Starting your own business is an important step toward financial freedom. It also gives you a sense of accomplishment and boosts your self-confidence. It's not an easy path, though. To succeed, you need to have a solid business plan and the discipline to stick to it.

Note that a business plan is not the same thing as a business proposal. The role of a business proposal is to sell your skills and services to potential clients.

Make Your Business Thrive

Did you know that nine out of 10 startups fail? About half of them close their doors in the first four years. According to Fortune, 42 percent of new companies go out of business because there's no market need for their products and services. Approximately 29 percent run out of money, while 17 percent lack a business model.

Other common reasons for startup failure include poor marketing, legal challenges, bad customer service, pricing issues and lack of financing. Some entrepreneurs simply don't have the right team. Others lose their focus or lack the experience needed to succeed.

While there's no surefire way to achieve business success, you can mitigate the risks. Proper planning is essential. Before getting started, make sure there's a market for your business idea. Research the latest industry trends, keep an eye on your competitors and set goals. With these things in mind, create a business plan and bring your vision to life.

Why Create a Business Plan?

According to a six-year study conducted on more than 1,000 entrepreneurs, having a formal business plan can increase the chances of achieving venture viability by 16 percent. Furthermore, entrepreneurs with innovative ideas and those focused on business growth are more likely to plan things out. This approach can make it easier to accomplish your goals and turn your ideas into reality.

The truth is that anyone can have ideas. Plus, starting a business is easier than ever before. However, none of these steps guarantees a successful outcome. You need more than just a great product to attract and engage customers.

A solid business plan will guide you in the right direction. Think of it as a road map for success. It can help you anticipate challenges and risks, eliminate the guesswork and define your organizational structure. It also clarifies your objectives and allows for more effective budgeting.

Types of Business Plans

There is more than one way to write a business plan. Its structure will depend largely on what you plan to accomplish. A startup plan, for example, will look different than a strategic plan or an annual business plan. Consider the following options:

  • Lean business plans
  • Startup plans
  • Growth plans
  • Feasibility plans
  • Strategic plans
  • Internal plans
  • Annual plans

Assess your objectives and determine why you need a business plan in the first place. Do you want to start a business, attract investors or expand your operations? Draft a business plan that meets your needs or go online and search for free business templates to help you make plans.

Let's say you have a brilliant idea for a new product or service. Create a feasibility plan to determine if your new product or business idea is viable. Research your target market and industry, estimate the market potential and describe how your product benefits customers. Your plan should also include product features and characteristics, competitive analysis, potential risks, financial forecasts and your unique selling proposition, among other factors.

What Is Lean Business Planning?

This type of business plan is a good start for most entrepreneurs. It's about one page long and covers key aspects such as your company's primary activities, resources, partners, channels, cost structure and revenue streams. When done right, it can make it easier to set business goals and track your progress. The downside is that it doesn't address product/market fit, which is a crucial aspect for startups.

Traditional business plans go into detail and can be several pages long. For this reason, they are difficult to write and update. A lean plan, on the other hand, is designed for internal use and consists of lists and tables. It may include your business strategy, product pricing, marketing tactics, milestones, financial aspects and performance metrics.

Create a Startup Plan

If you plan to launch a business, draft a startup plan before going any further. As its name suggests, this document appeals to new companies and describes the steps needed to get started. It usually includes a brief summary of the company and its products or services, cash flow projections, goals and milestones, startup costs, infrastructure and more.

Consider using Enloop and other software programs to create and manage your business plan. Choose a blank template, fill out your company's details and let the software do the rest. Next, add your own insights and expand each section according to your needs. Some programs will automatically generate financial forecasts based on your data and compare them against your industry's averages.

A startup plan should also describe your company's legal structure, location and management. Find out what licenses and permits are required in your state and write down everything. Describe your ideal customers and their needs. Come up with a list of marketing strategies that you can implement to reach your audience and generate interest in your business.

