If you consider establishing a company, you need to take into account many different factors. One of the most crucial of them is a strong basis for your ideas. That’s why knowing how to make a business plan is necessary.
In this article, we explore what to include in a business plan, provide a step-by-step guide on drawing it up, and explain why you might need one in the first place. So regardless of the niche you’re striving for, by the time we’re done, you’ll be well-informed, inspired, and ready to get started right away!
What is a Business Plan?
We can get to grips with this basic term in two ways. The first, a more superficial meaning is simple enough: it is a schedule for how your company is going to work. The second, a closer-to-reality meaning, is actually a bit more complicated.
There are multiple types of business plans, some of which are for emerging projects while others are for established companies. Yet all of them answer the question, “What does a business plan look like?” similarly. It is a strategically important document that defines a company’s goals for the future and how you’re hoping to accomplish them.
Writing a business plan implies sketching a roadmap for commercial success, highlighting finances, marketing, and operational issues. For that, you’ll require a profound understanding of your goals, the market scene you’re targeting, as well as potential issues and opportunities it poses.
Business plans differ in scope, length, and components, which depend on your purpose. But, on the other hand, they all comprise similar sections and cover the same key aspects.
How to Come up with a Business Plan?
First and foremost, you should answer the question, “Why”? Why do you need an outline for a business plan in the first place? Let’s figure your purpose out.
Carrying a splendid idea for a business venture, you most likely are eager to dive headfirst into getting it up and launching. Such enthusiasm is commendable, yet it may be counterproductive without some direction. Creating a business plan entails envisioning your company’s strategy for the next one to three years.
With it, you’ll be able to set reachable targets and goals, define priorities, and establish a landmark for your performance. A clear structure that manifests itself through making a business plan will be useful for both your ambitions and other involved people’s understanding of where you all are on a “roadmap.” All stakeholders will be sure everyone is aligned with the same priorities.
Financing your venture is another incentive for you to learn how to write up a business plan. If you’re seeking investors or approaching banks, they will require your financial statements and other evidence that you understand clearly how much you’re going to spend and earn.
Moreover, your small business plan will demonstrate a market’s demand for your service or product. Ideally, it should also illustrate how exactly your business model is going to be profitable and how much you forecast to make.
Multiple studies have already proved that strategic planning increases a company’s performance by up to 30%. Such growth revolves around if you plan business, have clear goals, and are ready with crafted strategies in place. A good document also includes identified risks, sales projections, and specified opportunities to obtain new customers.
How to Write a Business Plan
Be it a one-page document or a more extended and advanced plan, you will still have to cover off some of the fundamentals. However, the following business planning steps should guide you and facilitate the entire process.
This document must be unique for your company; hence, we do not recommend resorting to free templates you can find online. Instead, you can always request help with business planning from experts seasoned enough to work through and tailor your document. Otherwise, mind your attention to detail, get prepared, and let’s learn how to create a business plan yourself.
Step 1: Research
How to start a business plan? Well, before you actually start writing, spend some time researching all the stuff you’ll have to include in the document. Make sure you’ve got sufficient basic data about your business, financials, marketplace, competitors, etc. A data-driven approach will serve you well, highlighting things you might otherwise miss.
Step 2: Create Your Company’s Overview
Start a business plan with a section explaining the necessary background to what your organization is and what it’s all about. Such a mission statement of your organization should cover the following points:
- When your company started operating (if it did already), and what progress it has made so far.
- If you’re launching a new business, provide details of your professional background and what you’ve managed to initiate to get your new venture started.
- If you take charge of the business, specify the details about a prior owner.
- Information about the legal framework and the current ownership, specifying major stakeholders and key partners.
Step 3: Concentrate on Your Service/Product
The overview of your company’s services and/or products should contain outright information yet not overly technical. Reveal something that makes it unique and distinguished.
Before you write a business plan, you should already be aware of your company’s unique selling point and how it stands out on the market. What goes in a business plan at this stage is also highlighting your products/services benefits as well as how you’ll eliminate any potential shortcomings.
