Build a Business Plan: How do I build a business plan, and who is it for?

Reddit always supplies the goods:

Source: r/smallbusiness on Reddit: Let's discuss! Do we really need a business plan to create a successful business? 🤔

Put simply, having a business plan is not a guaranteed, surefire way to make your business idea turn into a unicorn overnight, but as we know companies that plan grow 30 percent faster than those that don’t plan. Pitch decks are very necessary but may have a different audience and purpose.

Lesson Overview

Understand the purpose and key components of a business plan

Learn how to tailor your plan for different target audiences

Discover tools and templates to streamline the business planning process

Who is a business plan for?

A business plan typically has an audience of:

Business partners related to the business who need to align on ideas, plans, or attract other talent
Investors requiring a detailed summary of your future plans so they can potentially provide investment
Introductions to more formalised businesses/partnerships/alliances. This may be required before signing over a PO for B2B businesses.
Mentorships and guidance conversations about your businesses
Government or Private Grants that require planning
Your customers: If you have a clear strategy and goals, then you are more likely to increase your sales.
Most importantly - YOU. By planning out your business you will be able to understand where you should focus your energy, and the opportunity size of your business.

It's safe to say that it is a really, really good idea to have a plan if you intend to start your business soon. As the saying goes, "failing to plan is planning to fail."

What is a Business Plan?

A business plan is a comprehensive document that outlines your business idea, target market, competitive landscape, operating model, and financial projections. It serves as a strategic roadmap, guiding your company's development and growth.

But a business plan serves multiple purposes beyond just guiding your internal strategy. It's also an essential tool for engaging external stakeholders, such as investors, partners, and talent.

To effectively engage these different audiences, it's important to tailor your business plan messaging. While the core components may remain the same, you'll want to emphasize the points that matter most to each stakeholder group.

For example, investors will be particularly interested in your financial projections and competitive advantage. Partners will care more about your operating model and how a collaboration could be mutually beneficial. And potential hires will want to understand your company culture and how they can grow with your business.

How to Create a Winning Business Plan

There are many great business plan templates - just search ‘business plan template free online’ and you will see that there are hundreds. However, they are generally just that: A template. And often, they are not great.

If you’ve read this far, you’ll already know that IdeaFloat just so happens to automate the task of business plan creation for you. You will get a document with all of the below fields filled. Not only is the IdeaFloat business plan backed by experience, it’s also design friendly and unique.

Crafting a comprehensive business plan may seem daunting, but breaking it down into key components can help you tackle it piece by piece. Here's a step-by-step guide:

Executive Summary
1. a. Provide a high-level overview of your business idea, target market, unique value proposition, operating model, and financial projections. This is the first thing readers will see, so make it clear, compelling, and concise.
2. Write this last as you have completed your other sections.
3. This section should be short and punchy, ensuring it includes all information that an interested party could possibly want (revenue, customers, etc).

The executive summary is your chance to hook the reader. Spend extra time refining this section to paint a vivid yet concise picture of your business opportunity. Use active language and compelling data points to draw them in.

Business Overview
1. Dive into the details of your business, including your business model and industry.

This is where you expand on the "why" and "how" of your business. What inspired you to start this venture? What makes your approach unique? Help readers understand your vision and values.

Products and Services
1. Describe what you're offering and how it uniquely solves customer needs. Highlight your value proposition and competitive differentiators.

This is where you expand on the "why" and "how" of your business. What inspired you to start this venture? What makes your approach unique? Help readers understand your vision and values.

Market Analysis
1. Outline your target market segments, competitive landscape, and market trends. Show that you have a deep understanding of the market opportunity and how your business fits in.
2. Introduce your ideal customer:
  - IF PEOPLE – where do they live? what age are they? what do they do for a living? what do they care about?
  - IF A BUSINESS – what industry are they in? how big are they? where are they? how much money do they typically spend on your type of product or service? c. Describe your competitors:
  - Who else is going after these customers? Say what they're not doing so well but spend just as much time on their strengths. They're in business for a reason, so don't assume they're succeeding by accident. List their advantages in terms of access to customers, marketing budget, or economies of scale.
  - Not all competitors are obvious. Think about indirect competitors too who may be targeting the same customer dollars in a different way.

