A business plan is the ultimate guide for you and stakeholders as you grow your business. Having a written business plan is just as vital when you are getting into a business venture alone or with others.
This is the document that you will refer to when checking how your business is progressing, when you feel like you need to make changes in the company, when you feel like you need to do more to achieve your set goals and most importantly, this is the document that you will use to pitch your business ideas to potential employees, stakeholders and investors.
This said a business plan that’s both well thought out and well written is important for you whether you are a beginner entrepreneur or you are already running a successful business that you are looking to improve or expand.
Writing a good business plan may appear like a rather daunting undertaking. However, all it really requires is some attention to detail and a bit of time and this step by step guide on how to write a good business plan.
Even before you get down to creating a good business plan, there are some key steps that you need to follow to help you in the process.
First, carry out some research on the various business plan templates. This will give you a sense of the kind of plan you want to write for your company. There is a general standard process for how to write a business plan but you may want to go for a more industry-specific business plan, or, if you need to hurry the process along, the process, the SBA advises that you go for a “ lean” or “ startup format”.
A lean business plan should cover important areas such as your business’s value proposition, major partnerships, customer segments and channels, and revenue channels. It can be about a page long. This format is ideal if you quickly need to come up with a business plan or if you intend to keep changing your business plan regularly. It may however not suffice if you are looking to present your business plan to investors or lenders.
Secondly, decide if you simply want to write your business plan using an easily editable writing tool like Google Docs or if you want to make use of a business plan which can provide you with guided and structured assistance while writing your business plan. This software will often include sample templates for you to refer to.
3 important pointers to keep in mind when writing your business plan
1. Keep your business plan short and to the point
Here is why:
One, you write your business plan so that it can be read. When your business plan is too long, this automatically puts off the reader, no matter how interested they are in your business. Honestly speaking, nobody has the time to read a 100-page long business plan.
And two, your business plan is an important tool that you will need to use often in the running and growth of your business. This means that you will need to read it every now and then and revise it as you progress your business. If you write a really long business plan, this may be impossible to do.
The last thing you want is to write a good business plan only for it to spend forever gathering dust on a shelf in your office. This would beat its purpose altogether, right?
According to the SBA, a business plan should be 30-50 pages long. Be careful not to keep it too short so that it is comprehensive enough.
2. Consider your audience
Write your business plan using a language that your target audience won’t have difficulty understanding.
For example, if your company is in the medical field, avoid using hard medical terms that are not understandable to all.
Explain your product in simple and direct terms. That way, you accommodate your potential investors and clients.
If you really need to, use your business plan’s appendix to give more comprehensive specs on your product or service.
You may also need to adjust the master version a little to suit who’s reading it. For example, the investors will most likely be more interested in your product, service and marketing strategy. So, adjust their copy of the business plan so it reflects this. And when it comes to lenders, their interests will be mostly on financial projections so try adjusting their copy a little bit to draw attention to these forecasts.
With this in mind, it is advisable that you create one master version of your business plan, make copies, and label each copy in accordance with the target reader.
3. Don’t be discouraged
Most entrepreneurs and successful business owners who you think are gurus in the business field didn’t start off as such. In fact, a lot of them still aren’t experts at it. Running a business is a continuous learning process.
Do not let everything you’ve read on writing a good, business plan intimidate you into thinking that you can’t do it. Sure, it can be a little daunting but you can do it. The fact that you know your business makes you an expert on it and gives you an added edge. Start with a simple business plan that you can later make a little longer and more detailed as your business progresses.
6 Elements To Include In A Business Plan
Your business plan should help you improve your business. Therefore, write it well in such a way that it guides you properly in achieving your set objectives and goal. Your business plan will be unique depending on your type of business. But there are some set rules you ought to follow when writing it. Below is a list of the key components that you should include in your business plan. These elements go hand in hand with the above rules.
According to business experts, a business plan consists of answers to a number of questions. The key is to answer only a few questions at a go. It is easier to prepare a small section of your business plan at a time than tackling it all at a go.
