A 3 Year Business Plan: What Is It All About?

Why 3 years, and not 5, or even 10 years? The reason for setting up a 3 Year Business Plan, especially for startup businesses, is to work out the pros and cons of the business. In essence, a 3 Year Business Plan is a written documentation of the process of how a business, mostly startups, sets its goals and what plans it has created in order to achieve those goals. A 3 year business plan is usually created for the purpose of securing funding as a startup capital.  Having a plan that is 3 years instead of a longer term is a more measurable way for financial institutions to sum up if the business will thrive or not, before they will even approve the loan. It is a practical time frame that can easily reflect if a business is ready for the long run or not.

Business plans in a way served as a roadmap through its financial and marketing planning process to earn that aimed revenue stream. How effective and successful a business is would also depend on how good and well thought out the business plan is. Although there are some that function without a business plan, still, there are a lot of benefits that would come out of having a good business plan, aside from making a proposal for securing a loan.

4 Reasons to Have a Business Plan

A business plan is more than just a roadmap. In fact, businesses would treat it as some sort of a lifeline. Some owners would even go out of their way to hire someone expert in making business plans. If prepared and drafted well, a business plan could seal the deal of the venture’s future. It can be used as a tool in beating out the competitors, as well as an instrument that drives your business’s success. Admittedly, there are some businesses out there that operate without a business plan, but there’s no telling how long their business will last. Here are some of the reasons why a business plan is a MUST asset for any businesses to have.

To Better Gauge the Business’s Feasibility and Viability: Perhaps the top most important reason for having a business plan is that it will help the owner assess if the business is in it for the long run. The plan helps monitor the business’s progress, whether or not it’s near to achieving its desired goal. A 3 year business plan is a good starting point. Aside from being the focal interest of a financial institution for approving a startup’s loan application, a 3 year business plan presents the process of how they will ensure the growth of the business within a measurable and practical timeframe. For the startup’s loan application to be approved, the 3 year business plan needs to show plans that reflect the characteristics of a SMART goal, meaning plans that are Specific, Measurable, Achievable, Relevant, and Time-bound.Helps in Reducing Business Risk: Starting a new venture, or any kind of trade, is very risky. The risk involves securing the funding, having the right infrastructure, equipment, and manpower in place, unforeseeable events such as natural hazards, and even risk in how successful the marketing and sales strategy later on will be. Having a business plan does not prevent all risks from happening, but it does lessen the chances of some of it coming to fruition, or else mitigates the impact once it did happen. The risks, therefore, then become more manageable. A good way of identifying risks is by doing the SWOT analysis, identifying the Strength, Weaknesses, Opportunities, and Threat conditions surrounding the business.Creates Assurance and Builds Confidence: Investors would love to work with businesses that have a good plan on hand. Employees would love to work for employers that have a plan that guarantees the company will survive and thrive. There is also an overall trust that is developed when a business prepares for the better or worse case scenarios, either through having a good marketing plan, or a contingency plan for emergency situations. A 3 year business plan is also a test to show how well a business can be able to develop that kind of a relationship with its investors, clients, and employees.Creates Solid Documentation of a Revenue Model: How to make money is the end-all, be-all of a business plan model. Structuring and documenting your revenue model is a critical process that shows how you plan for your business to earn money. It is the section that your investors anticipate the most. Creating that revenue model will also help you identify what sales or marketing strategies need more funding, how much is needed, and also helps in creating plans in securing more funding as needed.

Creating that Effective 3 Year Business Plan 

Creating a business plan can be a bit tricky, especially if it’s for a 3 year term. The goals and the strategies stated should be specific and compacted within that small time frame. There is no hard and fast rule in formatting a 3 year business plan, but there are some essential elements that need to be included in it. A 3 year plan model is usually done on a per year basis, meaning that the strategies and plans are laid over a three-year time period. Hence, you can see, for example, that there are strategies created for the year 2021, next for 2022, and then lastly for 2023. The purpose of this is to show the progression of the action plans, which intends to address the previous year, and maps out strategies for the next year. To find out more, read on more to find out what are the usual steps, or elements, that are found in a 3 year business plan.

Step 1: Executive Summary 

The executive summary of a 3 year business plan should highlight all the important parts of the business plan, as well as giving a brief overview of the nature of the business. The executive summary could also include the mission and vision statements of the business. The mission statement is a  brief statement of the reason why the business exists, what its intent and purpose is. The vision statement describes what the business hopes to accomplish, in this case, within a 3 year period. It also gives a depiction of what it hopes the business will look like after a 3 year period.

