Skip to the main content.
Contact Us

7 min read

What Is A Business Plan (& Do I Really Need One?)

The Four Types of Business Plans

You’ve been thinking about this for a decade. You are going to open the perfect coffee shop.

You've worked at three different cafés in the last nine years (four if you include the one where they didn't have a POS and you only lasted a week). Your list of what-not-to-do is as long as your list of to-dos. You even have your eye on a spot with great sidewalk seating. You bought some rad chairs last month and have them stored in your cousin’s garage.

But you know that starting a coffee shop is expensive, and you’re going to need more money than you have saved. So the first thing you think to do is call your bank, and the first thing they ask you is if you have a business plan. You pause, and for a split second, you think to reply, “Yeah, my plan is to open a café.” But you're smarter than that, and you know that can't be what she's asking. “Um,” you say, formulating your thoughts, “I’m still working on the formal plan. Will I need that ready for next month’s meeting?” The banker says yes, and you start to sweat.

So after hanging up, you Googled “what is a business plan,” and that brought you here. And now you’re waiting for me to get to the point and finally tell you the answer.
First, take a deep breath. You got this.

Ok, ready?

Let’s start with a simple definition:

A business plan is a document that describes a company's objectives and its marketing, financial, and operational strategies for achieving them.

Depending on the needs of your business, the length of your plan will vary. But one thing is certain: your business plan should be written with the audience in mind, and the closer you are to opening your business, the more details and specifics they'll want to see.

A business plan should not only be a guide for you but also be a way for you to share your vision with others. And a business plan isn’t just for startups; it should be a living document that is flexible and can expand to meet your needs.

However, keep in mind that not every business plan is useful when it comes to obtaining a bank loan, but we'll get to that later. First, let's go over the four different kinds of business plans and what they're used for.


#1. The Back-of-Napkin Business Plan

 


Key Elements:
  • Get ideas down on paper
  • Ideate, revise, scratch-out
  • No bad ideas (yet)
Audience:
  • Yourself
  • Trusted Friends & Family
  • No one else!
 

 

You’re scoping out a future rival, waiting for that friend who is always 30 minutes late, but for some reason you still get there on time. While sitting at a two-top alone, an amazing idea for what you will name your café hits you. You’re feeling inspired. The Napkin Phase has been initiated! You’re thinking about decorations, and then an idea for a promotion comes to you, and you’ll do poetry readings twice a month. Write out every idea that hits! You can edit later.

This phase of planning could happen anywhere that you have a moment to yourself (and access to a napkin). You may also feel the urge to initiate this phase of planning while on a plane after being handed an orange juice, a napkin, and some pretzels, or possibly while being stood up by a date at a place not quite fancy enough to have cloth napkins, or perhaps while visiting your grandmother and sitting at her dining room table (with some of her delicious caramel cake) after she has gone to bed.
The urge to plan on the back of a napkin is one of those things that comes to you. The key is not to miss it. So if you feel the ideas beginning to flood, grab a pen (and the napkin) and start jotting!


#2. The Lean Business Plan

 


Key Elements:
  • Unique Value Proposition
  • Goals, timelines, and metrics
  • Flexibility - bullet points are great for this

Audience:
  • Yourself
  • Potential Partners
  • Advisors
  • Internal Strategy
 

 

Unlike the Back of the Napkin Plan, a Lean Business Plan is one you sit down intentionally to write. The goal is to outline ideas, finances, and connections in a slightly more formal way.

If you are at this phase in the process, open a new document, and follow along with these prompts:

  • Define what your business is trying to accomplish. What problem will you solve and who will you solve this problem for?
  • What do your finances look like? Will you need more money? How much? How and where could you get those resources?
  • Consider if there is competition.
  • How will you find your first customers?

This version of planning really shouldn’t take long. Probably 2-6 hours. It’s all about getting the idea out on paper.

Share your plan with someone you trust. Show it to a friend or family member and see if anyone has perspectives to add. The more collaboration, the better!

Once you have your lean business plan, it is the perfect tool to share your vision with possible business partners. But the most important function of a lean business plan is it gives you a sense of what you know, what you need to know, and the next steps to take.


#3. The LeanPlus Business Plan

 

Key Elements:
  • Clarity & Conciseness
  • High-Level Overview
  • Simple Financials
Audience:
  • Landlords
  • Pre-Seed Investors
  • Vendors & Partners
 

 

At some time during the process, you will almost certainly need to present your vision to outsiders. Because there are too many unknowns at this point to devote time to writing a comprehensive business plan, you will continue to use your Lean Business Plan internally. However, you should now supplement it with a more professional document that provides a general overview of the business. The LeanPlus Business Plan includes a high-level executive summary as well as a simple Profit & Loss Statement. The LeanPlus Business Plan, unlike the Lean Business Plan, should be a narrative document with key headers for organization, meaning you should be prepared for an outside party to read it. Here is an outline of what to include:

  • Problem/Opportunity: Why is this business needed? What key changes have occurred to make this the right time to launch it?
  • Product (or Service) Features: What are you selling and why will people want it?
  • Marketplace: What industry will you operate in and what is its economic forecast?
  • Target Customers: Who will buy your product? How big is your customer base?
  • Revenue Model: How will your business make money?
  • Management: Who is leading the company and why are they the right people?
  • Financials: A simple P&L that shows your expected revenue, Cost of Goods Sold, and key expenses like marketing, rent & utilities, and personnel.

