There’s no right or wrong way to write a business plan. What’s important is that your plan meets your needs. A good business plan guides you through each stage of starting and managing your business. You’ll use your business plan as a roadmap for how to structure, run, and grow your new business. It’s a way to think through the key elements of your business.
Business plans can help you get funding or bring on new business partners. Investors want to feel confident they’ll see a return on their investment. Your business plan is the tool you’ll use to convince people that working with you — or investing in your company — is a smart choice.
Types of Business Plans
Most business plans fall into one of two common categories: traditional or lean startup.
Traditional business plans are more common, use a standard structure, and encourage you to go into detail in each section. They tend to require more work upfront and can be dozens of pages long.
Lean start-up business plans are less common but still use a standard structure. They focus on summarizing only the most important points of the key elements of your plan. They can take as little as one hour to make and are typically only one page.
Steps of Writing a Business Plan
Before you begin to implement your company’s business plan, it’s necessary to brainstorm to make sure your team is prepared to answer some questions:
- 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?
Step 1. Executive Summary
The summary is where you (briefly) introduce your vision. Try to make sure your executive summary answers these questions:
- What sector are you in?
- What products/services do you provide?
- Who is your target audience?
- What does the future of your industry look like?
- How is your company scalable?
- What are the next steps?
- Who are the owners of your company? Backgrounds? Experience in sector/business?
- What motivated you to start your company? Why now?
The Executive Summary is often the make-or-break section of your business plan. A great business solves customer problems. If your Summary cannot clearly describe, in one or two pages, how your business will solve a particular problem and make a profit, then it’s very possible the opportunity does not exist–or your plan to take advantage of a genuine opportunity is not well developed.
Step 2. Mission Statement
This part is extremely important to you and your team. However, this isn’t quite as important to your audience as you think it is.
Your mission statement should include your goal and the objectives that will lead you toward it; your industry, how you see it evolving in the short and long term, and who your customers are. Your mission statement also says who you are and talks about the strengths of you and your team. This is where you, in part (and in brief), sell the features and benefits of your company.
Step 3. Products and/or Services
This part includes information on what you do and what you plan to sell it for. This is also where you sell the benefits of your business.
For example, if you plan to sell a commodity item and the key to your success lies in competitive pricing, you probably don’t need to provide significant product detail. Or if you plan to sell a commodity readily available in a variety of outlets, the key to your business may not be the commodity itself but your ability to market in a more cost-effective way than your competition.
But if you’re creating a new product (or service), make sure you thoroughly explain the nature of the product, its uses, and its value, etc.–otherwise your readers will not have enough information to evaluate your business.
Key questions to answer:
- Are products or services in development or existing (and on the market)?
- What is the timeline for bringing new products and services to market?
- What makes your products or services different? Are there competitive advantages compared with offerings from other competitors?
- Is price an issue? Will your operating costs be low enough to allow a reasonable profit margin?
- How will you acquire your products?
Step 4. Marketing Plan
Your marketing plan should be the result of a blend of first- and (reputable) second-hand research into your marketplace. Break it down into sections, grouping by market topic. We suggest these seven:
- Your customers: Are you B2B or B2C? Who are your customers?
- Your competition: Who are your direct/indirect competitors? What’s your advantage?
- Your niche: Or market or sector. What separates your business from your competitors?
- Your distribution: 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? How will you use advertising to retain customers? 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?
- 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.
Step 5. Operational Plan
The next step in creating your business plan is to develop an Operations Plan that will serve your customers, keep your operating costs in line, and ensure profitability. Your ops plan should detail strategies for managing, staffing, manufacturing, fulfillment, inventory–all the stuff involved in operating your business on a day-to-day basis.
This part takes a reader through the day-to-day of your company, explaining the:
- Location/Logistics of your business
- Transportation (if you’re selling a product)
- Legal — Do you need a permit? License? Do you need to join a union or other professional organization?
- Inventory — if you’re selling a product, where will you need to store it?
- Providers/Suppliers/Freelancers — Detailed contact info/pricing for anyone you’re outsourcing to.
Step 6. Management Team
Many investors and lenders feel the quality and experience of the management team is one of the most important factors used to evaluate the potential of a new business.
But putting work into the Management Team section will not only benefit people who may read your plan. It will also help you evaluate the skills, experiences, and resources your management team will need. Addressing your company’s needs during implementation will make a major impact on your chances of success.
Step 7. Fiscal Plan
The fiscal piece of your business plan puzzle is the piece investors and loan managers are going to spend the most time looking at. Without proper capitalization and financial planning, even the most excellent business idea that fulfills an urgent need is at high risk for failing.
Most fiscal plans include at least five basic reports or projections:
- Balance Sheet: Describes the company cash position including assets, liabilities, shareholders, and earnings retained to fund future operations or to serve as funding for expansion and growth. It indicates the financial health of a business.
- Income Statement: Also called a Profit and Loss statement, this report lists projected revenue and expenses. It shows whether a company will be profitable during a given time period.
- Cash Flow Statement: A projection of cash receipts and expense payments. It shows how and when cash will flow through the business; without cash, payments (including salaries) cannot be made.
- Operating Budget: A detailed breakdown of income and expenses; provides a guide for how the company will operate from a monetary point of view.
- Break-Even Analysis: A projection of the revenue required to cover all fixed and variable expenses. Shows when, under specific conditions, a business can expect to become profitable.
Step 8. Appendix
This is where you talk about the remaining things. The appendix shows you did your research. Also, this is where you add any technical diagrams of your business plan. Use your appendix to provide supporting documents or other materials that were specially requested. Common items to include are credit histories, resumes, product pictures, letters of reference, licenses, permits, or patents, legal documents, permits, and other contracts.
Writing a plan can be a tedious exercise, but it’s a crucial one for the future of your business. It’s not just about attracting investors. Creating a business plan helps you and your team organize your business better, with one eye on its present state and the other on building a future together. You can book an appointment with our consultants at Riz and Mona Consultancy for further guidance and help in writing a perfect business plan.