Complete each section, step by step, to create an extensive analysis of your company, as it is currently and as you hope for it to be in the future.
1. Executive summary
The executive summary is an overview of your business and your plans. It comes in the first chapter of your plan and it explains what your business is about, where it is currently, what you are looking to achieve in your business in both the short and long term and what you need to get there. This is the actually most important part of your business plan and as such, it should be able to hold its own.
It should ideally be one to two pages long which I know, seems a bit lean for such an important section of your business plan, but it can be done.
This is how;
First, make sure you toss out any piece of information that does not pertain to the whys, whats, wheres and hows.
Second, follow these handy points that SBA recommends to put together your executive summary:
- Mission statement – use one paragraph to outline your mission statement which should explain what your business is about and what your goals are.
- General company information – use this section to indicate when your business was formed, the names and titles of the founders, the number of employees, and the location of the business.
- Highlights – if you have been running your business for some time, use this section using graphs and charts to indicate any growth you’ve achieved since the offset of your business. You can either indicate financial market highlights or key achievements of the business. This is the part of your executive summary that shows why you are likely to be successful. However, if you are just starting out, you most likely won’t have any statistics back you up here but you can give information on experiences you’ve gained in your past endeavors.
- Products and services – explain your product or service in brief and who your target clients are. In case you haven’t launched a product yet, describe your plans for your product.
- Financial information – this is an important point especially if you’re looking for financing for your business. Include information about any banks or lenders you’ve worked with so far as well as your funding goals at the end of your executive summary.
- Future plans – briefly outline what future plans you have for the business.
Do not forget that it is a summary so; keep this part of your business plan short but interesting. Leave the lengthy details about your business to the other elements of your business plan.
Also remember that this is the most important part of your business plan and if you are having trouble writing it first before you get into the nitty-gritty details, and then consider writing it last. This is helpful because it is only after you’ve gotten a comprehensive understanding of what your business intends to do, what your goals are and what you need to achieve them, can you be best placed to put it all in a summary.
2. Market Opportunities
After you’ve tackled the Executive summary section, you need to delve into market research, a critical aspect of every successful business. Ensure that your business plan properly analyzes customer demographics, purchasing styles and patterns as well as their inclination to embrace new products and services. This will involve some research to ensure that there is a viable market for your products and services.
To help you in this process, you will need to understand your market and answer these questions in the most comprehensive way you can.
- What are you actually selling? Choosing the right products and services is a key factor in ensuring your business success.
- Who is your target market? Knowing who your customers are is key. Include the segment and percentage of your market you intend to focus on, to penetrate and acquire.
- How are you solving a need for your market? Knowing what your customers need and why will they be willing to purchase your products and services will help you tackle this section effectively,
- Who is your competition? Know your competition, what their strengths and weaknesses are. What advantages you intend to offer to customers to counter the competition.
The execution chapter of your business plan should indicate how you are going to take your opportunity and turn it into a thriving business. Include your marketing and sales plans, operations, as well as your milestones and metrics for success should in this section.
Generally, your marketing plan should include the following;
- Positioning: explain how you intend to position your business and products in the first part of your marketing plan. How you position your brand is important as it determines how customers find and interact with you. Indicate if you are a free service or a service that can guarantee quality. This is the thing that will make you be different and stand out against your competitors when it comes to branding.
- Promotion: After outlining how you intend to position yourself in a way that makes you stand out, you now need to describe where you’ll get the word out to reach your customers. This typically includes your plans for packaging your product, advertising it-either-online or using the usual media sources, handling public relations, or taking part in content marketing practices.
Next, you need to cover details involving your sales plan including;
- Sales force: Explain who will be selling your product and if you need a sales force and if so, how big of a sales team do you need and who will train your sales force.
- Selling strategy: give an outlook of your business’ sales funnel and summarize how you intend to sell your product or services. How you will initiate and close deals, if your team will be cold-calling potential customers or attend sales meetings in person.
