How To Make A 5 Year Business Plan

Whether you’re running a multi-million corporation or a small home-based company, planning your business is one of the most important things you need to think about. You should have a business plan for your company. This guide will show you how to make a 5 year business plan.

Failing to plan is like setting out on a journey towards unchartered territories.

Without a roadmap, you’ll only end up losing your way and diverting your focus from your original destination.

As a business owner, it can be tempting to ignore the planning stage altogether.

After all, if you’re already earning some decent profit anyway, what’s the point of pouring your time and effort on creating a business plan forecast?

According to business experts, here are 3 reasons why you should have a business plan.

3 Reasons Why You Should Have A Business Plan

It Gives You A Point Of Reference

A business plan allows you to clearly define what your business is and what you hope for it to be in the future.

Having this point of reference to look back to whenever you encounter trouble is a great way to motivate yourself and your team into action.

Going back to your business plan should inspire you to press on as you work towards reaching the business goals that you’ve set.

It Helps You Analyze Your Business Operations

Writing a business plan involves analytic thinking so having one will help you manage your operations better, even on a day to day basis.

It helps you recognize opportunities within your industry that you can take to increase your profit margin in the long run.

When you write down your goals and action plan on paper, it becomes much easier for you to come up with decisions that will allow your business to thrive.

It Shows You Which Direction To Take

And since businesses need to adapt to the changing times, developing a business plan helps you keep your operations relevant.

It allows you to plan for changes brought by industry innovations and market trends.

A business plan doesn’t just show you where you started, it also offers you a vision into the future.

Simply put, having a business plan helps you manage your business better, which is not only beneficial for your team, but also for your customers, investors, and potential partners.

But not all business plans are created equal.

Some companies are quite content with a 1-year business plan, and there are others that choose to have a 5-year business plan.

As a business owner, it’s up to you to know how to structure a business plan that best represents your organization.

Whichever time frame you choose, here are 10 components of a business plan that you definitely need to keep in mind.

10 Components Of A Business Plan

Executive Summary

The first thing that people will see on a business plan.

It’s a compelling summary of what you hope to accomplish with your business.

It highlights all the strong points of your business – your mission statement, products and services, and a brief explanation of how you started your business.

Most business experts suggest that you write this part last.

Description Of The Company

This part includes all the vital information about your company.

This is where you specify your goals (short term and long term), your target customers, and what factors differentiate your company in the specific industry that you’re a part of.

Description Of The Organization

This is where you outline your business organization and specify the details on the kind of business structure that you already have.

You can also include details on how you plan to restructure the company once you reach a certain milestone.

Don’t forget to introduce your upper management and give a brief description of their job responsibilities and skills.

You can also include a diagram of your company’s chain of command if you have it available.

Description Of Your Products And/Or Services

You can’t have a company without having products or services that you’re selling.

While you may have already briefly mentioned what you have on offer in the executive summary, this is the part where you give a more detailed description.

Always include features, benefits, and other relevant details that you think your readers would like to know. If you have suppliers, mention them as well.

Competitive Analysis

You should also give the lowdown on the competitors that you’re up against.

A good business plan will give information on where the business is positioned in comparison to their direct and indirection competitors.

By knowing their strengths and weaknesses, you give readers, especially investors, the impression that you know exactly how your business stacks up in your industry.

Market Analysis

This part shows that you’re aware of the ins and outs of your industry.

By using data and statistics you’ve gathered in your market research, you can have a better understanding of where the market has been and where it’s anticipated to go.

You can then show in your business plan how your company will fit in the current market.

Marketing Plan

The marketing plan is one of the most important parts of a business plan because it lets readers know how you intend to get your products and services to your target market.

In this part, you can give a background on your target market and include opportunities you would like to take to get more people to recognize your brand.

Sales Strategy

In any business, marketing can only do so much.

You also need dedicated sales reps to turn brand awareness into actual sales.

When writing down your sales strategy, be sure to be as specific as you can with the numbers.

Like how many sales reps do you plan to hire over a period of time and what are their sales targets.

Funding Request

If you’re writing a business proposal to get more funding, this part should clearly let investors know how much you need.

When writing this part down, make sure to be specific on how you plan to use the additional capital.

You should also disclose if you’ll need your capital replenished in the next couple of years.

Financial Goals

Don’t forget to write your financial projections over the next couple of years.

In order to show that you’re a viable business, you need to create a report on your anticipated revenue based on market research.

Since you’re writing a 5-year business plan, you should disclose your projected earnings for the second to the fifth year of business.

Not all business plans will look the same so don’t get discouraged if your business plan looks nothing like that of another company’s.

As long as you have the key components that were mentioned above, this important business document should keep you on the right track.

But what if you’re still in the early stages of operating a new business?

Is it practical to create a 5-year business plan if you have no idea what could happen to your business 5 years from now?

