A business plan is more than a mere formality you have to go through to attract investors. Essentially, it is a concrete development strategy for your business — no matter if it is a local flower shop or a global manufacturer. Any new enterprise, no matter how big or small, will go through essential development stages as well as experience challenges along the way. That is why every successful entrepreneur needs to start with a thorough, coherent, and comprehensive business plan.
Sure, if you have never created a business plan before, the whole endeavour might seem challenging. In practice, it is not always so — especially if you understand what a business plan is and which aspects it should cover. Once you are sold on the basics, you should use your business plan as a tool to convince potential sources of finance, investors, and employees that you and your start up business are the real deal.
In this guide we will provide practical tips as to how to create a business plan, step by step.
What is a Business Plan?
A business plan explicitly explains how a new company, or start up, understands its primary objectives. Simply put, it is about what a company will do, why, and for who. But more importantly, creating a business plan is about highlighting actionable strategies on how all of these goals will be achieved. To create a functional plan, one will have to consider the company from several perspectives — not just the idea and the product, but also finances, the commercial opportunities, goals, marketing, benchmarking successes, and so on.
Some companies create business plans for internal use, which is a wise and responsible strategy. An internal business plan helps business owners keep track of their progress, ensuring their business development goes according to plan. Whilst creating a business plan for internal use is a wise idea, it is not a must-have feature. Besides, internal plans may be somewhat vague.
Another thing entrepreneurs should understand is that sometimes things will not go according to plan. So, do not expect a business plan to be something you write just once and then tuck away in your desk. On the contrary, it is a strategy you will need to revisit regularly and probably even revise and adjust. This will ensure stable, predictable business growth and timely reaction to any challenges.
Why is a Business plan vital for your Company growth?
There are several reasons to build a functional and commercial plan, even if you do not intend to share it with investors or anyone outside your top management team. A well-written business plan is an important tool because it gives entrepreneurs the ability to lay out their goals and track their progress as their business begins to grow.
Formulating a business plan should be the first thing done when starting a new business. Business plans are also important for attracting investors so they can determine if your business in moving in the right direction and worth putting money into. Here are more reasons to consider creating your plan in more detail.
A Business plan explains your business idea to others
Investors aside, you may need a business plan to get a business development loan from the bank. Even if you have enough funds of your own, you still need to attract other people to your team. A potential employee may not be as interested in your long-term strategy as a business developer, will be. The same goes for any high-class executives who usually want to see the larger picture behind any company before jumping on board. This statement is also true for potential partners.
Developing a business plan for a new business
Every sole trader would like to boost their sales as quickly as possible. This is going to be way easier with a well-structured business plan. When creating a long-term development strategy for your start up, the business owner gets a chance to re-evaluate (and, as a result, adjust) some of their goals. This helps create a realistic timeframe for business growth. At a future stage you will be able to refer back to it and see if the planned milestones really happen according to plan. When creating a business plan, owners and senior management alike get a chance to find any gaps or inconsistencies on the initial, idea-stages. Besides, sharing your development plan with other people on your team you are ensuring that everyone understands the objectives so are on the same page. This will result in steady and predictable growth.
What are the best tips to make a good business plan?
Remember: Keep it simple. It is likely your plan will be seen by potential customers who may not necessarily have an intimate knowledge of your industry or sector, so you need to make sure that it is written in language that is very accessible to interested parties without specialist experience.
Do not forget the presentation. Use tables, graphs, and charts to clearly signpost the information or messages about your business you want to get across to potential investors or team members rather than it being buried in paragraphs of text.
1. Start with your target audience & appropriate markets
You may at some stage have to prove the existence of a client base for your product or service to be viable. Unless you are dealing with a revolutionary product no one has ever thought of before, this part will be simple. However, existing markets and clients pose another challenge — competition. So, the next step is to think about your product’s advantages. A rare product today is 100% unique; however, every offer should have something special — something that is better than any direct competition. To get this information, you may need to brainstorm potential clients in person, invite comments on social media or even send a mailshot that includes an online survey.
2. Find factual evidence for your claims
You may be certain that people will love what you are offering. However, it is always nice to have solid, factual proof when dealing with banks and investors. Besides, every entrepreneur will feel more confident if they know that there is a gap in the market that their offer can fill, so include valid proof to back up your claims.
