10 Factors that every good business plan needs

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What does a good business plan include?

What do investors want to see in a good business plan?

These are some of the questions that every entrepreneur should ask themselves before writing their business plans.

In this blog post, we will discuss 10 factors that every good business plan needs and give you some guidelines for creating your own!

Let’s dive right into point #1.

#1 It is a document that outlines the goals of a business and how it will achieve them

There is one extremely fitting saying that you can use to guide you through this whole process of creating a good business plan.

Every step you take each day brings you either closer to your goal or further away

Everything you display and don’t display will bring you either closer to your goal or further away.

This might be convincing investors to invest in your startup.

While creating it, and after finishing it, review each little information and think about if this information brings you closer to the close or further away from it.

If it seems like something rather non-beneficial, but it’s necessary information, think about how you can put it in a way that’s helpful to your message.

TIP

If you’re having a hard time phrasing things, contextualizing might help you out. To contextualize, you need to find similarities in other niches or companies that prove that your information is good.

For example: If you predict to break even in a relatively long time (=having a more extended period of no positive revenue), find examples of companies that succeeded the same way and be able to communicate why this is a good approach for your startup.

#2 It provides a crisp overview of the company’s management, products, services, marketing strategies, and financial projections

While all the most common areas in business plans are essential, these should get special attention.

If you can explain these areas with the most specific words in the easiest understandable way possible, you will already have won 80% of the game.

Most business plans fail because the information is too complicated and not crisp enough.

To quote Mr. Einstein himself:

If you can’t explain it simply, you don’t understand it well enough

Similar to #1, go through each displayed information and explain it as simply as possible.

If you’re having a tough time understanding a section of your business plan, somebody outside of your company will have that tough time times 10.

#3 The plan should be flexible to account for changes in the market or economic conditions

This one is crucial for modern startups that focus on a digital business approach.

The more technology evolves, the faster our society becomes.

And your modern startup needs to be able to adjust accordingly.

Proactively think about what might happen, what might change, and develop systems that can push through and thrive through these challenges.

As an entrepreneur, you will still learn and improve probably more than 50% on the way – so you can’t plan for all that.

But you can plan for some possible significant challenges that might come your way.

  • What if you lose your primary sales channel?
  • What are three ways you could deliver your product to your consumer if one fails?
  • What if a pandemic situation happens? How could you overcome such a significant impact?
  • What if you get an inquiry from a huge client that you barely can deal with from your resources? Will you focus on this one main client, get a lot of cash but be dependent, or will you focus on multiple small ones and grow with them.

Think thoroughly about questions like these, and be able to give confident answers.

 

#4 A good business plan serves multiple needs

Usually, when most of us think of a business plan, we instantly relate funding to it.

But receiving funding isn’t the only area a business plan is good for.

The primary purpose of a good business plan is to create clearance, structure, and insight for the business owner.

And here’s an interesting fact that we found out through working with multiple companies and creating award-winning business plans:

“The more clearance we can create with the business plan for the business owner, the more convincing, realistic, and easily understandable the plan get’s for others.”

That’s a crucial correlation.

So before you reach out to investors, make sure that you and all members related to the creation of your business plan fully understand each information and have ultimate clearance on your goals and how you will reach them.

Avoid costly mistakes and get together with experts.

#5 The meta-level of your business plan

Before you start creating your business plan, figure out accurately what you make it for and who you write it for.

Yes, you write it for yourself and investors, but let’s dig a bit deeper than that.

  • Which investors are you writing the business plan for?
  • Which other people (e.g., stakeholders) are you writing the business plan for?
  • If you would be in their position, what would you like to see? What would you like to read?
  • Which colors would create the most fitting perception of your company’s values?

On a meta-level like that, there is a lot to think about.

The great thing in answering all these questions first is this:

Once you get these questions right, you will have a clear thread guiding you through the whole business plan.

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If you need more information on getting the meta-level of your business plan right, we wrote a whole article about modern vs. conservative business plans.

 

#6 Explain why your company would be successful with these plans

This one should be the overall feeling of your whole business plan.

While in #1, we talked about the “what” in terms of what a good business plan should do, in this point, we go one level deeper and talk about the “why.”

If you don’t figure out the why’s you have, you’re just listing up information without an actual value.

And value in business is something exciting.

Value is an absolute subjective construct.

In marketing, we like to use the term “perceived value.”

This perceived value goes hand in hand with wants, needs, and why’s.

All that influential brands do is to find the most effective way to communicate their value and create a specific perception that, in best cases, triggers the wants and needs of their customers.

What does all this marketing talk have to do with your successful business plan?

To put it simply: If you can explain “why your company would be successful” in a way that communicates “why your service or product will appeal to your customers’ wants and needs,” you will most probably succeed.

TIP

Try to take your explanation even a step further by contextualizing it with the approaches of your competition.

In practical words:

  • How do you plan on attracting your clients?
  • Why will this approach of attracting them work?
  • Why is your goal setting realistic?
  • Why will customers prefer your service/product?
  • Why does your customer need your product?

Answer these questions with as much detail as possible.

 

#7 A good business plan includes a section about risk management

While there is massive value to putting things in a positive context, realistic risk management is something you don’t want to miss out on.

How will you react if one of your assumptions does not come to fruition?

What would happen if a part of the project gets delayed or canceled for reasons beyond your control?

What are some possible risks for this business, and how can they be managed?

One way that might work is: “In case any problems occur, we have taken measures so that these don’t get out of hand.”To prove that statement, you will need to show some backup plans.

Remember

It’s always good to plan!

You never know what will happen. Maybe a pandemic could crash all your plans – how will you still create positive outcomes if the inevitable happens?

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Include all possibilities in detail – even those you think won’t ever become a reality.

 

#8 There is a strategy to reach the goals

In our modern time and age, it’s effortless to get lost in short-term goals and short-term actions.

This is especially true for modern startups with young team members and reactive and day-to-day business models.

The more you can establish a proactive business approach, the better you can create an easier-to-follow-through strategy to reach your goals.

Nonetheless, you will need an effective strategy to reach your business goals.

To be more practical – here are the three main questions your business strategy should answer:

  • What are the goals?
  • Who is the target group?
  • What will be your competitive edge in this market?

This simple dynamic approach can also lead you to more specific strategies that work well with your initial plan.

This could even go so far that you explain your marketing channels’ benefits and emphasize your outstanding sales launch strategy.

 

#9 The three areas a good financial plan has to cover

A good financial plan has to include how the company will generate revenue, cover costs and establish reliable liquidity.

Generate revenue

  • Where does the revenue come from?
  • In which quantities do you receive the revenue?
  • In which time intervals do you generate cash flow?
Overhead budget chart

Cover Costs

  • Which direct and indirect costs do you have?
  • How do you differentiate salaries for in-house employees and freelancers?
  • What are other expenses related to distributing your product?

Reliable Liquidity

  • What are the payment goals of your client?
  • How do you deal with challenges in payment issues?
  • Have you considered having a person responsible for payment modalities?

     

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