Plan for Business Growth

If you're looking to expand your business or develop new products, come up with a growth plan. Focus on the specific area or operations that you plan to expand, such as going digital or opening offices in other countries. Evaluate your business goals, perform a SWOT analysis (strengths, weaknesses, opportunities and threats) and define your target audience. Your new product line, for example, may appeal to a different market segment than your current offering.

Next, outline your growth strategies and the resources needed to implement them. Determine how you're going to measure the results. An expansion plan should describe the exact steps to achieve business growth along with specific milestones and metrics.

Emphasize your value proposition. What makes your new project or product idea relevant and competitive? Why should customers buy from you when there are so many other options available? Walmart, for example, strives to offer the lowest prices, while Whole Foods Market emphasizes product quality. Define your strengths and establish a value proposition that aligns with your customers' needs.

Focus on Strategy

Strategic planning is the key to business growth and optimum performance. As an entrepreneur, you need to know exactly how you're going to achieve your goals over the next few years. Consider the ever-changing market conditions as well as your company’s strengths and weaknesses. Write a strategic business plan that focuses on your long-term objectives.

This internal document defines a company's vision and purpose. Compared to a traditional business plan, it puts greater emphasis on how you'll reach your goals. For example, if you plan to double your market share over the next five years, you must develop a strategy that aligns with the company's overall mission and utilizes its strengths. This requires an in-depth SWOT analysis and a good understanding of the market to which you're trying to sell.

A traditional business plan focuses on your company as a whole. Strategic planning, on the other hand, provides a detailed road map. This approach is more suitable for established organizations than startups. In general, it covers a period of three to five years.

Elements of a Business Plan

By now, you should have an idea of what to include in a business plan. In general, this document has several major sections that can be later customized according to your company's needs and goals. At the very least, focus on the following areas:

  • Executive summary (a snapshot of your business profile, accomplishments and goals)
  • Company description (a detailed overview of your business and its strengths)
  • Market analysis (a description of your target market and industry trends)
  • Business management and organization (an overview of the company's founders and key employees)
  • Product description and features
  • Key operations
  • Marketing and sales strategies
  • Revenue projections (a rough estimate of the company's potential revenue)
  • Cash flow statement, including funding requirements

The executive summary, for instance, should summarize the most important sections of your business plan. Keep it short and relevant and try not to exceed one page. Include a brief overview of your company and its vision, highlight its key features and write a few words about its goals and future plans.

The next sections should address these aspects in detail. Describe how your products are different and why customers need them. State how you fit in the market, what your target audience looks like and what your goals are. For example, if you're trying to attract investors, make sure your business plan goes into detail about how much money you need, why you need it and when you'll pay it back.

Avoid These Common Mistakes

Crafting a business plan that hits all the right notes isn't easy. First of all, make sure your plan covers these key aspects. If it's too long, it will put the audience to sleep. A business plan that's too short and vague will fail to reach its purpose.

While it's important to highlight your product's features, make sure you don’t get stuck in technical details. If you really want to cover these aspects, do it in the appendix.

Back it up with statements that include hard facts and studies. Remember, you're writing a business plan, not a novel. Refrain from making unfounded assumptions and grand statements. Be realistic and come up with several different scenarios of what could happen. Consider the risks involved.

Business Plan or Business Proposal?

Before getting started, make sure you understand the difference between a business plan and a business proposal. Both documents highlight your company's strengths, but the latter appeals to prospective clients. Its role is to sell your skills and help you win new business. It typically includes an executive summary followed by a statement of the problem and how you plan to approach it. This document also specifies legal matters, payment schedules, deadlines and other relevant aspects.

Don't use a blank business proposal template to write a business plan or vice versa. These documents serve distinct purposes. With a business proposal, you're trying to sell your services to a potential client. A business plan, on the other hand, serves as a tool for defining your company's vision and goals.

Whether you plan to grow your business, start a new venture or make investments, proper planning is crucial. A well-defined business plan can make it easier to secure capital, build credibility and achieve your objectives. Furthermore, it shows what you're doing well and what you need to improve. In the long run, it can help you avoid costly mistakes and can reveal new opportunities for growth.