Whether you’re just beginning to think about starting a business, or you’ve already jumped in, you’re probably familiar with the idea of a business plan. There’s some debate around modern startups and the need for business plans — but whether you take it to an investor or simply use it to guide your own strategy, we recommend laying out your thoughts and plans for the business and its growth.
Today, we’ll chat about what information to include in your business plan — what questions it should answer and how to tailor your plan for different audiences.
We’ll be discussing this topic in our fireside chat, How to Create the Modern Business Plan for Your Startup, on Wednesday, June 15th. Don’t forget to RSVP!
What The Experts Had to Say
You know the standard format for what goes into a business plan, but concepts like 'marketing strategy' can be pretty vague. We wondered if there are specific questions that your plan should set out to answer, so we asked for input from five small business experts.
Here's what they told us:
What questions should every business plan answer?
Jill Bigelow, PELV-ICE LLC:
Every business plan should include the following elements: Problem being solved, addressable market size, team, marketing strategy, CAC (customer acquisition cost) if known, competition, financial slide (projections), Protectability/why your solution is better, the ask (what you are offering in exchange for investment).
Eric Michael Sales, Eric Michael Sales Public Relations:
The who, the what, the when, the where, and the why. It should be catered to three audiences as well: The public. The investor. And, the team. In the end, the business plan is a tool that’s supposed to help everyday operations.
Kurt Ostergaard, Stirling Insurance Services:
Who are the customers? What is their pain? What channels will you use to reach them? Economics of production, distribution, customer acquisition. Who are competitors? What is your relation to suppliers?
Kyle Golding, The Golding Group:
- Who, What, When, Why, Where, How and For How Much.
- Who are we as a company/brand and who is our primary and secondary audience?
- What are we offering them, at what value?
- When are they buying/paying for it and how often?
- Why is our product/service needed and why do they choose us over others?
- Where do they purchase and at what cost to us?
- _How does our audience decide to purchase and how do we influence them? How do we speak to and listen to our target audience? _
- How much can we charge the consumer with all real cost and margins included to be competitive and profitable? The reason to run business is to be profitable.
Daniel Feiman, Build It Backwards:
Who are we; why do we exist; what difference do we want to make; where do we want to go, how are we going to get there; how will we communicate & engage employees in the journey; using what resources; how goals will be measured; how will we make adjustments; how will we reward people; how will we keep this going.
Summing It Up
That’s a lot to digest — let’s pull it all together. According to the experts, your business plan should address the following basic questions:
- Why are you in business? Talk about your mission. What drives your and the business beyond revenue and profits.
- What does the market look like? Discuss who your potential customers are what pain points they have that you’ll solve. Analyze your competition — their business, their performance, and their weaknesses.
- What will you do? Here, you’ll detail how your business is different from what’s out there. Explain what you’ll offer, how you’ll solve customer problems, and how the market will respond to your business.
- How will you grow? This is where you’ll specify financials, projections, and where you expect the company to be in the future. You should also include plans for how the business will scale.
- What do you need? Finish with your ask. Talk about what you need (investment, partnership, etc), how it will be used, and what you’re offering in return (equity, debt, etc).
Why Are These Answers Important?
Answering these five questions allows you to clarify what your business is and why you’re uniquely qualified to succeed in the current market — which helps potential investors, partners, and employees understand the value of working with you.
Whether you’re asking the audience for time, money, effort, or something else, they’re more likely to buy into your venture if there’s a clear-cut path from plan to operations to profit. Answering the questions above clears that path and helps to answer the all important question: What’s in it for me?
Customizing for Different Audiences
Tackling these questions gives you a great framework for your business plan, but the details should be tweaked depending on who you’re presenting to. There’s no one-size-fits-all plan, so it should be tailored to your individual audience.
Investors like venture capitalists and angel investors probably see a hundred business plans every day. So when crafting yours, keep two things in mind:
- Be concise — Your plan may only get a few minutes’ time, so ensure your message and passion can shine through within that small window.
- Be unique — In order to score a few minutes or more of an investor’s time, your plan needs to stand out among the other ninety-nine sitting on their desk.
The goal of your business plan when it comes to investors is to communicate your vision and passion in a way that gets the investor excited about your business, too.
Lenders like banks are usually interested in more practical information. They want to know how risky investing in your business is and how likely they are to get their money back, in a timely manner.
When pitching to a bank, don’t skimp on current financials (if you’ve already launched) and projections. Banks will see straight through inflated financials, so keep your projections reasonable, and be prepared to answer additional questions about the fiscal side of things.
When pitching to partners, your business plan serves two purposes. It explains your vision to potential partners, and it helps you to weed out people who don’t share that vision. The idea is to find someone who is already as excited about your idea as you are.
Your business plan should convey your mission and why you’re going into business in a way that’s honest and candid. Someone who will make a good partner will have bought in before even glancing at the financials or operating plan.
Potential employees are a unique audience in that they’re probably equally interested in the tangible and intangible aspects of your business plan. Increasingly, employees want to work for companies whose mission they believe in.
But they also want to be financially secure. If your business doesn’t have the management or strategic advantage to be successful, potential employees may be wary of investing years of their career (especially if they’re looking at equity compensation).
Additional Questions to Be Able to Answer
While your business plan should answer the basic questions in a complete way, you couldn’t possibly detail every single tiny aspect of your business or the market. That means there are some additional questions you should be able to field if an investor or other reader asks. Here are a few examples:
- Financial anomalies — If your business has been growing consistently but profit randomly dropped off one month, you should be able to explain why that happened, why it won’t happen again, or how you’ll address the situation if it does.
- Your expertise — A good plan is accompanied by information regarding why you, the founder, have the unique skills or experience to take the business to fruition.
- Elevator pitch — When an investor closes the plan and says, “You have 30 seconds. Sell me,” you should have a concise and compelling elevator pitch prepared to hammer home the key aspects of your business.
Bplans has a great article on some other unexpected questions you should be prepared to tackle.
You know all the questions that your audience needs answered, so now’s the time to start answering them. Dive into your competitor research, get lost in penning your vision, and get your business plan presentation-ready.
If you want extra info on getting started with a business plan, check out Brainstorming Your Business Plan — part of Grasshopper Academy’s Developing a Business Plan course.