So, you are an entrepreneur, and your business is already up and running. Or perhaps you want to be an entrepreneur and wonder how to build the company of your dreams? Either way, the business plan exercise is somehow getting in your way, and you are wondering how to deal with it – right?
As business coaches and entrepreneurs ourselves, we see the “what is a business plan for” question come up again, and again (and again). That’s typically the case with a very small business, but it also matters for larger ones. Either way, the issue is always the same so we have written this article to clarify a few points.
First, what is the definition of a business plan? What is the purpose of a business plan? Or its main purposes if there are more than one? Then, of course, what is the purpose of writing a business plan yourself (two very different topics!)? What makes an excellent business plan? And, to wrap things up, what’s a business plan going to do for your business?
Before we dig into the topic of what’s a business plan and how to leverage it, though, please keep in mind two crucial points!
One, this article is part of a very comprehensive series of blog posts on business plan writing available on Impactified. We are working hard to make your life easier with these, so give them a look!
Two – we have also designed our best-selling Business Plan Builder module for those who want to stop losing their time and get the thing done, easy as 1, 2, 3. The module includes a complete business plan template, two designer-made decks, a work tool to get you started and tell you what to write (and how), the automated financial tables you’ve been dreaming of, and over two hours of video made to take you by the hand! So if writing a business plan is a topic for you, you have no excuse!
Back to our topic, though – what is a business plan for? Let’s start with a quick business plan definition.
Business plan definition: First things first, right?
First, entrepreneurs often ask us for a simple business plan definition. The question is fair because people usually struggle with a grey area! When you pitch a business, people ask you for a deck. And that necessitates a business plan.
Still, where to start? How to get it written? And, perhaps more importantly, what do they expect from their document?
In a nutshell, we at Impactified often say that a business plan is a convincing story you need to tell people about your business, show that it is going somewhere inspiring, AND that you are in control. Period.
One key thing you need to remember from this article: a business plan is not “just a pdf” document. Excuse my French, but nobody gives a damn about your business plan if all it is is ‘just a pdf’.
Hm, I know the feeling.
Still, as we explained in another article, having a business plan is all about having a strategic plan for your business.
That plan has to be clear, logical, convincing, and inspiring. It needs to be sharp. Easy to explain, easy to understand, and easy to remember. And most importantly, you must be able to pitch that plan in a normal conversation, without your deck or any table.
Long story short? Working on a business plan helps, but only if it is all about having a business AND a plan for that business over the next three to five years. That is – a clear potential, a clear direction, a clear differentiation, a clear strategy, and a clear pitch packed with pragmatic storytelling. That’s what a business plan is about.
Quick business plan definition:
- A business plan is a convincing story you tell about your business, to show that it is going somewhere inspiring and that you are in control.
- A business plan is not just a pdf.
- You have a business plan if you have a business and a plan for that business.
- That plan must show potential, a direction, and differentiation.
- It must show you have a strategy.
- There is no business plan without storytelling.
What is the purpose of a business plan?
Now that we’ve set the definition, another question we get asked all the time is, “what is the purpose of a business plan?”.
That question is often justified because people define a business plan as a mere pdf document, which naturally brings the question of why such a document is needed.
However, since we just defined a business plan as a convincing story about your business that shows a direction and can inspire people – the purpose is included in the definition by default.
Having said that, the purpose of a business plan can vary depending on the interlocutor you have in mind, which is what we’re going to focus on here.
The purpose of a business plan for investors
Option one, your interlocutor is an investor or a group of potential investors. When that’s the case, the role of a business plan is straightforward. One, you want to use storytelling to show your investor that the business is generating traction with your customers and target market. Two, you want to show that there is a viable (as in, profitable and sustainable) business model, marketing plan, and go-to-market strategy capable of generating sales with a profit. All this in about three to five years from now.
Keep in mind that an investor, as the name suggests, is interested in investing in your business. But, by definition, their purpose is to generate a profit at a later stage. Hence, their job is not to fund the genius business idea, hoping to be repaid soon. And it’s not to help you reach your goals out of philanthropy either. Instead, it is to bet on a management team, take equity in your company, and take a significant financial risk to receive some gains later on. And that makes a huge difference.
For that reason, your job as a business owner (and business plan maker) is to show that the existing or new business has the potential to generate that profit. And that the odds of getting there are beyond optimistic, provided that the necessary capital is available. All this with a good dose of inspiring storytelling.
