A clear, concise, and well-crafted business plan provides an excellent foundation for seasoned business owners and aspiring entrepreneurs. It serves as a roadmap to help you stand out from the crowd.
Whether you’re launching your first company or looking to secure funding for expansion, one thing remains true: a professional business plan can help you achieve your goals.
This article provides a deep dive into how to write a business plan, what is included in one, and the steps necessary to get there. But first, let’s take a look at the advantages of having a thorough business plan and why a poorly written plan can negatively impact your business.
Advantages of a business plan:
- Transparency: A well-written business plan offers transparency, clarity, and purpose.
- Clear strategy: A business plan structure can guide future growth and success.
- Credibility: A clear business plan demonstrates to investors and potential shareholders that you’re serious.
Disadvantages of a poor business plan:
- Missed opportunities: A poorly constructed business plan can get overlooked by potential investors.
- Little to no engagement: a lack of long-term goals, relevant market analysis and financial projections might result in your proposal being ignored.
- Inaccurate projections: Setting unrealistic goals and forecasts will do you more harm than good.
Remember that planning for a business should resonate with investors and the target market, so writing your business plan from their perspective is crucial. Investors and your market affirm your business’s financial viability, so you want to demonstrate that your business can be profitable, cover operating costs, and provide a solution to customer’s needs.
What is a business plan?
A business plan is crucial for any entrepreneur. It serves as your company's blueprint and should include objectives, financial projections, and your target market - amongst other elements. The right plan helps keep you focused on operating your company efficiently, giving it the best chance for long-term success.
One of the main goals of a business plan is to attract investors and secure financial support. Demonstrating your understanding with a detailed and thorough plan builds confidence in potential investors and lenders.
Knowing how the business will generate profit, what the competition looks like, and who your ideal target is will help your business plan stand out.
Why do you need a business plan?
A business plan is essential for several practical reasons, whether you're starting a new business or looking to grow an existing one. Here’s why a business plan is indispensable:
- Clarity of vision: It articulates your business idea, goals and the path to achieve them, ensuring that your journey is guided by a clear strategy.
- Securing funding: Investors and lenders seek confidence in your business's potential. A robust business plan demonstrates your venture's viability and profitability, making it easier to secure the necessary capital.
- Strategic planning: It enables you to outline your approach to market analysis, marketing strategies, financial forecasts and operational plans, turning challenges into opportunities.
A business plan acts as a roadmap for your business, guiding you through the early stages and beyond. It's crucial for making informed decisions and ensuring that your business moves towards its goals efficiently.
Whether you're seeking financial backing or just setting up your business structure, a well-thought-out business plan is your first step towards success.
Before you write your business plan
Before diving into the creation of your business plan, several foundational steps lay the groundwork for a comprehensive and effective strategy. These preliminary actions ensure that when you sit down to write your plan, you clearly understand your business's framework, goals and the market environment.
Here’s what you need to consider:
- Understand your business model: Define how your business will operate, make money and provide value. Identify your unique value proposition, main revenue sources and essential resources and activities.
- Conduct market research: Validate your product or service demand through market research. Analyse trends, identify your target market and assess your competitive advantage using tools like SWOT analysis.
- Set clear objectives: Establish SMART (Specific, Measurable, Achievable, Relevant, Time-bound) goals for both short-term achievements and long-term ambitions, covering financial targets and operational milestones.
- Financial forecasting: Begin with estimating startup costs, ongoing expenses and expected revenue to gauge your business's financial viability. This step is crucial for securing funding and understanding your financial needs.
- Identify your ideal customer: Determine who your ideal customers are to focus your marketing and product development efforts. Develop customer profiles that detail demographics, buying behaviours and motivations.
- Prepare for potential challenges: Anticipate and plan for potential business challenges by considering risks related to the market, finances, or operations and devising strategies to address them.
Business plan types
Various types of business plans serve distinct purposes, each tailored to specific needs and objectives. Let’s take a look at some of the most common business plan types:
- Startup business plans: These are vital for new ventures because they outline initial steps, market entry and growth strategies. Rich in market analysis and financial forecasts, they're comprehensive business launching guides.
