A business plan can be as simple as an outline you write on your own or as detailed as a 100-page document full of graphs and spreadsheets that you hire an outside consultant to create for you. For small business owners, it’s usually somewhere in between. In the end, it’s the strategies outlined in your business plan that will either allow you to start and run your company effectively or cause you to fail within the first year of operation. Let’s take a look at how to write a business plan so that you can be successful in creating one.
While your business plan will likely be outdated from day one, it’s important to write one before you launch your business. And since launching your business is an iterative process, there will never be a perfect time to start writing it.
While many people think of their business plan as something that needs to be done all at once, don’t overthink it. Focus on completing one section at a time and keep in mind that your plan doesn’t have to represent everything you know about your idea or company right now—in fact, most of what goes into writing it will change in some way or another later on down the line.
What is a business plan? Who writes it? Why write one? What’s in it? Where do I start and how do I go about it? These are some of questions that come up in your mind when you decide to get into business. To respond to these questions and help you move forward, we have put together an easy-to-follow guide on writing business plans. We will try to keep our tips simple with examples as much as possible so that everyone can understand what exactly needs to be done in business planning.
So let’s begin:
1) A business plan serves primarily four functions: Business Modeling (it helps you think through your business idea), Market Analysis (your competitors, customer base etc.), SWOT Analysis (strengths, weaknesses, opportunities and threats), and Financial forecasting (where is all money coming from). It explains who are you serving; how your company makes money; how long will it take for profits; etc. It gives details on people/entities involved in creating a business like owner(s), co-owners, directors/partners if any etc.
It contains expected financial numbers so that outsiders can assess whether your business would be viable or not. For example, lets say XYZ Corp has revenues of $50K and we have been spending $30K in operations every year, then our profit is only $20K per year which means that next year with same spending our profit may come down to as low as $10K even with no growth in sales volume!
2) Secondly, it should also be organized according to accepted formats like those offered by SCORE or US Small Business Administration (SBA). Their templates help guide you through each section of your plan which makes it easier for an outsider/newcomer/reader etc. to understand what is going on in a business plan.
Having said that, it is always better to follow industry standards rather than blindly copying from any such standard as every sector may not have same requirements and thus a generic format may not work well in all situations.
3) Finally, it is about your target audience. Who would read your business plan; are they bankers? Angels? VCs? Or just some simple investor? So there will be some difference while writing these plans depending on what kind of readership you expect.
Business plans are an organized and formalized description of your company. It’s best thought of as a map—it doesn’t show every detail, but it helps you navigate more easily. Your business plan can be simple or detailed; it’s whatever works for you.
Here are some ways to think about writing your business plan Model how you want your business to run:
What will your business model look like?
This usually starts with identifying what industry you’re going into—think not just on paper, but also in real life: go out and talk to people who have businesses that interest you. Are they successful? Why? How did they do it? What lessons can you take from their story? Identify what will set your business apart from its competitors.
No one knows exactly what new things will come up in any given field – so when companies try to make their plans five years out, they inevitably get many things wrong.
Those who can benefit from writing business plans include entrepreneurs, small-business owners, and people seeking a loan or investment capital. Business plans have many uses. They help you put your company on paper; they help you understand your strengths and weaknesses; they allow you to assess potential problems; and ultimately, they allow you to determine if your business is viable or not.
When used as an essential planning tool, a business plan will save you valuable time and money by helping you avoid costly mistakes before it’s too late. For example, it’s hard to identify whether specific staff members in key areas are working up to their full potential unless someone outside of that area takes a good look at how everyone performs.
Well-written business plans can quickly identify issues such as these and offer solutions — solutions that might otherwise take months of internal meetings between various groups with no real outcomes resulting. In addition, writing a business plan forces you to think through your organization’s strengths and weaknesses, giving you an opportunity to improve performance in areas where you have fallen short.
Further, it requires you to set goals for your company based on clear criteria, so if something doesn’t work out as planned there will be documented evidence detailing why it didn’t work out.
An effective business plan should include four components: mission statement, executive summary, market research, and financials. More specifically, an efficient business plan should outline your company’s mission statement and goals for growth (executive summary), summarize research about what customers are looking for in your industry (market research), and give an overview of expected sales, profits and capital expenditures (financials). Each section of your business plan is important; however there is one component that is vital.
The executive summary is often known as the sell. It should tell your story in about one page, in no more than two pages, give your customers and potential investors a reason why they should care about your business, and present you as someone who has what it takes to be successful.
The length of each section is up to you—but keep in mind that if you want to persuade people that you can get their investment or loan, your sections should be as detailed as possible. You’ll want other professionals with experience in your field to review it too, so don’t forget advice from them.
In any case, spend as much time and thought on each section as you possibly can; even minor details here could end up being key issues further down the line. Read your plan over several times and revise until it sounds good enough for others to read easily. Once you have finished writing your business plan and are satisfied with what has been created – share it with someone who has business experience for constructive feedback.
Most businesses operate on one of three business models: service, product or subscription. As soon as you figure out which type of business model your new venture will use, you’ll need to start writing down what you plan to sell, who you’ll sell it to and how you plan on selling it. A detailed business plan is an absolute necessity in order for most businesses of any kind to get off their feet and take flight.
That’s why it’s so important to get your business plan off on the right foot. The process of writing one can be stressful and difficult, but fortunately there are plenty of sites out there that offer help with business plans. Many of these resources will allow you to customize your business plan based on your own industry and needs.