4. Company and management summary
You then need to define the organization and management structure of your business. Keep in mind that investors are on the lookout for great teams in addition to great ideas. Use this chapter to describe your current team and who does what in your business. Explain what everyone’s background is, and what their past successes and experiences bring to the team.
You will also provide a quick overview of your legal structure, location, and history if you’re already up and running, here.
Break this section down into the following;
- Organizational structure – start off this section with an organizational chart illustrating a comprehensive structure of your business and how each stakeholder fits into the bigger picture. This will show that you know who is in charge of managing what aspect of your business.
- Ownership structure – although you already mentioned this in your overview, the ownership structure is where you go into more detail about the legal structure of your company. It is where you explain what and how much everyone owns.
- Background of owners and board of directors – use this part to explain your team’s background as well as that of the managers, partners, and board of directors.
This background info serves to show potential investors that all the people you’ve surrounded yourself with are both willing and cut out to make your business a success.
Hiring need: this is especially crucial if you are just beginning your business. Your current small team might seem sufficient right now but you’ll probably need to hire more people as you expand your business in the future. Make a list of any important hires that you are likely to need to help you achieve your set goals.
5. Financial plan
Now your business plan is almost complete, but not without a financial prediction. Your financial plan comes at the end of your business plan, but it can be the most important part of the whole document. It typically includes a bit of information especially if you have been running your business for a while. This includes;
- a sales forecast,
- a cash flow statement,
- an income statement (otherwise known as a profit and loss statement), and
- your balance sheet
The other statements that you should have in your financial plan include;
- Accounts receivable statements (if applicable)
- Accounts payable statements (if applicable)
- Documentation of debt obligations (if applicable)
In the event that you do not have any past financial data from your company, you still need to include financial projections in this section. Financial projections should either be supported by your past data, or they should be based on research and analysis on the industry and your top competitors.
Some of the essential documents you should include when you are projecting the financials of your business are;
- Statements of projected income
- Cash flow forecasts
- Balance statements
- Capital expenditure budgets
A good business plan should typically have financial projections for the first year of business, and should take a lengthier outlook at a plan for the next three to five years.
It is advisable to consult a financial advisor like a business accountant to help you figure out all the details involved with creating a financial projection.
Finally, your financial plan should include any funding needs for your business, now and in the future. You may choose to get funding either via equity financing with angel investors or venture capital firms, or via debt financing with small business loans. Whatever the case, here is what your funding request should include:
- The funding amount you need at the present time,
- Any funding you may require in the future
- What you need the funds for, either as working capital, to purchase equipment, or to pay various business related fees, etc, and how these funds will help.
Giving the above information in your financial plan is vital as it gives any potential investors reading your business plan an idea of just what impact any of their financial contributions will have on your business.
Finally, remember to include graphs and charts that give a visual illustration of the current financial situation of your business and future plans.
As the final step involved in writing a business plan, you may view the appendix as a rather unimportant step. This couldn’t be further from the truth. The appendix, though at the very end of your business plan, will hold all of the supporting information that you weren’t able to include in the rest of your document.
If you have any additional data points, charts, footnotes, product images or additional information that are crucial in creating a complete plan, the appendix is ideal for you to include these details. You can also use this section to add any contracts, legal documents and permits.
What’s more, the appendix also gives you the perfect place to fit your resume as well as the resumes of any key members that make up your management team. This gives anybody reading your business plan a place to refer to if they need more information without distracting or confusing them with long text explanations or numbers while they are examining your business plan. Putting this extra information that is great to have but not overly related to the core purpose of your business in the appendix ensures that your readers only read it if they choose to.
This said, the appendix should start with a table of contents that breaks down the parts of your business plan, followed by any extra information that coincides with each part.
In a nutshell your business plan should;
- Be both objective and logical. Bear in mind that you may have had what seemed like a good idea for a business when starting out but after some deep thought and evaluation, it may prove not as practical either due to too much competition, inadequate funding, or even a non-existent market.
- Serve as the ultimate guide to the business’s operations for the first months or even years. It should create a blueprint that company leaders will consult and follow.
