Every business needs to have a business plan, and it should be written. This helps map out the business progress plan and also guide on where the money will come from.
In this publication, we hope to take you the basics you need to make a practical business plan.
Statistically, seven out of ten businesses fail within five years and this primarily because they lacked planning from the start.
A business plan is a strategic plan that is going to see your business move from one point to another in terms of growth and development. You start here, today, with certain resources and abilities. And you want to get there, a point in the future (usually three to five years out), at which time your business will have a different set of resources and abilities as well as greater profitability and increased assets. Your plan shows how you will get from here to there.
Just like a plan for marketing, a business plan should not be complex. The longer the document gets, the more likely that you will get confused along the way. And we do not want that.
What is a business plan?
Before we detail how to write a business plan, we should figure out what a business plan is. Then, we can cover the basics of how to write a business plan.
A business plan in any company is a document with every crucial detail. It covers the following information: what you are going to sell or produce, the structure of your business, your vision on how to sell the product, how much funding you need, information on financial projections, among other details.
Harvard Business Review (HBR) says “the real key to succeeding in business is being flexible and responsive to opportunities. Entrepreneurs often have to pivot their business once it becomes clear that their original customer is not the right customer, or when it turns out that their product or service fits better in an alternate market. Because of these realities, business plans written at the start end up nothing more than a fable.”
There are several factors for startups to consider when doing business and according to Entrepreneur.com and Rule’s Book of Business Plans for Startups, founders should be considering these factors when creating their plan.
- How the business will be vested
- Main objectives
- Mission statement
- Keys to success
- Industry analysis
- Market analysis
- Competitor analysis
- Core strategies
- Marketing plans
- Organizational structure
- Key operations
- Projections and proformas
- Break-even analysis
- Financial needs
Lucky enough, with advancement and technology, coming up with a business plan has never been easier as regards data sources. Furthermore, some templates reduce time wasted trying to figure out the content outline.
While going into making the plan, there are questions you and your team need to be ready to answer with similar answers from the whole team:
- Why are we starting/ready to expand the business?
- What makes our company different? How can we differentiate ourselves?
- What solution are we providing? How do we offer it?
- Who are we? Be ready to introduce your management team, any key players, and advisors.
- Who are your customers? Target business?
- What needs to happen to break even?
- How can we make a profit? In one year? In five years?
There are many more than just the above but the above are very vital and your business plan must address them in a clear, concise, strategic, and realistic way.
So, what are the components of a business plan?
1. Executive Summary
The executive summary of your business plan introduces your company, explains what you do, and lays out what you’re looking for from your readers. Structurally, it is the first chapter of your business plan. And while it’s the first thing that people will read, I generally advise that you write it last.
Why? Because once you know the details of your business inside and out, you will be better prepared to write your executive summary. After all, this section is a summary of everything else you’re going to write about.
What is in an executive summary?
- Strong Introduction – First impressions matter a lot. With that in mind, you want to make sure the first thing potential clients are likely to read is the strongest part of your entire proposal. Make it a confident sell.
- Targetting – Make the document aim at your intended target audience. You can go further and highlight the problem your audience is faced with; backed with well-researched references, facts, and figures. With a problem, should come a solution, i.e. indicate how you will deal with the problem.
- Goal – A potential client must see just what it is you and your company can do for them.
- Avoid Generalization – Honest appraisals and truthful promises are what sell, not overused, recycled ideas, and hollow claims.
- Attention to detail – Attention to detail is paramount throughout the entire executive summary. Nothing ruins the hard work on a proposal more than sloppy attention to detail. Silly mistakes can and must be avoided.
2. Mission statement
Yes, this part is important to you and your team. However, this isn’t quite as important to your audience as you think it is. People who read your business plan will already know a little bit about your business because they read your executive summary. But this chapter is still hugely important because it’s where you expand on your initial overview, providing more details and answering additional questions that you won’t cover in the executive summary.
3. Products And/Or Services
Here, you include information about what you do and what you plan to sell it for. This is also where you sell the benefits of your business.
This being a business plan and all, it’s important to list the cost of the products/services you are providing:
- How much does it cost to produce? Versus How much will you sell each piece for?
- Is there packaging?
- How will the client purchase the product?
- What system will you use to bill them?
- Are there extra costs in getting it to the customer? How will it be transported?
The products/services section should also differentiate your new business:
- What makes your business different?
- What gives your company’s product or service an edge in the marketplace?
- What distinguishes it from competitors?
4. Marketing Plan
Now that you’ve proven what you want to do and how you will make it happen, next you will need to detail how you’re going to spread the word.
This details how you plan to reach your target market segments (also called target marketing), how you plan on selling to those target markets, what your pricing plan is, and what types of activities and partnerships you need to make your business a success.
Break it down into sections, grouping by market topic, as suggested below by PandaDoc:
- Your customers: Are you B2B or B2C? Who are your customers? How do you plan to reach them? Where will you sell your product/service? How will you garner feedback from them? How will they know you care?
- Your competition: Who are your direct/indirect competitors? What’s your advantage? Don’t be shy — tell them you are better and why.
- Your niche: Or market or sector. Again, what separates your business from your competitors — how will you make yourself known in the niche?
- Your distribution: Of course, this is a marketing plan, so they’ll want to know your tricks for promoting within the said niche. How are you selling it — directly to clients, to a vendor, online, at a store, an office, freelance, etc.
- Your advertising: Are you advertising already? Where? When you have more funding, where do you advertise? How will you use advertising to retain customers? Get new ones? Make sure you outline your marketing budget either here or within the financial plan. How much will be spent on print, TV/radio, Internet, direct mail, external ads, etc?
- Your sales strategy: Depending on the industry, this could be one of the most important parts — how are you going to sell your product/service? Online? A sales team? Telesales? How will you incentivize sales? Will you offer a free sample or trial? Host a free workshop?
- Your face: You’ve described how you will market, what, to whom, on where. Now it’s time to explain the image you’re going to project. This can include your slogan, images, logos, website, social media channels, etc.
5. Operational Plan
This step takes the potential client through your team’s credentials and what roles are performed or going to be performed by whom.
This part is about presenting the probable client with a solid team that will deliver to their expectations. Include brief bios that highlight the relevant experiences of each key team member. It’s important here to make the case for why the team is the right team to turn an idea into a reality.
6. Financial Plan
This is where most business people get headaches. Business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast.
A typical financial plan will have monthly sales and revenue forecast for the first 12 months, and then annual projections for the remaining three to five years. Three-year projections are typically adequate, but some investors will request a five-year forecast.
This is where you include everything else about your plan. You should go technical in this column and include vital info like any charts, tables, definitions, legal notes, or other critical information that either felt too long or too out-of-place to include elsewhere in your business plan.
Creating a business plan is going to help you to determine the future of your business. It may seem hectic to write or come up with but it is just as vital. It helps you identify and organize your team as per the roles suited and goals set.
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