there is a real market opportunity. Use market studies, economic data and other studies to demonstrate the potential market size.
If you’re already in business, use this section to highlight what you’ve accomplished so far and the future opportunities.
When describing your target customer, focus on what differentiates them from the people who would not buy your service or product.
When describing your target market, think of the acronyms TAM, SAM and SOM. If you are not familiar with them, take a moment to read about the most common market descriptions.
Competition
Though you should highlight the major competitive threats your business may encounter from competitors in your industry, you should also showcase what makes your business special and how you will beat those competitors. Include information on your most likely competitors and their value propositions. If you think you have no competitors, look again! Sometimes your competitors are not so obvious - for example, the biggest competitor of a personal finance app might be an old good Excel spreadsheet.
Gather valuable information about direct competitors by conducting market research. For this, ask your target customers, “Which similar services/products have you used? What do you like about them? What could be better?“
If possible, review and analyse your competitor's annual report. Analyse revenue numbers based on location, service level, reputation and any other relevant factors.
Team
One of the most important aspects of an early-stage business is the team and its credibility. Use this section to talk about the founders, management and key employees. You'll highlight their unique skills and why they’re the right people to build this company.
Don't include full bios. Name, responsibilities, skills, professional background and education is adequate.
Describe the competencies of the team in the framework of the resources you need to offer your service or product.
If you are looking for investment to grow your team, describe your dream team and how you will build it. When describing the required positions, don’t write, “We need an accountant.” Write, “A person with accounting skills is required in order to create models to increase profitability.”
Service or product
What is your service or product? Use this section to talk in detail about what you offer to customers.
Depending on your business, this section may be relatively long based on the complexity of your actual service or product. This is a good section to talk about the long-term vision or product roadmap that will enable you to stay relevant and competitive in the future.
When describing your service or product, focus on the problems and pain points of your customer instead of listing features and functionalities. Answer the following: What need or problem does your offering solve? What makes it more appealing than other similar offerings?
Execution
This section details your sales and marketing and should help others understand how you plan on building your business to meet goals and projections. Talk about how you’re putting your current and future resources to use, your high-level strategies for growth and continue to highlight what separates you from the rest of the crowd.
When setting goals, make sure they are measurable, understandable and flexible. Learn how to set SMART goals.
Set your goal on profit and turnover. Set additional goals that help you achieve your turnover (for example, attaining a certain market size or competitive advantage).
Think through how you will market your offering and what investments are needed for marketing.
Financial analysis
The money. How much your business operations will cost, what resources they require and the revenue they will produce. It is important to remember this section is sometimes based on your best guess and is highly liable to change. Some who review your plan will take the data with a grain of salt - perhaps more importantly, it illustrates your thought process, attention to detail and honesty.
Most financial analysis sections include several different reports including a balance sheet, income statement, cash flow statement, operating budget and break-even analysis. This section is also a good place to get a solid understanding of the real costs of your business and potential profitability - it’s very important to not fool yourself with the opportunity. Remember, be conservative! And do not forget to count your own working hours into the costs.
When making sales projections, use the knowledge from describing your product, market and competition. When done well, this should give you enough insight to create a good starting projection.
Closing summary
All good business plans end with a restatement of the initial executive summary. This is your opportunity to leave your last thoughts with your audience. Highlight the scale of the opportunity, what makes your service or product special and why you’re the right team to deliver.
Final advice and resources
Recognizing a business plan is often a living document that will be rewritten many times over - it should serve as a foundation for your strategic planning. In the end, it's what you make of it. It can be a simple tool for fundraising or a guiding star for the months and years to come.
If you’re looking for more information or inspiration, read How to Write a Business Plan and How to Write a Perfect Business Plan. If you are looking for something lighter before getting started with your business plan, we recommend building a Business Model Canvas at Canvanizer or Cowan or trying a Pitch Deck.