Step 2: Market Analysis

Every kind of business needs to have a good handle on the type of trade it’s in, the market condition, as well as the target customer market. Hence, the need for a market analysis. This will give the business owner an awareness if there is a niche in the current market condition for the type of product or service the owner will provide. Aside from doing the SWOT analysis to give the owner a better understanding if the business is prepared or not, recognizing the target market is also another way of doing a market analysis. Identifying the target market can be done through a demographic analysis classification. You can categorize the customers according to age, gender, location, lifestyle, income, et cetera. This will also help you later on when formulating your marketing plans and sales strategies. 

Step 3: Marketing Plan and Sales Strategy

Since this is a 3 year business plan model, the marketing and sales strategies are divided into 3 years. A marketing plan outlines the advertising strategies or PR campaigns taken to generate sales revenue. Marketing plans involve doing promotional activities through social media, or digital marketing campaigns, TV and radio broadcasts, field work, and so on. A sales strategy is the method, or the selling method, of positioning a business product or service on the market. An example of a sales strategy is increasing the number of sales personnel in a particular area, or increasing the sales field work. Another is by generating sales leads through making calls, sending emails, et cetera. Both the marketing plan and the sales strategy are designed and aimed at targeting a specific revenue. In a 3 year business plan model, ideally, that total 3-year revenue is divided into 3 years. Hence, the marketing plan and the sales strategy should be created uniquely to each of those years and be done in progression. For example, the year 1 marketing plan and sales strategy turned out less than what was targeted revenue for that year, the year 2 planning and strategy should be revised to cover the loss of year 1, adding the revenue balance of year 1 to year 2, and so on to year 3.

Step 4: Identifying Resources Needed

For each of the planning and strategies outlined, there should be a space that indicates what are the resources or supports needed to accomplish the business’s goals. Resources could come in the form of budget, equipment, and manpower.  The need for support or resources are also reviewed and adjusted on a per year basis.

Step 5: Financial Planning

The financial planning section can be included with the other steps, or it can be created as a separate section. This is where a comprehensive financial evaluation takes place. If there was a budget provided, compute it against the estimated or the ongoing costs and expenses. The costs and expenses could be in the form of what is called the startup cost and the operating cost. Startup costs are those expenses incurred necessary to start the business, such as one time purchase of technology or equipment, the insurance, permits, or license fees, advertising and marketing promotion expenses, and so on. Operating costs are ongoing expenses necessary in order to run the business, such as salaries, utilities and maintenance fees, rental fees, et cetera. A thorough financial planning should analyze if the business can survive on a per year basis based on the existing budget and its expenses, or if there is a need to secure more budget to fund the current year, or the next couple of years.


What are the other types of business plans?

There are lot of different types of business plans, but the most common ones are the: 1) Startup Plan – a business plan that’s created specifically for new businesses, with the intention of securing investors’ funding, or securing loans from financial institutions; 2) Strategic Plan – a type of business plan that focuses on laying out the foundation for the business, making sure that there is an existing need for the product or service, usually through means of doing market analysis. This is typically where the SWOT analysis is applied; 3) Growth Plan – this type of plan is used when the business is considering to expand; 4) and Feasibility Plan – doing the market analysis, this business plan focuses on how well a product or service is doing in a given market, and if does well or not in generating the required revenue.

What are the essential considerations when creating a business plan?

The first thing you need to consider when creating a business plan is the market condition. This is done through doing a thorough market research and analysis. Next is considering the target customer market. Another is by scouting out the existing competition. Then, check to see if there is enough funding to start the business, or if there is a need to secure more funds. Finally, make sure that you have the right qualified management and operation manpower in place to implement the business plan’s processes.

What are the concerns usually addressed by a business plan?

A business plan usually addresses the concerns of: if the product or service presents a solution to the current market needs; how will the business gain or maintain an advantage over its competitors; how long does the business plans to operate; how will the business market and sell its products and services to the customers; what are the financial and operational support and resources needed; and how will the business manage its operations.

The main aim of every business is financial stability, profitability, and business sustainability. It’s all about numbers and growth, surviving and thriving. A business without a plan is like a ship lost at sea without a map or a compass, just floating around aimlessly with no direction. A map, therefore, is that driving intent and purpose why you wanted to set up a business in the first place. It could be because of a passionate interest in a product or a service, or it could also be that you are the type of person that works well in the business trade industry and would like to see yourself at the very top of that corporate ladder. Whatever the reason, all businesses start at the bottom. And a very good way to measure its feasibility, viability and profitability is through a 3 year business plan model. 

We have all kinds of business plan templates available on our website, but if you’re interested in a 3 year plan model, we also have that one specifically. Our 3 year business plan template is drafted in a way that makes it easy for you to fill out. Download one now, and start taking those steps towards a successful business within 3 years time!