Do you have a start-up idea, but not sure if you need to write a business plan? Having a vision and strategy is vital for any company stable growth and longevity. Find out essential elements that make up a professional business plan and discover tips that will save your time.
A business plan is more than a mere formality you have to go through to attract investors. It is a concrete development strategy for your business, whether a local flower shop or a global manufacturer. No matter how big or small, any new enterprise will go through essential development stages and experience challenges along the way. That is why every successful entrepreneur needs to start with a thorough, coherent, and comprehensive business plan.
This task may seem daunting if you have never written a business plan. However, even if you know what a business plan is and what it should cover, it is not always true in practice. So use your business plan as a tool to convince potential investors and employees that you and your start-up business are the real deal.
In this guide, we provide a step-by-step guide on how to create a business plan.
What is a Business Plan?
A business plan explicitly explains how a new company or start-up understands its primary objectives. It is about what a company will do, why, and for who. But more importantly, it is about highlighting actionable strategies on how you will achieve all these goals. To create a functional plan, you 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, etc.
Creating business plans for internal use is an innovative and responsible strategy. An internal business plan helps owners keep track of their progress and ensures their business growth goes as planned. However, while creating an internal business plan is a good idea, it is not required. Moreover, internal plans generally can be vague.
Also, entrepreneurs must accept that plans may not always work. So, don’t expect to write a business plan once and then file it away. Instead, it is a strategy that requires regular review, revision, and adjustment to ensure stable, predictable business growth and timely response to any challenges.
There are several reasons to build an operational and commercial plan, even if you do not intend to share it with investors or anyone outside your top management team. First, a well-written plan for a business loan is an essential 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 on the list when starting a new business. Business plans are also crucial for attracting investors to determine if your business is moving in the right direction and worth investing money in.
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 bigger 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, which will be much 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, helping to create a realistic timeframe for business growth.
You will refer back to it at a future stage and see if the planned milestones happened according to plan. When creating a business plan, owners and senior management alike get a chance to find any gaps or inconsistencies during the initial stages. Besides sharing your development plan with other people on your team, you ensure that everyone understands the objectives and is on the same page, resulting in steady and predictable growth.
What are the best tips to make a good business plan?
Remember: Please keep it simple. 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 a language accessible to interested parties without specialist experience.
Do not forget the presentation! Use tables, graphs, and charts to 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 potential customer base for your new product or service to be viable. This part will be simple unless you deal with a revolutionary product no one has ever thought of before. However, existing markets and clients pose another challenge — competition. So, the next step is to think about your product’s advantages. A 100% unique product is rare; however, every offer should have something special — better than your 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 sure that your product will be a hit. It is always nice to have solid proof when dealing with banks and investors. Also, knowing that there is a market need for your product or service will boost your confidence, so include valid proof to back up your claims.
3. Consider precise strategies tied to precise goals
You might 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 your core objectives. 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 correlate..
4. Evaluate risks & find escape routes
Any business’s success depends on how realistically it can evaluate all associated risks. If you create a business plan for yourself, the more risks you evaluate, the more prepared you will be. A detailed overview of risks and possible solutions will also score many points when writing an investor plan. This part of your plan will not put off experienced investors. On the contrary, they will see you as a serious and credible entrepreneur who knows what they are doing and will determine the opportunity’s viability.
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 want critical information they can pull out).
Add them as appendices if you feel you should provide more proof and data. Whatever your idea, six elements should be present in any plan.
The business plan executive summary
This is a brief overview of your business. 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 section describes the product or service you are offering in greater detail. Add information about product lifespan pricing and highlight the benefits for the consumer. If you plan to produce goods, include your manufacturing process and available patents. If not, describe any Research & Development process involved as well.
Market analysis and strategy
This section describes your product’s potential markets. To sell a new product, highlight the opportunity or gap in the market and consider the competition when offering a pre-existing product. Include a list of major competitors and explain how your product is different. Include information about the company’s strengths and weaknesses.
Marketing strategy is a critical section in any commercial plan, so you can make it very detailed. A marketing strategy contains the company’s value proposition, essential brand messaging, data on target customer demographics. In addition, you might want to leverage various marketing plans, including social media, content marketing, and product launch marketing plans, highlighting channels, strategies, tactics, and campaigns you intend to promote your new business or product.
This part states your financial goals. Start-ups should provide expected profits with time frames to achieve these financial milestones. In addition, companies that have already been in business and are now looking for growth/ partnership/ investment opportunities should offer insights into your current financial situation.
Small business financial goals may include achieving an attractive profit margin or reaching specific objectives 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
Contrary to popular belief, the Budget is not the same as financial planning. The Budget is about the initial expenses required to start a new business, whereas financial planning is about expected profits. Staffing, R&D, marketing, and other costs are examples. Here’s where you say how much money you need to attract investment. This section should be included in any internal business plan to help determine the initial expenditure required.
A pricing strategy considers factors like competitor behaviours, market conditions, consumer trends, and other variable costs to help formulate the pricing model of the goods. Once in place, businesses can now advertise and sell their products to customers.
You have two clear areas that will drive profitability – your cash flow – your incoming and outgoing funds. Money out (or expenses) is affected by efficiency, marketing, technology, staffing and more. Money coming in is driven by the volume and value of service provided, both of which can depend on pricing. Pricing will have a significant 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
All of the plan examples that you find will have a similar structure and logic. However, there may be some minor differences in the formats. Consider the nature of your business when selecting a sample business plan. It’s best to stick with the tried-and-tested templates if you’re going for a more traditional look.
Finally, remember that you cannot write such a detail-oriented document overnight. According to Harvard Business Review, successful entrepreneurs spend 6-12 months polishing their plans from the idea stage.
Of course, if you have already done some research, it will take less time. Analysing and researching every detail of future business operations 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.
Whether you are starting a new business or updating an existing one, we can help with the accounting aspect of your plan. Please schedule a call with one of our specialists today.