Of course, the purpose of your business plan is also to show the investor(s) that they are investing in a team capable of delivering on the promise made in the investment proposal. Thus your plan has to show that as well.
Last but not least, the financial tables must be adapted to your audience: if you want to make a business proposal to an investor, typically, the business plan’s purpose is to show cash flow gaps over time and, of course, profitability expectations three to five years from now.
Practical example: what is your marketing strategy? How will you fund it? Will you need any capital to do that? When do you expect returns? So forth, and so on.
One last thing. Having a business plan is a matter of having a business and showing that there is a plan for that business, remember? If you are a young startup business or if you are not in business yet, the challenge is even more significant. Why? Because you don’t have any tangible proof of concept or product-market fit to base your fundraising on. Yet, you still have to show traction, team adequacy, and profitability expectations. You will also have to build deep financial projections even though they come out of the blue. Overall, the task is a lot more challenging.
The purpose of a business plan for loans (and bankers)
Option two, your business plan aims to get a loan from the bank rather than equity from an investor. In that case, the banker does not take equity in your business and does not expect to make a profit five years from now if all goes well. However, they expect that you will repay the loan, starting immediately.
A banker’s risk, said differently, is tied to their business analysis. And their job is to bet on your ability to repay now and every month after that. Hence, with this type of interlocutor, the purpose of your business plan is to show the existence of a sound repayment strategy backed by solid business administration skills. With a market analysis showing strong growth potential. And with a proper financial management approach that creates trust. In that case, therefore, an effective business plan provides peace of mind and builds confidence.
Again, look at our insights on how to write a business plan for a loan if you are interested in the topic.
The purpose of a business plan for partnership development
Third option? Business plans can also be a tool when it comes to building partnerships. And there, having a business with a plan can make a significant difference.
For instance, having a business with a plan (again, far beyond a mere pdf) gives you a significant opportunity in terms of storytelling. And that storytelling can be used to onboard people who believe in the project and feel aligned with it.
This could be a way to hire your business partners, but this could also be a way to build partnerships with other organizations and stakeholders of all sorts. So, well, make sure to adjust your storytelling and pitch to be relevant to your audience.
3 main purposes of a business plan:
- Show investors you can make them money.
- Show bankers you can repay the loan.
- Show partners there is room for alignment and collaboration.
What is the purpose of writing a business plan yourself?
Having clarified the purpose of a business plan, people also wonder whether they should write their business plan themselves or have it written by someone else. Which gets us to the next point: what is the purpose of writing a business plan yourself.
There are two elements of consideration here. First, writing a business plan yourself can make you save on costs (big time). Second, it will give you one of the best opportunities ever (with business coaching – shameless plug) to take some perspective on your business. And to boost your strategic thinking, it goes without saying.
Write a business plan yourself to save costs
The first interest in writing your business plan yourself is purely financial. Having someone (a business plan writer) do the work for you can be costly and reach between five and ten thousand dollars for a small or medium business. That’s a lot, but that’s normal if you think about it.
The exercise involves a lot of research and copywriting, and it implies some significant financial planning work. Hence, someone external to the business will have no choice but to spend some time on the thing. Therefore, writing your business plan yourself can help you make significant savings.
Write a business plan yourself to boost your strategic thinking
Another element of consideration: writing your business plan yourself (or with a financial expert within your organization) will give you one of the best business planning opportunities ever.
Again, the most important aspect of coming up with a business plan is not the final pdf but your ability to pitch a business story with a clear and inspiring plan, remember?
Well, what it means is simple: writing a business plan by yourself will give you an excellent reason to dig deep into business strategy.
The exercise will make you think in terms of big picture. It will force you to clarify what makes your business different and how you create value for your clients. And it will compel you to be very clear as to who the client is, let alone as to what the market looks like.
And, and, and, it will give you an excuse to “articulate yourself as a company”, to borrow a term formulated recently by one of our clients after a strategic thinking workshop.
No, seriously!
Of course, writing a reliable business plan typically takes a bit of time, but it’s worth it.
You gain a usually unforeseen and untapped perspective on your business when you go through the exercise. You stand on the table, so you get to look at the big picture. You get to clarify what makes you unique. You get to build reliable financial plans. And you get a chance to create the most inspiring message ever for your audience.
I am repeating myself on purpose here. Still, if you think about it, many people play business strategy games on their phones every day to pass the time. They have some fun – so why would writing a business plan be boring?
3 reasons why writing your business plan yourself is worth it:
- Cost-saving is huge.
- It forces you to work on the big picture.