Many entrepreneurs make the mistake of defining their market too broadly or claiming "we have no competitors." Investors want to see that you have a realistic, research-backed view of your market. Use data from credible sources to estimate the size and growth potential of your specific target segments.

Risk Assessment
1. Put your black hat on and list all the things working against you. Will some supplies be hard to get? Will you rely heavily on a specific employee? Or a big customer? Will you have to educate customers to behave in a new way?Don’t limit yourself to immediate problems. Ask what challenges could crop up later. Could a competitor lower their prices to freeze you out of the market?List all these things and indicate how likely they are to affect you. If a risk is substantial, say how you’ll deal with it.

Acknowledging risks demonstrates your thoughtfulness and preparedness. Don't shy away from potential downsides, but do show how you plan to mitigate or overcome them. This builds credibility with readers.

Marketing and Sales Strategy
1. Your budgets and financial projections will be based on achieving a certain number of sales. This is where you explain how you'll get those sales.
2. Sales - Will you need people to interact with customers? If so, how many steps will there be in each sale, and how long will it take? Work out what that will cost you.
3. Marketing - How will you get the word out? Decide on a few ways to reach your target customers (such as social media, letterbox drops, or local PR). Say how much you'll spend on each activity, and when they'll happen.

Be as specific as possible in this section. Which marketing channels will you prioritize and why? How will you measure success? What is your sales process and who will implement it? Vague statements like "we will leverage social media to drive awareness" aren't enough. Spell out the details of your strategy.

Operating Model
1. Explain how your business will function day-to-day, including your organizational structure, key processes, and milestones. Outline your staffing, facilities, equipment, and technology needs.

Investors and partners will want to see that you've thought through the practical realities of running your business. How will you produce your product or deliver your service? What key hires will you need to make and when? What tools and infrastructure will you require? The more detailed your operating plan, the more confidence you'll instill.

Example Operating Model Section: Green Garden will operate as an online Direct to Consumer (DTC) retailer of succulents and air purifying plants. Our lean team structure enables efficient order fulfillment and personalized customer service:

Founder/CEO (Jane Smith): Oversees overall strategy, finance and key partnerships

1 Operations Manager: Manages inventory, order processing and shipping from our 2,000 sq ft warehouse

1 head of marketing: Drives customer acquisition and retention through digital channels

1 Customer Service Rep: Provides email and chat support to customers

1-Part Time content creator and stylist: Produces photos and videos showcasing our plants in stylish home decor settings to feed our social media and email marketing

In year 1, we will focus on fulfilling orders in-house utilizing a simple Shopify website, leased warehouse space, and manual inventory management. As order volume grows, we will invest in an inventory management software to streamline operations.

Key milestones include:

Month 1: Finalize supplier contracts and receive first inventory shipment

Month 3: Execute marketing launch campaign and process 1,000 initial orders

Month 6: Hire customer service rep and achieve $25K monthly revenue run rate

Month 12: Expand product line to include larger statement plants, achieve $50K monthly revenue

By year 3, we aim to automate 80% of our order fulfillment through robotics and conveyor systems in an expanded 10,000 sq ft warehouse. This will enable us to process up to 500 orders per day with 99% on-time shipping and position us to scale nationally.

Finance & Budget
1. Provide historic financial statements (if applicable) and realistic future projections, including revenue, expenses, profits, and cash flow. Clearly state your funding needs and how you'll use any capital raised.

This is often the most scrutinized section of a business plan. Be conservative in your sales/revenue estimates and generous in your cost projections. Highlight your key assumptions and how they impact your projections. Make sure your funding ask is clearly tied to specific milestones and uses of capital.