- Communicate the company’s purpose and vision. Outline the responsibilities of management, detail staff requirements, give a rundown of marketing strategies, and analyze present and future competition.
- Create the foundation of a financing proposal for investors and lenders to use to evaluate the company.
The ideal business plan should dig deeply into each of the above categories and it should also fulfill other purposes.
One of the most important of all these other purposes is a good business plan should be convincing. It should provide backup for a case. It should provide tangible, evidence supported by facts showing that your business idea is without a doubt sound and reasonable and has all the likelihood of thriving.
So, who does your business plan have to convince?
The first person that your business plan has to convince should be you. It should convince you that your business idea is not just a product of wishful thinking but that it has the potential to become a possible reality.
Naturally, entrepreneurs are positive and optimistic people. Once you have objectively analyzed your financial needs, products and/or services, competition, marketing plans, and likelihood to make a profit, you’ll be better informed on how practical your plan is and what chances you have for success.
If after this evaluation you are not convinced by your business plan, do not fret: simply take a couple of steps back, regroup and perfect your plans.
Who can your business plan convince?
Now that we have established that your business plan must at all costs convince you, let’s look at who it could convince.
a) Potential lenders. Starting a business often requires financial aid either from lenders such as banks or from family and friends. If this is the case, your business plan is a great tool you can use to make your case.
Giving financial aid is often risky business and a good business plan can help potential lenders understand the kind of risk they would be getting themselves into.
Financial statements and projections show where you have been and where you are headed to. This ultimately increases your chances for a loan approval.
b) Potential partners and investors. You can use your business plan to bring potential investors-whether dealing with angel investors or venture capitalists onboard. They often need a business plan in order to evaluate your business.
c) Potential joint ventures. Joint ventures are partnerships between two or more companies. A formal agreement to share the work, the revenue and profit is a joint venture. As a new company, you will likely be an unknown quantity in your market.
Setting up joint ventures with established partners is especially beneficial for your startup company because they could help your business catch the eye of the right people in the early stages of your business venture.
d) Skilled employees. For your business to succeed, you need to attract the right talent. You do need to provide them with something to explain what you are involved in. your business plan can be that thing that helps them get a better picture of this. If you are just starting up, your business plan can help these prospective employees grasp what your goals are, and their role in helping you achieve said goals.
1. How long should a business plan be?
Your business plan should ideally fit in about 50 pages. Having an extensive business plan that is too long might scare off anyone intending to read it instead of impressing them.
2. Do all the above sections be included in the business plan?
No. your business plan should include only the sections relevant to you and your business.
3. Must every part of a business plan be written down?
Yes, you do. Having a well-written business plan forces you to give every aspect of the business the required attention. It forces you to work to achieve your goals and to re-evaluate them whenever necessary for the success of the business.
Writing a business plan can seem like a lot of work and a big hustle. But a well written business plan is a vital thing to have when running a business. As you lay out your business plan, you are likely to encounter problems or complications you had never thought of.
Perhaps the market is smaller than you thought. Or perhaps your plan to counter the competition by being the low-cost provider is not practical at all since the profit margins will barely cover your costs. Or maybe you might realize that although you have a sound idea for your business, your implementation of that idea might require some change.
Do not let these or any other hiccups hinder you from creating your successful business. Remember, in order to run a successful business both you and your business cannot remain the same. learn from previous mistakes, and adapt to changes either in the economy or the marketplace, their clientele or their products and services. Identifying opportunities and challenges and reacting correctly is key.
Creating a business plan is a way for you to identify these opportunities and challenges diving into the challenging waters of business. With a good, written business plan, you are better placed to evaluate and refine your ideas and concepts without risking your money.
Always look at your business plan as a great, affordable way to test how viable your business is while steering clear of possibly pricey mistakes.
I hope that the above information helps you write the perfect business plan for your business.
And once you are done, give yourself a pat on the shoulder; you have just successfully completed the first step of running a successful business.
All the best!