Debitoor's accounting dictionary
Business plan

Business plan - What is a business plan?

A business plan is a document that outlines what goals a business has and how they will achieve them. It is a detailed document generally used for new businesses to assess their strategy, and gain funding for the company.

Starting a new business and searching for funding opportunities? Check out our small business guide on how to get financial backing from a bank or investor.

Although business plans are generally used for new businesses, established businesses should also utilise a business plan. This way, the business can review the plan periodically to assess if goals have been achieved.

Why should I create a business plan?

Creating and utilising a business plan can be beneficial in many ways. It is a great way to gain access to funding as your business will be summed up in one document for investors and banks.

It is also a great way for established businesses to clearly outline future goals, how they will achieve them, and how much they will cost. They can later review the plan to see how they are progressing, and make changes accordingly.

The types of business plans

There are a few different types of business plans, and I’ll outline the main three below. Each one differs based on its length, purpose, and inclusions.

One-page business plan

This type of business plan is exactly as it sounds - one page long. It is a short summary of your business goals described in a concise, direct manner.

A new business may use this format to quickly attract potential investors and once they are interested, provide a more detailed business plan. It may also be used for established businesses looking to jot down some important goals for the upcoming year and keep track of progress.

Lean business plan

A lean business plan is more detailed than a one-page business plan. It provides a deeper understanding of the financial aspects, forecasts, and the business strategy of the business.

It is generally 5-10 pages long and defines the projected sales, expenses, and tasks of the company. It outlines the specific dates that goals will be accomplished as well as the funding it will use to meet these goals.

This type of plan is commonly used when new businesses are initially applying for a loan or investment. It may also be used for existing businesses to lay out specific goals, and how and when they will achieve them using a detailed budget.

External business plan (standard)

An external business plan is the standard form of a business plan, and the most detailed. It is commonly used as an in-depth document to convince investors or a bank to help fund the business.

An external business plan may also be referred to as a formal or standard business plan. It is usually used as an addition to the lean business plan presented in a formal, well laid out document.

It is geared towards showing potential lenders an in-depth overview of your business, and what their money will be used for. External business plans can be anywhere from 10-100 pages depending on the business model.

What should be included in a business plan?

Business plans may vary depending on your industry and goals. The majority of (standard/external) business plans should include the following information.

  • Executive summary: This is a short 1-4 page summary outlining the key points and goals in your business plan. This section should clearly describe what you want from the reader.
  • Business overview: This section describes your business including the location, business structure, industry, and history.
  • Market analysis: Create a detailed report of the market you are entering. This section should include specific data including your target audience, and how your business will reach them.
  • Products/services sold: Describe the products or services your business will sell. You should briefly describe each product or service, and explain how you will create and distribute them.
  • Marketing and sales plan: Outline your sales and marketing strategies. This should include your pricing strategy, as well as how you intend to reach your target audience through marketing strategies.
  • Competitive analysis: Analyse the market you are entering and your closest competitors. Explain how you will be competitive within the market, and the strengths and weaknesses of your competitors.
  • Information on the management team: Provide relevant information on the management team and key people in the business. Explain their tasks and how their background will help the company.
  • Financial plan: This is probably the most important section in the eyes of potential lenders. You should include all financial information including how much you will need to start and maintain your business, how you will use the funds, and how much you will need over the next 5 years. You may also include a balance sheet and any operating expenses such as salaries, and insurance costs. Be as detailed and realistic as possible in this section to show lenders that you have done your research and provided and accurate plan.
  • Projections: In this section, provide projected sales and income information, as well as balance sheets and other documents, if appropriate. You should give projections for at least 2 years.
  • Supporting documents: Attach any additional information that may be relevant or beneficial. This may include articles about your business, management CV’s, etc.
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