- Write a business plan to establish a business focus, secure funding and attract investors.
- Common challenges of writing a business plan include identifying financials, demographics and workable goals.
- Some entrepreneurs struggle with creating a business plan that is concise, interesting and informative enough to prove that their business idea is viable.
- You can simplify your business planning process by doing your research, speaking with experts and peers, and conferring with a business consultant.
Writing a business plan is difficult, but it is necessary. A business plan is used for various tasks like establishing your business's focus, securing funding and acquiring new investors. How you intend to use your business plan will affect how you tailor it, since every business plan should uniquely address your stakeholders' specific inquiries.
What is a business plan?
Entrepreneurs know that dreaming up a business idea is the easy part – it's making your dreams come to fruition that's the real challenge. One of the first steps to taking on that challenge is creating a business plan, a task that is pretty daunting no matter how great your idea is.
According to Yoram Baltinester, founder of Decisive Action Workshops, a business plan tells the story of your business, from the big picture to the tiny details. It explains why your business exists, the problems you aim to solve, the methods you will use to solve those problems and your vision of the company's future.
"This vision includes everything that you'd expect a good friend to show you as they walked you through their business after years that you haven't talked," Baltinester told Business News Daily. "From company values and culture to market segments, products or services and competitors, from how the headquarters look to the company's reputation in the market and with the media, and from its financials and performance to what it does to give back to the community and the world."
Your business plan is essentially your map to success. It is critical to have a business plan if you're seeking funding. However, just because it is an important document, doesn't mean it has to be challenging to create. Rick Cottrell, CEO and owner of BizResults.com, said the difficulty of your business plan strategy depends on the type of business you have, the size of your business and the complexity of your desired result.
"A business plan for the launch of an entirely new product or service would be more difficult than for an established company creating a business plan for the next year," said Cottrell. "The established company would have a deep understanding of their sales, revenues, customer demographics and profitability. The established company would be able to more accurately forecast sales and profits, and produce a detailed baseline of desired results if it needs to seek outside investment for growth."
How detailed should a business plan be?
The length and complexity of your business plan will be unique to your business, since it will depend on what your goals are for creating the business plan. Although your business plan can be as short as one page or as long as a book, Baltinester said the average business plan he creates with his clients is four to six pages long.
Cottrell said business plans should cover the following topics:
- The current standing of your company
- The overall prospects for your industry in general (e.g., growing, stagnant or receding)
- How you differ from competitors
- What your projections are for sales and revenue for the next year, five years, etc.
- How you will make those projections happen
Some industries, like finance, have additional regulations for what your business plan should include. [Read related article: Writing a Business Plan? Do These 5 Things First]
The most common challenges of writing a business plan
The challenges of writing a business plan vary. Do you have all the information about your business that you need? Does your industry have strict guidelines that you must adhere to? To help you prepare for some of the common issues you may face, we asked business owners, strategists, and experts what the most difficult part of writing a business plan is and how to overcome it.
Here are 10 of the most common challenges you may face when writing your business plan.
1. Getting started
"The hardest part about writing a business plan is getting it started. Lock yourself in a room, turn off your phone, and focus." – John Gavigan, managing director, Endeavor
2. Identifying cash flow and financial projections
"The most difficult part of writing a business plan is the financial section. It is difficult to project figures on a brand-new business with, possibly, a brand-new concept. There is no roadmap, no one to follow. The best you can do is find a similar company and try to gauge what they are making." – Rosemary O'Brien, owner, Pocket Parks Publishing
3. Knowing your target market
"The hardest but most important piece is getting your target demographics dialed in properly. You need to know whom you'll sell to and how big the market is to estimate with some accuracy as to how many people you can reach and sell your product or service to." – David Batchelor, founder, DialMyCalls
4. Being concise
"[One of the top challenges is] keeping it short and sweet. The more concise and focused a plan is, the more likely business owners are to achieve the goals they have set for themselves and their business." – Rick Faulk, CEO, Locus Robotics and Quiet Logistics
5. Making it interesting
"The hardest thing about writing a business plan is being able to tell your story in such a way that people buy into your idea. If you tell a lousy story, people won't want to invest." – MJ Pedone, president and founder, Indra Public Relations
6. Establishing workable goals
"Establishing clear, concise and understandable goals – these goals must also be realistic. When people can't see the vision of the plan, they won't take action to pursue the plan. In addition, by having set goals that align with your plan, you have measurable targets to track your progress." – Mike Rodriguez, coach and business consultant
7. Being realistic about business growth
"[You need] to be honest with yourself. Entrepreneurs are, by nature, dreamers and optimists, and business plans require them to challenge their assumptions about market opportunity, the competition, the value of their product, and growth projections. That is where they get caught up in defining an aspirational but somewhat realistic business plan." – Vikram Aggarwal, CEO and founder, EnergySage
8. Proving that your idea is worth it
"A common challenge is being able to express your idea and prospects for growth in hard numbers. If you seek capital, numbers are of the greatest importance. Investors and lenders will look at projections and determine the business's prospects for profitability. They will want a return on investment over time, whether it be a year, five years or whatever the parties agree on." – Rick Cottrell, CEO and owner, BizResults.com
9. Finding the right amount of flexibility
"The hardest thing about writing a business plan is making it flexible enough to allow for change without making it so flexible that it isn't really a plan. There is a happy medium between these worlds, and this is where the most success can be found." – Idan Shpizear, co-owner and co-founder, 911 Restoration
10. Creating a strategy that you can implement
"In my experience, the biggest challenges CEOs face is creating a business plan that can actually be successfully implemented. Many companies create plans, but too often, those plans sit on the shelf with actions not done, targets not met." – Renee Fellman, turnaround expert and change agent CEO
How to overcome the challenges of writing a business plan
Although you won't accurately predict everything for your business, you can take pre-emptive steps to reduce the number of complications that may arise. For example, familiarize yourself with the business plan process by researching business plans and identifying how others successfully executed their plans. You can use these plans as a basis, but Cottrell recommends taking it one step further: talk to small business owners and others who have experience.
"The business owner should talk to an accountant, banker and those who deal with these plans on a daily basis and learn how others have done it," said Cottrell. "They can join startup and investment groups, and speak to peers and others who are getting to ready to launch a business, and gain insights from them. They can seek out capital innovation clubs in their area and get additional expertise."
If you research how to write a business plan and still don't feel comfortable writing one, you can always hire a consultant to help you with the process.
"It is simply a time-consuming process that cannot be rushed," said Cottrell. "Millions of dollars can be at stake and, in many cases, requires a high level of expertise that either needs to be learned or executed in conjunction with an experienced business consultant."
Additional reporting by Brittney Morgan. Some source interviews were conducted for a previous version of this article.