3. Consider precise strategies tied to precise goals
You would be surprised to know how many sole traders cannot tie their goals to their business strategies. To avoid making a similar mistake, start with understanding what your core objectives are. Say, you need to attract new clients, how will you do that, exactly? Social media campaigns? Specialist magazine advertising or selling your products on a shopping channel? Depending on your business goals and your ideal customers, business execution strategies and plans will differ; so, make sure they correspond.
4. Evaluate risks & find escape routes
Any business’s success depends on how realistically it can evaluate all associated risks. If you are creating a business plan for yourself, the more risks you evaluate, the more prepared you will be. When writing a plan for investors, a detailed overview of risks and possible solutions will also score many points. No experienced investors will be put off by this part of your plan. On the contrary, they will see you as a serious and credible entrepreneur who know what they are doing and will determine the viability of the opportunity.
Must-have components of a Business Plan
How long should a business plan be? Depending on the nature of your business, the length of a plan will differ. A basic plan, for example, can be as short as five pages (sometimes, even less). More complex plans can reach 20 pages — but no more (nobody is likely to read the whole plan, they may just want the key ‘pull out’ information).
If you feel that you should provide more proof and data, add them as appendices. Now that we have the plan length covered, let us take a look at the business plan format and structure. Regardless of your idea, these six elements should be present in any plan.
The business plan executive summary
This is a brief overview of your business — like an abstract in an academic paper. Executive summary business plans briefly present your core idea, mission, and objectives. This part may also include information about your location, the number of employees, and basic operations.
Product and/or services
This part describes the product or service you are offering in greater detail. Make sure to add information about product lifespan, pricing, and do not forget to highlight benefits for the consumer. If you plan to produce goods, include information about your manufacturing process and available patents. If not only development but also research is involved, describe the R&D process as well.
This section describes available markets for your product. If you are offering something brand new, you should highlight that there is a gap in a market that can be filled with your product. So, it is about consumer demand. When offering something that already exists, business plan writers should draw special attention to competition analysis. You will need to list your major competitors and explain how your product is different. This section should also provide information on the business’s strengths and weaknesses.
This is one of the most important sections in any commercial plan, so it can be pretty detailed. A marketing strategy contains the company’s value proposition, key brand messaging, data on target customer demographics. Depending on the company you own, you might want to leverage a variety of different marketing plans. This might include Social Media, Content marketing and Product launch marketing plans highlighting channels, strategies, tactics, and campaigns you intend to use to promote your new business or product.
This part states your financial goals. Start ups should provide estimates of expected profits with time frames to achieve these financial milestones. Companies that have already been in business and are now looking for growth/ partnership/ investment opportunities should offer insights into your current financial situation.
Financial goals for a small business may involve achieving an attractive profit margin or reaching a specific tangible objective such as saving enough money to buy a specific piece of equipment.
In this case, it is possible to present billing sheets and statements within a financial planning section or an appendix.
Budget and pricing
It may look like the budget should go within the financial planning section, but these two are a bit different. Financial planning is about profits a company expects to achieve. Budget is about the initial expenses necessary to start a new business. These include any pricing costs related to staffing, research, development, marketing, and so on. If you want to attract investment, this is the part where you state just how much money you need. When working on an internal business plan, this section should give a clear idea of the initial expenditure that will need to be allocated right from the start.
A pricing strategy considers factors like competitor behaviours, market conditions, consumer trends, and other variable costs to account for the pricing model of the goods. Businesses must decide on a pricing strategy before advertising products to customers. You have two clear areas that will drive profitability – incoming and outgoing funds.
Money out (or expenses) is affected by many things like efficiency, marketing, technology, staffing and more. Money in is driven by the volume and value of work, which can both depend on pricing. It goes without saying then, that pricing will have a big bearing on your revenue and profitability. It is worth spending some time on it. Think about what you and your client need out of a pricing structure.
Final Word On Writing & Formatting
When searching for business plan examples, you will see that they all follow a more or less fixed logic. However, the formats may be slightly different. When choosing a sample business plan that would work best, consider the nature of your business. If it is traditional, stick to traditional templates — this will create a coherent and logical impression.
Finally, remember that such a detail-oriented document as a business plan cannot be written overnight. According to Harvard Business Review, successful entrepreneurs spend up to 6-12 months polishing their plans from the idea stage. Of course, if you have already done some research, it will take less time.
Still, analysing and researching every little detail of future business operation is a time-consuming process. However, it remains one of the essential elements of a commercial plan. The bright side is that proven, carefully researched business plans usually result in successful, profitable companies.