Writing a Business Plan
A business plan is usually a written description of your business future. It is a requisite tool that any startup business needs to have before beginning its operations. Various venture capital firms and banks make the presence of a viable business plan a necessity to the investment of funds in the business.
What is a business plan?
A business plan is a written document that describes the nature of your business along with a glimpse of financial background, profit-loss statement, sales and marketing strategy. The business plan should also have the overview of the industry in which the business would be situated and how the business would stand and grow in the market with its potential competitors. A business plan acts as a road map that directs the business towards its future and helps avoid any hurdle in between. A business plan is an investment that pays big dividends in the long term.
What are the main components of a business plan?
When you break down the structure of a business plan, it consists of the following components:
Title Page and Contents
A business plan needs to be well put together so that it looks professional and is easy to read. You can include a table of content that follows an executive summary. It makes easier for readers to find any information required regarding your business plan.
The Executive Summary
It is also referred as a statement of purpose. By its name, it is clear that you need to encapsulate your reason for writing the business plan. All the questions that are in your head should be written here briefly and clearly. It should not be more than half a page. The main points that it should cover are:
- Basic Company Information
- Business Concept
- Financial Requirements and Features
- Prototypes or patents
- FAQs related to your business
The size of the business description depends entirely on the complexity of your plan. It begins with the brief information about the industry. Research properly to explain the various markets within your industry. Also, include the references to new products that could benefit or hinder your business. Just keep in mind that the investors or bankers would want to know all the facts so that they don’t risk their money. To avoid conjecture or assumptions, provide the observations based on reliable data.
When describing your business, start with the sector in which your business falls, then tell whether it is new or established. After that, talk about your business structure (Partnership, Sole Proprietorship, LLC, C or S Corporation. Next, talk about your business’ principles and the state in which it is located and will bring business in. You can then continue with other information like who the customers would be, how big the product’s market will be and how the product or service will be distributed and marketed.
Product or Service Description
When describing your product, make sure that it grabs the attention of the readers. It should give readers an idea of what you are talking about, how people can use your products, how different your product is from others. After that, explain how your business can attain a competitive advantage. Describe all the factors that can make your product or service successful. Give hard facts about the product. Be particular about what sets your business apart from those of your competitors. Also, you need to mention the suppliers who are ready to work with you. In addition, state the reasons for the choice of your locations to sell your product.
Competitive Market Analysis
The purpose of this competitive market analysis is to determine:
- The pros and cons of the competitors within your market
- Plans that will provide you with a definite advantage
- Hurdles that can be formed to prevent competition from entering your market
- Any flaws that can be employed in the product development cycle
If you are applying for funding, you need to draft your funding requirements here. Your main aim should be to explicitly explain how much funding you’ll need for the coming five years, what for and how you’ll use it.
Decide whether you want equity or debts, the conditions you’d like to apply for, and the time frame within which your request will cover. Give a full description of how you will be using your funds. Indicate if you will need funds to buy materials or equipment, pay salaries, or include particular bills until revenue rises. Always add a summary of your future strategic financial plans, like selling your business or paying off debt.
Enhance your funding request with the financial projections. Your main aim is to convince the reader about your business idea and convince them that it is stable and will be a financial success. If you have an already established business, include balance sheets, cash flow, and income statements of the last 3-4 years. If you have any other collateral that you can put against the loan, make sure to list it too.
Also, present a prospective financial vision for the next five years. Add balance sheets, forecasted income statements, capital expenditure budgets, and cash flow statements. For the first year, be even more precise and use monthly or quarterly projections. Simply make sure to justify your projections, and balance them to your funding requests.
It is the best part to use graphs and charts and tell the financial story of your business.
Operations and Management
This component of your plan is designed to outline how the business functions on an ongoing basis. The operations plan gives an idea of the logistics of the organization, such as the duties and liabilities of the management team, the tasks allocated to each division within the company, as well as the capital and expense obligations concerned with the operations of the business.
Marketing and Sales
There’s no particular way to propose a marketing strategy. The strategy you are proposing should evolve and change to fit your requirements. The main aim of this section is to describe how you will attract your customers and retain them. In short, completely describe your marketing and sales strategies.
Advantages of Writing a Business Plan
It helps businesses have their complete focus on their unique identities, their target markets, and their services or products tailored to match their business.
Keep a check on the complete business
If the business planning is done right, it connects the dots in your business, so you get a better picture. The strategy is deemed to relate to tactics with vital alignment. Questions to ask are: does that show up in your plan? Do your sales connect with your sales and marketing costs? Are your products appropriate for your target market? Are you covering costs, including the long-term fixed costs, product development, and working capital needs as well?
With a meticulous planning process, businesses can frequently review assumptions, catch new developments and track progress so they can adjust to the status quo. Plan vs. real analysis is a dashboard, and setting the plan is steering.
A good business plan sets expectations and track results. It’s a mechanism for systematic review of what happened and what’s expected to happen.
With a good business plan, you can set milestones and work towards them. These are the key goals that you want to succeed, like touching a defined sales level, hiring the sales manager, or opening the business in the new location.
A business plan is vital to the health of your business. Investment-seeking entrepreneurs can easily convey their vision to potential investors and help them in managing their company in a better way.