- Internal business plans: Focus on internal strategy and short-term goals, guiding daily operations and financial planning. They streamline internal processes, emphasising immediate objectives over extensive company backgrounds.
- Strategic business plans: Long-term visions for a company, detailing market share goals and competitive strategies. These plans map out the path to long-term success, backed by in-depth market analysis.
- Feasibility business plans: Assess the viability of new ideas, focusing on market potential, financial needs and operational requirements. They're crucial for validating the feasibility of projects before full commitment.
- Growth or expansion plans: Strategies for scaling businesses, including entering new markets or launching new products. They outline steps for significant growth, supported by financial projections.
- Investment business plans: Designed to attract investors by showcasing the business's value, market opportunity and financial health. They highlight potential ROI and growth to secure funding.
How to write a business plan in 8 steps
Following the eight steps listed below will make your business plan look professional and help it stand out.
Write an executive summary
Like a book, an executive summary gives the reader an idea of what will follow. Think of it like an index or table of contents. Be sure to keep it short. One or two pages is ideal.
Successful executive business plan examples should include:
- Company details: A brief introduction of your business, objectives, and other helpful information that helps investors understand your company.
- Mission statement: Think of the mission statement as a slogan that describes the purpose and goals of the business.
- Brief description of what your business offers: This section provides investors insight into what makes your company different from its competitors.
- Highlight achievements and/or awards: Showing off your recent awards or accomplishments is a great way to show how invested you are in the business.
- Financial Goals: Give the reader a taste of what cash flow projections your business can generate.
- SWOT Analysis: A strengths, weaknesses, opportunities, and threats analysis is an excellent way to find out what your company does well (and what it doesn’t) and how you can create a strategy for the future.
Tip: The executive summary is the first impression, but you may want to write it last. Highlighting key and unique elements of your business will keep the reader interested and eager to know more.
Provide a business description
A detailed business description provides an in-depth look at your business, its goals, history, and future expansion plans.
Reinstating your purpose helps cement your idea and how you envision the business. It should point out what unique service/product the company offers and how it might perform better than other market competitors.
A brief history section of your business will help the reader understand how everything started. If applicable, this section can be expanded upon by showing how the company has grown over the years, its location, and how long it has been in business.
A clear plan for the coming years should answer various questions, including where your business will be in the next 5-10 years and how you plan to get there.
Add a market analysis
Analyzing the market, and your competition is vital to any business plan. Although market research isn’t the most exciting subject, it can help you and potential investors better understand how you can become profitable and remain relevant in a competitive industry.
Start by researching your client base. Build a customer profile, understand their needs, and provide a solution to their problem. You can do this through existing market research and self-conducted tests such as surveys.
Next, analyze the competition. Observe their strategies and tactics and come up with better solutions. Competitor analysis is critical to ensure a thriving and profitable business. This data can be obtained from existing market research, products, prices, etc.
Pro Tip: Be as thorough as possible when creating your market analysis. In-depth details about the industry, target market, competition, and pricing make your business more credible and help it stand out.
Describe your offerings and value proposition
This step aims to shine a light on two critical factors: what your product offers to the market and how you position yourself as the top choice for buyers.
Whether it’s a physical product or a service, clearly explaining what your business offers and how it does it better than others will help build confidence and trust in investors, stakeholders, and your target market.
If your product is in its infancy or has yet to be developed, a clear plan of where you are and how you will bring it to life is critical. Alternatively, if the business has been around for a few years, demonstrate how you overcame certain obstacles and manufacturing hurdles.
Finally, you need to prove that your company's product or service brings value to your customers. Be sure to include a clear strategy for how your product or service will appeal to clients.
Define your marketing and sales strategy
A great product or service that no one knows will not be profitable. Putting in place a clear marketing strategy is vital for success, even for a small business plan.
Depending on what industry your business operates in will determine the best marketing options. Nowadays, digital marketing dominates. But classic marketing strategies such as TV, radio, and print are still valid, albeit very expensive.
