If you're starting a business, you need a business plan. It's a strategic roadmap that not only helps you but also gives your key stakeholders, investors, lenders, and other business partners an idea of what your business is capable of and where it's headed.
One of the many reasons why businesses fail is due to a lack of proper planning. This could be insufficient market research, weak financial planning, not building a strong foundation for the brand to stand on--all these drawbacks can be attributed to poor planning.
What is a business plan?
A business plan is a roadmap with every crucial detail outlined clearly. It highlights information such as what you are going to sell, your business's structure, how you plan to sell the product/service, how much funding you will need, your financial projections, and more.
Before you put pen to paper, brainstorm essential questions such as:
- Why are you starting the business?
- What makes you/your product different from what's already available in the market?
- What unique solution are you providing?
- Who are you--what does your management team look like? What experience and expertise do they bring to the table?
- Who will be your ideal customer?
- How will you make a profit, and how long will it take you?
These are some basic questions. There'll be other questions that'll be more industry and product-specific. Answering them in a clear, concise, and strategic manner will prove that you know what you're doing and your business idea is strong.
Who should write a business plan?
In most scenarios, it's the founder(s) who writes the business plan. This could be one person or a group of people. It's important to note that this is not an internal document. A business plan is a promotional document that undergoes constant changes as the business evolves.
Another crucial detail to remember when you create a business plan is to know your target audience. This could be your investors, customers, or other stakeholders. The way you explain certain concepts and ideas and the language you use will depend on who you're engaging with and in what realm.
How to write a business plan?
A business plan can get lengthy. So, organize your data beforehand to ensure that your outline doesn't become a 50-page long document. Share what's important to your audience. If you're taking a loan, then the bank or loan agency will often give you a structure that you can follow.
Listed below are some key headlines that you should include in your business plan. There is always room for creativity, as long as you address all the key points.
1. Executive summary
This is where you spell out your vision (succinctly). A good executive summary answers the following questions:
- What industry are you in?
- What product(s)/service are you selling?
- Who are you selling to (target audience)?
- Where is the industry headed?
- How will you scale your company in the future?
- What are the immediate next steps?
- Who are the founders of the company? What experience and skills do they bring?
- What's your motivation to start this company? And why now?
Once you answer these questions, look for executive summaries of other businesses in your sector for inspiration. You could pick up a template or a format and add your creativity to it.
2. Your Mission/Vision Statements
Your mission and vision statements are more important to your internal team than your customers. Writing these down determines how your business will react in a specific situation and how it will communicate with its audience.
Your mission and vision statements shouldn't (ideally) be longer than one sentence. It should be an exact sentiment that highlights your goals and how you see them evolving over the years. Defining these statements will help you get a clear idea of who you are and what motivates you to do better.
3. List Your Product(s) / Service(s)
This is the section where you list down all the products/services that you plan to sell. Explain what these products are, what's unique about them, how you will market them, their features, benefits, how they are different from your competitors, and more.
Since this is a business plan, you also should list down the cost of building these products/services. Answer questions such as:
- How much does it cost you to produce the product/service?
- At what cost will you sell it to your customer?
- Where can the customer purchase the product from?
- How will you bill them?
- Are there any additional costs (logistics, transportation, etc.) involved in getting the customer's product/service?
Avoid getting too technical in this section. Give a general idea of what your product/service is and how it can benefit your customer.
4. Outline Your Marketing Plan
Once you've explained what you want to do and what your product is, the next step is to explain how you're going to sell it. This is important as it highlights that you have a real plan regarding how you're going to execute your business idea.
Your marketing plan must include market research and data-backed insights. Once you have that, explain your marketing plan in these seven sub-sections:
i. Your target audience: Are you B2B or B2C? Who is your ideal customer, and how will you sell your product/service to them? Do they know about you? Why will they care about you?
ii. Your competitors: Who is your competition, and what advantage do they have on you? Do you have a plan on how you'll overcome that?
iii. Your niche: What is that specific area you're going after, and how will you differentiate yourself there?
iv. Your distribution strategy: How will you promote your product/service in the said niche? Will you be selling through your website? Will you have other vendors doing the selling for you?
v. Your advertising strategy: What advertising mediums are you going to use? Will your plan be purely digital, or will you explore TV, radio, print? Do you have the budget? Do you have a strong advertising message? What will be your success metric?
vi. Your sales strategy: How are you bringing in the revenue? Will you have telesales or door-to-door sales? Will you be putting together a sales team or handling it yourself?
vii. Your brand identity: You've described what you'll sell, whom you'll sell it to, and how you'll do it. The next step is to highlight what face you will give your business. This involves your logo design, your website, social media presence, and more.
5. Highlight Your Daily Operations
This section will explain what an ideal day looks like in your company. Feel free to paint a picture of how your typical day will look like from start to finish. Include a photo or video that may help depict your idea more visually.
This is also where you'll list down all the vendors and freelancers you'll be working with. Add all these details to give the reader all the necessary information they might need. Your objective is to show that you're a reliable team and have a well-thought-out plan to execute your business idea.
6. Outline Your Fiscal Plan
This is the part that most loan managers and investors are keen on. Without proper financial planning, even the best business ideas don't make it through. Include the following in this section:
i. Cash-flow analysis: This highlights what you're going to sell and your business expenses. It helps you project your profit margins.
ii. Profit and loss analysis: As a follow-up to the cash-flow analysis, this looks ahead at least a year and highlights revenue projections.
iii. Break-even analysis: This is where you tell them how much you need to break even.
All the information that you can't put in the sections above comes here. This includes the research you did and all your sources. If there are any technical diagrams that you cannot have in the earlier sections, you can include those here.
The addendum is also a fantastic place to add resumes, references, or ads showing you mean what you say. Everything important but can be excluded from the earlier sections can be added here.
When building a business, your first focus should be to get the foundation right. Next comes documenting everything and putting it into a presentation. Creating a business plan helps you be productive, gives you direction, and helps you stay focused. So, if you have a business idea, create a business plan for it today.