- It gives you a unique way to strategize your growth.
What’s a business plan’s role in terms of money?
From a money perspective, a business plan has three critical functions. Spoiler alert: they are often difficult to grasp by non-experts. Or by most entrepreneurs, that is.
Build financial projections
First, defining a plan for your business typically forces you to put your hands into numbers and spreadsheets.
People usually don’t like that much, so we have you covered in two ways. For starters, our video module explains all the financial logic you need to understand if you want to build spreadsheets easily and convincingly.
Second, the exercise can be laborious and challenging, so the tool you get with the videos also comes with a built-in automated spreadsheet (oh yeah) designed to do the job – that’s smart – but more importantly to teach you how to build and read financial tables. That way, you will be able to explain where all the numbers come from when someone asks. That’s even smarter!
That being said, automation doesn’t mean you don’t have any work to do! On the contrary! It takes the hassle away by automatically making calculations. That includes your P&L, cash flow statement, and balance sheet.
More generally, however, automation puts you in a position to (finally!) understand what you’re talking about when it comes to numbers. And it gives you a chance to understand your business from the perspective of financial statements.
Get access to funding (asap)
Second, defining a plan for your business and turning it into a business plan should give you access to funding – whether that’s through investors, bankers, or subsidies of all sorts. So the impact can be very significant.
Get money in the pocket (later)
Last but not least, the exercise will give you a unique opportunity to give your business a valuation – in real dollars. That will help you raise money efficiently – how much could you get, how much would you have to give away. But, more importantly, it will also help you figure out what your hard work is producing for you down the road. And that, obviously, is money in your pocket at a later stage.
Of course, though, no financial planning means no funding, and no financial valuation, so no money in your pocket later either. See our point?
What makes an excellent business plan?
Before wrapping up this article on what a business plan is for, one last thing. We often get asked what makes an excellent business plan, and the question is very relevant, so let’s give you some food for thought.
First, you must understand that business plan writing is mostly a code question.
Exactly! There is a code.
And every professional business plan reader will expect you to crack it, AND follow it.
So, if you want yours to be better than average, make sure to dig into that code and use it. We tell you everything in our articles on how to write a business plan and in our article on what a business plan outline looks like.
Second, investors and bankers tend to read dozens (hundreds!) of business plans every year; hence all tend to look the same. Said differently? Make it sexy to read, and make it a page-turner so your audience wants to read it over the rest of the pile. More on this in our article on how to make your business plan sexy.
Third, and to follow up on the previous point, make sure that your business plan is short and straight to the point. Again, follow the code and give the reader what they expect. And, of course, play with the design to make sure that the document appeals to the eye. We tell you more in our article “How long should a business plan be?“.
Size matters, so we also wrote a short article on one-page business plans and executive summary writing. Hint: a one page business plan only works in very limited circumstances. If that’s something you’re thinking about, then make sure to give it a read!
Four tips to make an excellent business plan
- Nobody gives a damn about “just a pdf”; have a business with a plan instead.
- Turn reliable data into inspiring storytelling.
- Follow the business plan code.
- Make your business plan sexy.
Meet The Business Plan Builder: 2 hours of tutorial videos and the tools you need to get started
If you are looking for a push to get started with your business plan, we – at Impactified – have built The Business Plan Builder. And it’s THE tool you have been dreaming of finding.
The Builder comes very handily, in the shape of a Module built around over 2 hours of explanatory videos and a package you’ll be able to use to
- Figure out what you need to figure out – powerful, uh?
- Understand the business plan code
- Write your business plan – with just the right amount of words and pages
- Build your financial estimates – with an automated table
- Create a visually appealing (designer-made!) document, and deck people will want to read
If you want to stop wasting your time, this is THE most simple business plan template, and you can’t afford to miss it!
Wrap up: what is a business plan for?
Wrap-up time! You got my point. The questions “what is a business plan for” and “what’s a business plan going to do for my business” are widespread. Still, the answers to both can be misleading.
The point of writing a business plan is not to produce a pdf document nobody wants to read. It is to make sure that you have a financially viable business and a plan for your business over the next three to five years.
Perhaps more importantly, the purpose of a business plan is to give you a comprehensive picture of your business that most entrepreneurs lack when they look for money. And it is to provide you with a way to turn a boring data set into an inspiring story people will want to read, listen and remember.
The next step, of course, is to get your story clear and make sure you use it well! More on that in our article “What must an entrepreneur do after creating a business plan?“.