Appendices
1. Include any supporting information, such as detailed financial spreadsheets, product diagrams, legal documents, or team resumes. Organize these references so readers can easily find what they need.

As you develop your plan, leverage tools and templates to save time and ensure you cover all the bases. The Xero business plan template provides a clear, professional format you can easily customize for your needs. The IdeaFloat tool also offers interactive assistance and many automations to build out a business plan.

Some tools you can use to help build out each section

Below are some tools and frameworks you can consider doing more research into in case you get stuck on any section of your plan:

Business Plan Section	Tool/Framework to Use	Explanation
Executive Summary	Elevator Pitch	Concisely convey your business idea, unique value proposition, and key objectives in a compelling way, as if pitching to an investor in a short elevator ride.
Business Overview	Business Model Canvas	Visualize and analyze your business model, including key partners, activities, resources, value propositions, customer relationships, channels, customer segments, cost structure, and revenue streams.
Products and Services	Value Proposition Canvas	Clearly articulate your product or service's value proposition by aligning customer jobs, pains, and gains with your offering's pain relievers and gain creators.
Market Analysis	TAM, SAM, SOM Analysis	Estimate your Total Available Market, Serviceable Available Market, and Serviceable Obtainable Market to understand your market potential and focus your strategy.
Risk Assessment	SWOT Analysis	Identify your business's Strengths, Weaknesses, Opportunities, and Threats to anticipate and mitigate potential risks and capitalize on opportunities.
Marketing and Sales Strategy	Marketing Mix (4Ps)	Define your marketing strategy using the 4Ps: Product, Price, Place, and Promotion, ensuring a comprehensive approach to reaching and engaging your target customers.
Operating Model	RACI Matrix	Clearly define roles and responsibilities within your organization using the RACI (Responsible, Accountable, Consulted, Informed) matrix to ensure efficient operations and decision-making.
Finance & Budget	Financial Projections Model	Develop a comprehensive financial model that includes projected income statements, balance sheets, and cash flow statements to understand your business's financial viability and funding needs.
Appendices	MECE (Mutually Exclusive, Collectively Exhaustive) Principle	Organise your supporting information and documentation in a clear, logical manner, ensuring that each appendix is distinct and that all relevant information is included comprehensively.

Final Tips for Business Plan Success

Tailor your language and level of detail to your specific audience. For example, a plan for investors will likely be more numbers-heavy than one for prospective partners.
Keep it concise. Aim for 15-25 pages for your main plan, with additional details reserved for the appendix. Nothing makes readers tune out faster than long-winded, repetitive content.
Use visuals. Charts, graphs, product images and team photos can break up long blocks of text and drive home key points. Just make sure they're relevant and easy to understand at a glance.
Get outside input. Ask trusted mentors, industry experts, or even potential customers to review your plan and provide feedback. Fresh eyes can spot gaps or areas that need clarification.
Expect to iterate. Your business plan is a living document that should evolve as you learn more about your market and customers. Don't be afraid to update and refine it over time.

The process of creating your business plan is just as valuable as the final document itself. By thinking critically about your business at this early stage, you'll be better equipped to seize opportunities and navigate challenges down the road. And with the right tools and templates at your disposal, you can create a winning plan that positions your venture for success.

Assignment

Decide if building a business plan is right for you. If you are stuck, write out a pros and cons list.

Using the Xero template (manual way) or IdeaFloat (automated), develop a draft business plan outline for your venture idea.

For each key section (executive summary, company description, market analysis, etc.), bullet out the core points you want to communicate and the supporting information you'll need to gather.

Share your outline with a potential investor, partner, or team member, and note how you would adapt your messaging for their perspective.

Refine your outline based on their feedback.

Knowledge Check

What are the key audiences to consider when crafting a business plan?

How can tools like Xero templates and IdeaFloat generators help in the business planning process?

Why is it valuable to tailor your business plan messaging to different stakeholders?