Business Plans 101

What is it? 

Suppose you have a great idea for a new type of high-end frozen yogurt shop and want to start putting pen to paper – where do you begin? For starters, you will need to create a formal business plan. A business plan is a document that consolidates all the planning and research that you’ve done to open a new business or expand an existing business.

Why does it exist? 

Business plans are a tool to help an entrepreneur or business communicate the aspects related to a new venture in a consolidated and efficient manner. The audience for a business plan can be varied, but it is often used as a preliminary review by lenders and investors in order to better understand the proposed business model and relevant details.

So how do I write a business plan? 

Although a business plan is not a strictly defined document (i.e. there is no one way to write it), including certain fundamental topics will help the reader understand your business. Using our frozen yogurt example from earlier, some of the questions that might come to mind include: 

  • Who are the people trying to start this new frozen yogurt shop? 
  • Why do they believe this business will succeed? 
  • Do they have experience running businesses like this in the past? 
  • What factors would support the business to be successful? 
  • What factors might prevent the business from being successful? 

As you can imagine, this line of questioning can go on indefinitely and one way to structure a plan is to think through the types of questions that may be asked so you can aggregate your content to address them in sections. We’ve outlined some of the more common sections of a business plan below.  

 Example Sections of a Business Plan: 

  1. Overview of Business Model – How does the frozen yogurt shop plan to make money? What differentiates it from other current dessert shops? Does it have revenue streams besides selling frozen yogurt? What are some of the unique sales and marketing tactics that will drive these revenue streams? 
  2. Market Research – Who are your key customers? What is this target market size and why is your frozen yogurt going to appeal to them? Are there direct competitors (i.e. other high-end yogurt shops) or indirect competitors (i.e. other dessert shops) nearby? Has the market for frozen desserts been growing recently or is has it actually experienced some rough patches?
  3. Team Structure – Who are the people on your team that will be supporting you on this journey? Do you have the right mixture of background, experience and skill sets to make this business successful? 
  4. Breakdown of Funding Usage – How much capital do you estimate is required in order to start this business? What are the current sources of capital that is being contributed in order to support this venture (e.g., cash from partners, other loans)?
  5. Implementation Timeline – What are the key milestones related to your venture (e.g., build-out of a brick & mortar location, opening date, revenue goals) and how long does it take before you plan to achieve them? 
  6. Key Risks & Assumptions – What are the things that may cause your venture to experience difficulties? Are there any major assumptions you’re making about market share / expected customer base during the implementation timeline that are worth calling out?  
  7. Financial Forecasts – Based on all the research you’ve done and the assumptions you’ve made, how is this reflected in terms of projected annual performance?  

Formatting the Business Plan 

A good business plan is often dictated by the substance of the report (i.e. how thorough is the research, how much background is provided, how valid are some of the growth assumptions), however there’s also a little bit of style at play. The inclusion of graphical references such as concept of design renderings, maps for location analyses, etc., can often help a reader gain a stronger understanding on certain selling points associated with your business. For example – if you’re an upper-scale restaurant planning to lease in a prime location, using google maps to highlight the complementary shops and restaurants alongside your store would be a good way to show others how you’re thinking about the location advantage. 

What Next? 

Writing a business plan can be a time-consuming process but it helps to remember that the steps that go into creating a good business plan (i.e. spending the time to do the appropriate research and making sure you have the right elements for success) are also what will enable you to succeed once you’ve started. As part of NextSeed’s dedication to supporting small and growing businesses, we are developing a series of articles to further dive in to creating strong sections of a business plan, including Market Research and Financial Forecasting. 

In addition to what we look to be producing, there are also an endless supply of resources currently online and available for both new and entrepreneurs to tap in to that we have outlined below: 

Other Online Resources: 

This blog article is provided for general informational purposes only, and not a promotion of NextSeed US LLC (“NextSeed”), any offering on NextSeed or any specific business.  Blog posts should not be construed as an endorsement or recommendation for any purpose. Blog posts does not take into account the specific objectives, financial situation or needs of any particular business. Past performance of one business is not a guarantee of future results of another business, and should not be relied upon or interpreted to be a prediction of performance of investments offered through NextSeed. In making any investment decision, investors should rely on their own examination of each issuer and the terms of each offering, including the merits and risks involved.