With a great business plan, you can clarify your strategy, identify potential challenges, evaluate your available resources, and conclude on the feasibility of your business idea before you begin. To write a business plan, you will need to be open-minded and do detailed research about your potential business. However, not every successful business begins with an official business plan.
Most entrepreneurs derive value in taking time to step back and delve more into their idea, and the market they intend to enter. This will further give them an understanding of the scope and strategy behind their tactics and appreciate the need to write a business plan. In this article, we will explain what a business plan is and also how to write a business plan successfully. Let’s dive in!
What Is A Business Plan?
A business plan is a document that is strategically written to outline a company’s goals, the strategies to achieve them, and the time frame for their achievement. It often includes aspects such as market analysis, financial projections, and organizational structure. It’s very important to write a business plan as it’ll serve as a roadmap for business growth and a guide to source funding.
Oftentimes, financial institutions and investors always require to see a business plan before pumping money into any project. In case you do not plan to source for funding outside, a detailed and well-written business plan will serve as guidance for your business as it progresses.
How To Write A Business Plan
Below we will outline the various steps to write a business plan successfully. Let’s check it out!
Write An Executive Summary
This is your elevator pitch which must include a mission statement and a brief description of the products/services that your business offers. Additionally, a broad summary of your financial growth plans must also be included. The first thing your investors will read is the executive summary, however, it can be easier to write it last. Such a method will help you highlight information you came across while writing other sections that are more detailed.
Describe Your Company
After your executive summary comes your company description. This section usually contains basic information such as:
- The registered name of your business.
- The address of your business location.
- The names of the major people in the business. Here, ensure that you highlight the unique skills or technical expertise among members of your team.
Furthermore, your company description must define the structure of your business, whether it’s a sole proprietorship, partnership, or corporation. It must also include the percentage ownership of each major member of the company, as well as the extent of each owner’s involvement in the company. Additionally, it’s important to write a little about the history of your company and the nature of your business to brief the reader about your goals.
State Your Business Goals
The third part when it comes to writing a business plan is an objective statement. Here, you will outline what you aimed to accomplish, both in the near term and over the coming years. Furthermore, if you need a business loan or outside investment, this section can be used to explain how it’ll be.
You will explain how the financing will help your business grow and your plans for achieving those growth targets. Meanwhile, the aim is to provide a clear explanation of the opportunities that your business presents to the lender. For instance, if your business is preparing to launch a third product line, you may need to explain how the loan will be of great help. It will make your company launch that new product easily and how much sales you think will increase over the next few years.
Describe Your Products And Services
Under this section, you’ll need to explain in detail the products/services that your company offers or intends to offer. Furthermore, ensure that you include the following:
- A detailed description of how your product or service works.
- The pricing model for your product or service.
- As well as the typical customers that you serve.
- Your supply chain and order fulfillment strategy.
In addition, you can discuss your current or pending trademarks and patents associated with your product/service.
Do Your Market Research
One of the ways to write a business plan is by doing extensive market research. Lenders and investors are most likely interested in what sets your product apart from your competitors. Therefore, in your market analysis section, you will need to explain who your competitors are.
Also, you will discuss what they do well and explain what you can do much better. Remember to explain it if you are serving a different or underserved market.
Outline Your Marketing And Sales Plan
In this section, you will discuss how you plan to persuade customers to buy your products/services or how you intend to develop customer loyalty that will result in repeat business. Remember to also include details about your sales and distribution strategies, such as the costs involved in selling certain products.
Perform A Business Financial Analysis
If you’re just starting up your business, it might be difficult to gather much information about your business finances yet. However, if you are an existing business owner, you may need to include income or profit-and-loss statements. As well as a balance sheet that points out your assets and debts and a cash flow statement that shows how cash enters and leaves the company.
Meanwhile, there is some accounting software that may be able to generate these reports for you. You can also calculate metrics with it, these metrics include:
- Net profit margin: This is the percentage of the revenue that you reserve as net income.
- Current ratio: This explains the measurement of your liquidity and ability to repay debts.
- Accounts receivable turnover ratio: It’s a measurement of how frequently you collect on receivables per year.
Furthermore, you can include charts and graphs in this section, it’ll make it easy for people reading your plan to understand the financial health of your business.
Make Financial Projections
This is an important aspect of your business plan if you need financing or investors. Here, you will outline how your business plans to generate enough profit to repay the loan or how you plan to earn a decent return for investors. Furthermore, you must make available your business’s monthly or quarterly sales, expenses, and profit estimates over a minimum three-year period.
It’s very essential for you to be accurate, therefore, ensure that you carefully analyze your past financial statements before giving projections. Even though your goals may be aggressive, they should also be realistic.
Summarize How Your Company Operates
Before getting to the end of your business plan, you will need to summarize how your business is structured and outline each team’s responsibilities. With this, your readers will have an understanding of who performs each of the functions you’ve earlier stated. Furthermore, making and selling your products/services and how much each of those functions costs. In case any of your employees have extraordinary skills, you may want to include their resumes to help explain the competitive advantage they give you.
Add Any Additional Information To An Appendix
Lastly, you will need to attach any supporting information or additional materials that could not be fit anywhere else. Such materials may include:
- Licenses and permits.
- Patents.
- Equipment leases.
- Contracts.
- Bank statements.
- Details of your personal and business credit history, if you need financing.