Dwell on the product development progress your company has made so far.
Plus, mention what you plan on doing to enhance it going forward.
Step 4: Analyze Your Competitors and the Market
If you learn how to build a business plan, market conditions are something you can’t just easily overlook. Competitive and market analysis is a cornerstone of the best business plans. It demonstrates how well you know the sector you’re targeting and how accurately you’ve revealed its trends, challenges, and prospects.
First, analyze various market segments, their types of customers along with purchasing habits. Consider how much of a market share you strive to gain. Next, move on to analyzing your existing/potential clients. And finally, if you’re at the stage of launching, explore your best prospects (or your insights into targets) and share how you’ll generate leads.
At the end of this section, you should analyze your main competitors. Write about their services/products, pricing policies, advantages and disadvantages, and whether or not clients will buy from you instead of them. Don’t overindulge in criticizing; instead, provide your truthful assessment of their benefits and shortcomings.
Step 5: Develop a Marketing Strategy
This section explores how you intend to position your service/product in the market. Remember to cover the following points in that regard:
- Pricing. How does it refer to the quality, worth, and exclusiveness of your service/product?
- Promotion. Which types of promotions should work best for what your offer? How are you going to scale your marketing activities?
- Channels. How exactly will you market your service/product? Will you choose digital marketing over more traditional means? What does your marketing research data show?
- Sales. What are the critical points of your sales strategy? Does it rest on the sales cycle, and how long is it?
Plus, don’t forget to include marketing costs as well as your estimated return on investment.
Step 6: Highlight Your Management and Other Staff
Drill down the human resources ready to help your company succeed. Share details of how the management is organized, the skills and qualifications of the staff, and particular gaps (if any).
Your business plan includes here also key metrics of your workforce and whether or not they go in line with other enterprises in the industry. Finally, share your goals on growing the team through recruitment along with a backup scenario in case of probable loss of key personnel.
Step 7: Accentuate Your Operational Activities
Where is your company based? What equipment do you use? How reliable are your systems?
A basic business plan should also highlight the premises you start with and whether or not it serves your today’s and future needs. Then, assess your equipment’s relevancy and efficiency and how it compares to your competitors and industry standards. IT systems you use are important to mention, too: how they are set up, which way you’re going to manage your accounts, user data, stock, etc.
Step 8: Provide Your Financial Forecast
Yes, to create a business plan, you’ll need a good grasp of accounting and commercial finance. If your company has been operating for a while, start off by highlighting some past data like sales and gross margin. Plus, add your profit and loss account, a balance sheet, and a cash flow statement. But despite having or lacking past trading data, you should still insert your financial plan along with a forecast specifying the next three years of trading operations.
And here again, make sure that a comprehensive methodology backs up your prediction. Use the data-driven approach to demonstrate how you’ve devised your forecast model. Prove that you’ve managed to consider a variety of market factors. In other words, do your best to show the financial health of your commercial concept.
Step 9: Carry out a SWOT Analysis
Steps of a business plan also include a SWOT analysis proving that you’ve got to grips with your company as well as external factors impacting it. You can make it brief yet ensure to hit every point with some descriptions:
- Strengths. The aspects contributing to your unique market position include expertise, high quality, or price policy.
- Weaknesses. Potential issues that you’ll have to solve in order to thrive, such as a shortage of financial backing or a small customer base.
- Opportunities. The factors potentially promising an opportunity for your organization to succeed, like a change in the marketplace, for instance.
- Threats. Things that might probably go wrong, such as a new competitor in the industry or an economic downturn.
Recount how you can benefit from or cope with each of these factors, demonstrating your profound grasp of the market.
Step 10: Come up with Your Executive Summary
Structuring a business plan actually prompts us that your executive summary will be the first chapter of the document. It will highlight who your company is, your scope of activity, and for what purpose you represent this document to readers. Why, then, do we list it as the 10th step? Because, by the time you’re done writing it, you’ll get to know your own company better than ever. Hence, it will be much easier to summarise the key points.