Well, if you want your business to be growing in 5 years, then the answer is yes.

It may be hard to envision where your business is headed that far out, but that’s what a strategic business plan is for.

It gives you the opportunity to plan for different scenarios that could affect your business.

Whether it’s a sudden drop in the stock market or a product’s failure to launch, having a business plan can help you prepare for any challenges that you might encounter along the way.

Here are 7 steps to creating a business plan forecast.

7 Steps To Developing A Business Plan

Do Your Research

In order to know how to write a business plan for your company, you need to do your research.

Investors aren’t going to put their money into an idea that isn’t backed up by top-notch information.

Aside from ironing out the details of your internal operations, you need to immerse yourself in the industry so that you know every single topic that is related to the business.

As much as you would like to include every single detail into your plan, you need to keep in mind that you’re writing material that you’ll be using in your presentations and pitches.

Since you’ll be presenting your business plan to busy people, your business plan needs to be concise.

Avoid turning it into a brain dump of everything and anything that’s related to your industry.

Know The Purpose Of Your Business Plan

Once you have your information, the next thing that you need to do is to know the purpose of your business plan.

Are you going to use it to get more funding?

Is it going to serve as a historical document? Whatever your reasons are, make sure to define your purpose for your business plan clearly.

Part of knowing how to write a business plan is to understand your own personal motives in creating it.

Tell Your Story

Stories sell, so if you want to know how to come up with a 5-year business plan, you need to give the reader a clear picture of what your company is about.

In the business world, this is what people call a company profile. It tells people how a company started and what it does in just a few paragraphs.

It’s designed to stick to a reader’s mind quickly so you have to be strategic with how you tell your story.

If there’s one thing that you want readers to remember about your company, what would you like it to be?

That’s all you need to think of when creating your company story or snapshot.

You don’t have to write this from scratch because if you already have one on your business website, you can just work with that.

Understand Your Audience

Not everyone reading your business plan is going to be an investor.

A company employee, for example, doesn’t need to know the exact figures of your expansion project.

If you want to get the most impact out of your work, you need to write different versions of your business plan for different audiences.

Part of planning your 5-year business plan is knowing the different people that you’ll be working with.

You can’t expect everyone to get on board with you with just one version of your business plan.

It’s just like applying for a job.

If you want to increase your chances of getting hired, you need to write different versions of your resume for different prospective employers.

Try To Be As Specific As You Can

Some business owners prefer to only highlight the selling points of their operations in the hopes that it will make their business seem more viable.

While it can be tempting to leave out the not-so-ideal details of your business, investors will wonder where the company is in the bigger picture.

Investors are aware that every venture has its pros and cons so it’s better that you just come out in the open with it.

You need to detail the status of your company in full.

The good, the bad, and the ugly. It’s also highly recommended that you also include your weaknesses, complete with strategies on how you plan to address them.

A complete and specific business plan is guaranteed to get you more support.

Plus, your investors will appreciate the transparency.

Make Sure That Your Business Plan And Your Marketing Plan Are Cohesive

One of the biggest mistakes that most rookie business owners make is developing a business plan without knowing how their product or service is going to be sold.

While a business plan often includes a segment on marketing efforts, you need to have a separate document that describes in detail how you’re going to sell your products and services to consumers.

Your separate marketing plan document will show how you plan to communicate the value of the products and services, as well as how they’re going to be sold to your target market.

It should also include details like price, promos, and marketing platforms.

Highlight Your Motivation

Lastly, you need to include your motivation in your business plan.

Whether you’re writing a 1-year business plan or a 5-year business plan, you should include a part about your aspirations for your business.

It’s the part where you share your passions without sounding too melodramatic about it.

Where exactly do you write your motivation in your business plan?

Most business owners include it in the mission /vision part of the document.

The motivation needs to convince people that the venture will succeed.

For many entrepreneurs, a well-written business plan is more than just a document, it’s often a requirement for getting additional funding for their companies.

It doesn’t just help convince investors that the business is viable, it also provides them with a set of benchmarks that they can hold the business partner accountable to.

It may be too idealistic to say that a business plan can help you in your fundraising efforts, but the reality is, you can’t get an investor interested in your idea if you don’t have anything to show for it.

Before you can write a business plan for investors, you need to think about 2 things.

How much money do you need exactly and what are you going to spend it on?

It’s unlikely for an investor to simply write you a check without showing the slightest interest on where the money is going.

With that said, here are some things you need to keep in mind when writing a business plan for your investors.

How To Write A Business Plan For Investors

Work On Your Executive Summary

Here’s the hard truth.

Investors, especially those who have been doing it for years, receive so many business plans that they all start to look the same over the course of time.

If you want to create a 5-year business plan that will get noticed, you need to spend some time crafting your executive summary.

Write your executive summary the same way you would craft your elevator pitch.

Your goal?

To seize the interest of your readers.