What is a business plan?
A business plan is a document that outlines the goals and strategies of a business. It covers areas such as marketing, finance, and operations, and it helps to ensure that a business is on track to achieve its objectives.
A business plan can be used by businesses of all sizes, from startups to multinational corporations. It’s an important tool for any business, and it’s essential for those seeking funding from banks (debt financing) or investors (equity financing).
What does a business plan look like?
A business plan is a roadmap for your business that outlines your goals, strategies, and how you intend to achieve them. It should include:
- An executive summary
- Your business model
- Your value proposition
- Your target market
- Your competitive landscape
- Your sales and marketing strategy
- Your operations and management plan
- Financial projections
- Supporting documents (e.g., bank statements, financial statements, etc.)
- An appendices (e.g., surveys, data analysis, etc.)
A business plan is not just a document you create when you’re starting a business – it’s a living, breathing tool that you should use to help you run and grow your business. As your business changes and grows, so too should your business plan.
The executive summary is the most important part of your business plan – it’s a brief overview of your entire plan, and it’s what lenders will read first.
The executive summary should include:
- your business name and contact information
- a brief description of your business
- your business model
- your value proposition
- your target market
- your competitive landscape
- your sales and marketing strategy
- your operations and management plan
- your financial projections
The rest of your business plan should flesh out these points in more detail.
Your business model is how you make money – it’s your revenue streams and cost structure. There are many different types of business models, so make sure to choose one that makes sense for your business.
Your value proposition is what makes you unique and different from your competitors. It’s what sets you apart and should be the focus of your sales and marketing efforts. See this guide by Hubspot on how to write a value proposition that communicates your core competitive advantage.
Your target market is who you’re selling to – it could be a specific demographic, geographic region, or type of customer. Knowing your target market is essential to crafting a sales and marketing strategy that will reach them.
Your competitive landscape is the other businesses that you’re competing against for market share. This includes direct competitors (those selling similar products or services) and indirect competitors (those selling complementary products or services).
Your sales and marketing strategy is how you plan on reaching and selling to your target market. It should include your sales goals, pricing strategy, distribution strategy, and marketing budget.
Your operations and management plan outlines how your business will be run on a day-to-day basis. It should include your organizational structure, your policies and procedures, and your management team. Some lenders may have a minimum requirement that the applicant has 3 years in the same or similar business. Many banks also want to know the financial position of all directors within a company.
Your financial projections show how much money your business will make over the next few years. They should include your projected sales, expenses, and profits.
Your supporting documents are additional materials that can help support your business plan. This could include 12 months of bank statements, 2 years of financial statements, resumes, letters of intent, market research, or data analysis.
Your appendices are additional materials that don’t fit into the other sections of your business plan. This could include surveys, data analysis, or market research.
To create an effective business plan, you’ll need to think about all of these elements and put them together in a cohesive document so that the bank can easily understand what their exposure to risk is and make a decision on your loan application.
How important is a business plan for a successful business loan application?
When applying for a business loan, one of the first things that lenders will ask for is a business plan. This document provides an overview of your business, including its goals and objectives, marketing and financial strategies, and more.
Having a well-structured business plan is essential for two reasons:
- It shows that you have a clear understanding of your business and are serious about making it succeed.
- It helps lenders assess the risk associated with lending to your business. By providing detailed information about your business, its finances, and its strategies, you can prove to lenders that you are a good investment and that they can trust you to repay the loan.
When creating your business plan, start small and continue to add and refine the document. See this one page business plan template to kick things off. Alternatively, if you like to be creative, Canva has a range of business plan templates as well.
What does a bank look for in a business plan?
When a business applies for a loan, the lender will evaluate the company’s business plan to help determine if the loan should be approved.
The business plan should provide an overview of the business, including its products or services, target market, growth potential, and financial projections. The lender will also look at the management team’s experience and ability to repay the loan.
Therefore, your business plan should be accurate and provide adequate information to demonstrate that your company is viable and has a good chance of success.