Having a strong sales plan will help you increase profit. Do this by setting sales objectives, tactics you’ll use to implement your goals, a timeline to achieve them by, and a plan for how you’ll grow your sales channel. Don’t forget to outline pricing strategies and special offers, including multiple/bulk order incentives.
Tip: A successful marketing and sales strategy always keeps a target market's needs and pain points in mind.
Company and management breakdown
To become more appealing and professional in the eyes of potential investors, a full breakdown of the company management team and their roles is vital.
A quick outline of your operations is a great starting point for this section. It lets the readers know what a typical day looks like and who handles specific tasks.
Expand on that by explaining how your company is organized regarding leadership. If the business is up and running, be sure to highlight the skills of each team member. In not, emphasize the corporate leadership required for a successful company.
Be realistic about how much it will cost to have a management team and show where outsourcing certain roles can help bring that budget down.
Prove your financial projections
An idea is just a dream without a good financial plan. Use this section to show your expenses, overall profit, and how future income will be allocated to grow the business.
List as much supporting paperwork as possible. It should include:
- Income statement: Also known as a profit and loss statement, the income statement summarizes revenue, costs, and expenses over a certain period.
- Balance sheet: A balance sheet provides a snapshot of your company’s financials. It should list assets, liabilities, and equity. Integrating a balance sheet into your business plan provides insight into your company's financial standings and how it manages resources.
- Cash flow statement: This statement tracks the inflow and outflow transactions during a specific period to demonstrate how cash moves and further solidify the business's profitability.
- Expense analysis: Arguably one of the most important documents of a financial financial statement, the expense analysis breaks down the costs and expenses in detail. It outlines expenses such as salaries, material costs(if applicable), rent, and other costs related to running the business.
- Break-even analysis: Calculate your present break-even point. The break-even point is the minimum sales numbers required to cover operating costs.
If the business is not operational, come up with a list of estimated costs, projected sales, and revenues to get off the ground. This list should include:
- Sales forecast: A sales projection for the next three to five years shows you are dedicated to the business. The forecast should be broken into quarterly forecasts and detail how the company will grow in that timeframe. If needed, further break down the sales outlook into specific product or service categories.
- Use of funds: If you are looking for funding from investors, provide a detailed list of how you will use the capital. Outline how the funds will help get the business off the ground and help it grow over time.
- Sensitivity analysis: Demonstrate that you’ve thought about different risks and scenarios by having an alternative plan if key variables, such as pricing and costs, change.
- Financial ratios: For a business to be profitable, gross margin, net profit, ROI, and debt ratio need to be calculated. A potential investor will look at the numbers to assess the business's financial health and overall performance.
Tip: Keep your financial projections realistic. Use past and present industry studies and trends to prove your projections. Hiring a certified accountant or financial advisor will help.
List your goals
Short and long-term goals are crucial when deciding how to make a business plan. Make sure they are realistic and achievable.
Growth goals are a great way to show the overall vision for the business. They can be split up into quarterly, yearly, and beyond.
Another great way to showcase your goals is by sales revenue projections. Again, these goals should be based on facts and data to back them up. However, don't be afraid to dream big if the vision is achievable.
Finally, go into detail about each goal and how you will achieve it. For example, if you want to increase sales by 20% over the next year, include a targeted marketing campaign and optimize sales.
Goals, whether big or small, should be flexible and adaptable. A shift in the market or business setback can happen at any time. Be prepared to adapt, adjust, and overcome.
Tip: A business continuity plan should be a part of your goals. This document outlines how the business will continue in the event of a disruption or if you decide to exit. Elaborate on the most common potential threats your business can face and how your business will overcome them.
The bottom line: writing a winning business plan
When creating your business plan, consider the market and investors. They are the ones that you are trying to attract. Think from their perspective, as opposed to only yours. Regularly adapt and update your business plan to changing market conditions and competition to ensure continued growth and success.
Multiple business plan templates are available online if you’d like more help with a business plan structure.
If you’re looking for financing options, our business financing guide offers great insights on how to get funding for different business objectives.
Remember that creating a business plan is an ongoing process. Keep it up to date and have a market-focused mindset. A well-crafted business plan will not only guide you through the journey, but open the door for the future of your business.
@Be_theBoss