Did you know that business plans come in not one, but two categories? More often than not, when we think of a business plan we think of a traditional format. This means a hefty document, about 30 to 40 pages in length, written three to five years out that outlines every detail that can contribute to the success of the business.
A lean startup plan, on the other hand, requires less time and detail to put together, but must be able to communicate the future of the business in an articulate manner.
Which type of business plan should you draft for your startup? If you’re not sure whether one format is preferable over the other, read on.
Traditional business plan
A traditional plan skewers towards being more lengthy and detailed than those in lean startup format; it’s essentially a blueprint that gives you a glimpse into the future of your startup.
Inside every traditional business plan, you’ll need to cover the following areas:
Executive summary- Here you should be able to explain, in no more than two pages, who you and your business are, what your company does, what industry it’s in, where you’re located (or will be located), when you will begin conducting business if you haven’t started already, how the business will make money, and why consumers will want the goods and/or services offered by the business.
Business description, concept, and strategy- This section contains more information about your products and/or services, including what they do, what makes them unique and distinctive, where the idea for your business came from, where you’re at in the development stages, and overall goals and strategies for the business, along with its projected timeline.
Industry analysis- Who is your competition? Here, you will analyze competitors of your brand and touch on their offerings, company background, and why consumers will choose your services over theirs.
Market analysis- Now that you understand your competition, who is your target audience? This section defines your target market, their needs, and how your business will be able to attract, capture, and retain this audience.
Organization and management- If you have management or staff employed, this section allows you to share their biographies, backgrounds, and core responsibilities.
Financial projections- This gives readers a glimpse into the cash flow of your business. It’s a table-heavy area that includes projected profit and loss, a 12-month income statement, expenses budget, sales forecast, and a break-even analysis with the revenue needed for your initial investment. And speaking of investment…
Financing request- If you are seeking funding from investors, this is the section to outline the amount of money requested, how it will be spent, and the manner in which it is spent.
Appendix- Your appendix should include industry studies, letters of incorporation, trademark registrations, and partnership agreements, just to name a few documents.
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Lean startup plan
If you need to write a business plan quickly or if your business is fairly simple and straightforward to explain, your format of choice is likely a lean startup plan. This is less of an intensive blueprint and more of a quick summary-sometimes no longer than one page!
No matter how short and sweet your structure is, a lean startup plan should contain the following elements:
Value proposition- The value that your small business brings to its respective market, summed up in a clear statement.
Key partnerships, resources, and activities- More information about the partners working alongside your business, strategies for gaining a competitive advantage, and resources, such as intellectual property or capital, used to create value for your target audience.
Customer segments, channels, and relationships. Who is your audience? Where can you reach them? How will you build a lasting relationship together? Define your target market, methods for being able to talk to them, and strategies for establishing the customer experience.
Revenue streams- Explain and list out the revenue streams your business has for making money. Make sure to include a quick section that defines your cost structure strategy too.
Which format does your business need?
The good news about writing a business plan? There’s room for editing. If you’re not satisfied with the format or need to make changes, you can always revise the document. There’s also the option to switch formats-if you start off with a lean plan, but want to shift to a more traditional plan, and vice versa.
Regardless of the format, the important thing is to be concise and critical about your business from the beginning. Your business plan works to align your team towards a common vision for the company and evaluate its feasibility as objectively and critically as possible. Having this kind of document contributes to the success of the business and positions you as a confident CEO.
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