The LeanPlus Business Plan should be 10 to 12 pages long in total and shouldn't take too long to create. Depending on your experience and the complexity of the model, anywhere between 12 and 25 hours should suffice.

Pro Tip: If you’re planning on using your LeanPlus Business Plan to raise series pre-seed, series seed investment or showing to a landlord who has a vested interest in your company’s success, it’s highly encouraged to spend some money on qualified market and industry research.

 

#4. The Traditional Business Plan

 


Key Elements:
  • Detailed
  • Well-Research & Cited
  • Communication
  • Pro Forma Financials
Audience:
  • Banks
  • Non-tech pre-seed, Series A (& Beyond) Investors
  • Hedge Funds and Investment Bankers
  • Government Agencies (i.e., USCIS)
  • Board of Directors
 

 

Put simply, a Traditional Business Plan covers a lot of the same topics as the Lean and LeanPlus Business Plans, but it’s way more detailed and researched. If you have never written one before and are going to write one yourself, the Small Business Administration (SBA) estimates you should plan for 150-200 hours to complete it.
Since a Traditional Business Plan is typically used to solicit funding, specific details must be covered, as well as adherence to the established business plan outline:

  • Executive Summary: A concise overview of the rest of the business plan that typically includes the company's mission statement and key details such as ownership, location, and structure.
  • Company Overview: A description of the company’s products and/or services, including pricing and components, operating processes, and research and development (R&D).
  • Market Analysis Summary: A thorough, well-referenced analysis of the company's industry and target market, including an assessment of its competitors and key competitive advantages, as well as anticipated customer demand.
  • Strategy and Implementation Summary: A list of the company's short- and long-term objectives with dates, as well as its approach for attracting and retaining customers through marketing channels and campaigns.
  • Management Summary: Biographies of the company’s key leaders and their roles within the organization, including relevant prior experience, as well as an evaluation of talent gaps that must be addressed.
  • Pro Forma Financials: A full financial projection includes a detailed five-year revenue forecast and key financial statements such as the Balance Sheet and Profit & Loss Statement.

The process should take time and be meticulous. If you are a lover of minutia, get a nice cup of coffee and get ready for the time of your life!

If minutia isn’t really your thing, there are options.

*Enter the professional business planner*

As professional business planners, we know what banks and investors expect from a Traditional Business Plan. We will leave you feeling confident about every aspect of your plan before you even set foot in a bank or talk to an investor.

A Traditional Business Plan is the tool you need when you need to confidently convince someone to share their money with you. It is also useful for setting key goals and tracking your progress as your business grows.

What does Masterplans offer that is so game-changing?

  • Simulation: Working through a business plan allows our clients to test their business model on paper before committing to real-world decisions that can’t easily or cost effectively be undone. Imagine signing a five-year lease for your café only to discover that you're in a neighborhood that consumes 20% less coffee than the national average! Yep, we do research like that.
  • Teamwork: We’re all about collaboration. We learn about you and your business! Unlike a robot or a questionnaire, we are human in our approach. And we give human advice and insight.
  • Perspective: We like to think we are some of the world’s best sounding boards! We have experience working with all types of businesses (over 18,000 of them to be specific).
  • Time: We cannot, in fact, create time. But we can take a significant portion of the business development process off your plate so you can focus on all the other things an entrepreneur must do. Our average client spends 5.5 hours working with us and reviewing their plan, that’s a 97% (169.5 hour) time savings, but who’s counting.
  • Research: Business planning is our obsession. We love it. The nerdy details are a joy to us. And we would be delighted to walk with you through this next step of your business journey.



Do you want to learn more about how Masterplans can help you make your dream a reality?


Schedule a free 30-minute phone consultation with one of our business planning professionals to get advice on what steps to take next and, if it's a good fit, a scope-of-work for us to help you get there.

Book a 30-minute call

The Art of the Pitch Deck: Timelines & Objectives

4 min read

How to Clearly Communicate Your Goals & Objectives in a Pitch Deck

Note: This is the second post in our "Art of the Pitch Deck" series, in which we examine the various slides of a typical pitch deck and discuss...

Read More
Take the first bite of an elephant

6 min read

Get it Down on Paper! The First Step to Starting a Business is, Well, Starting

We’ve all been there. You’re on your way to work or lying in bed trying to sleep when inspiration strikes: you have a million-dollar business idea!

Read More
Masterplans named Top 5 Business Plan Writer & an interview with William Dean, VP of Immigration

5 min read

Masterplans Named 'Top 5 Business Plan Writer' (for the 5th Time!)

For the fifth time, EB-5 Investors Magazine named Masterplans a “Top 5 Business Plan Writer.”

Read More