First of all, what is a business plan. A business plan is a formal written document containing the goals of a business, the methods for attaining those goals, and the time-frame for the achievement of the goals. It also describes the nature of the business, background information on the organization, the organization’s financial projections, and the strategies it intends to implement to achieve the stated targets. In its entirety, this document serves as a road-map (a plan) that provides direction to the business.
What is the importance of a business plan?
A well-written business plan is an important tool because it allows entrepreneurs and small business owners, as well as their employees, to set goals and track their progress as their company grows. When starting a new business, the first thing that should be done is business planning. Business plans are also important for attracting investors because they can determine whether your company is on the right track and worth investing in. Also a good business plan not just helps entrepreneurs focus on specific steps necessary for them to make business ideas succeed, it also helps them to achieve short-term and long-term objectives
What are the reasons of a business plan?
Before you begin writing your business plan, you must first understand why you are doing so. Below are some reason you need a business plan.
To demonstrate your commitment to your business:
A formal business plan is required to demonstrate to all interested parties, including employees, investors, partners, and yourself, that you are committed to growing the business. Making your plan forces you to consider and choose the strategies that will propel your growth.
To determine your financial needs:
One of the goals of a business plan is to help you determine how much capital you will need and what you will do with it. This process is critical for both raising and effectively employing capital in business. It will also allow you to plan ahead, which will be useful if you need to raise additional funds in the future.
To attract investors:
A formal business plan serves as the foundation for financing proposals. The business plan answers questions from investors like, “Is there a need for this product/service?” What are the projected financials? What is the company’s exit strategy? While most investors will want to meet you in person before writing you a check, they will almost always thoroughly review your business plan.
To discover new opportunities:
You will most likely see your business in a new light after engaging in brainstorming, white boarding, and creative interviewing. As a result, you will frequently generate new concepts for marketing your product/service and running your business. Coming up with these ideas and putting them into action are often the difference between a business that fails or barely survives and one that thrives.
How to write a business plan
Whether you’re creating a business plan to raise funds and grow your company or simply to see if your idea will work, every business plan must include six essential sections.
The executive summary provides an overview of your company and its plans. It should be one to two pages long and placed first in your plan. However, most people write it last.
The executive summary should ideally be a stand-alone document that covers the highlights of your detailed plan. In fact, when evaluating your company, investors frequently request only the executive summary. If they like what they see in the executive summary, they’ll often request a detailed plan, a pitch presentation, and more detailed financials.
A summary of the problem you are solving, a description of your product or service, an overview of your target market, a brief description of your team, a summary of your financials, and your funding requirements should all be included in your executive summary (if you are raising money).
Products & services
The products and services chapter of your business plan contains the meat of your plan. It contains information about the problem you’re attempting to solve, your solution, and how your product or service fits into the current competitive landscape.
Begin the products and services chapter by describing the problem you are solving for your customers and the solution you have devised. This is a summary of your product or service. Sketch out your competition. Who else is attempting to alleviate your customers’ pain points? What distinguishes your company from the competition? If you have any competitive advantages, such as specific intellectual property or patents that protect your product, this chapter is an excellent place to discuss them.
Finally, go over your goals and metrics. =This is an outline of the next steps you must take to get your product or service ready to sell, along with target dates. Discuss any key milestones you’ve already reached, such as landing a key customer or accepting pre-orders.
This section will contain all of the information about your potential customers. You’ll talk about your target market as well as the growth of your market and industry.
Begin by describing your target market. Your target market is the group of people to whom you intend to sell. Make an effort to be as specific as possible. It will be easier to create a sales and marketing plan that will reach your customers if you have a solid target market.
Following that, provide any market analysis and market research you haveYou’ll want to explain how your market has grown over time, as well as how your company is positioned to capitalize on expected changes in your industry.
Marketing & sales
The marketing and sales plan section of your business plan describes how you intend to reach your target market segments, how you intend to sell to those segments, what your pricing strategy is, and what activities and partnerships you will require to make your business a success.
Some businesses that distribute their products and reach their customers through stores such as Amazon.com, Walmart, Target, grocery store chains, and other retail outlets should reconsider how they operate in this area. The plan should cover the logistics and costs of getting products onto store shelves, as well as any potential roadblocks that the company may face.
A SWOT analysis can also be included in the marketing and sales chapter of your business plan. This is entirely optional, but it can be an effective way to explain how your products and services are positioned to deal with competitive threats and capitalize on opportunities.
Company organization and management team
Investors are always looking for great teams as well as great ideas. Describe your current team and who you need to hire in this chapter. If you’re already up and running, you’ll also provide a quick overview of your legal structure, location, and history.
Include brief bios that highlight each key team member’s relevant experience. It is critical to make the case for why the team is the best fit to turn an idea into a reality. Do they have the necessary industry experience and education? Have any of the team members previously had entrepreneurial success?
Your company overview should also include a summary of your company’s current business structure. The 5 common business structures include:
- Sole proprietorship.
- S corporation.
- Limited liability company.
Include a review of how the business is owned as well. What is the percentage of ownership owned by each business partner? What is the ownership split? An investor or lender may want to know the business’ structure before making an investment or loan decision.
Your financial plan chapter is often what entrepreneurs find most daunting, but it doesn’t have to be as intimidating as it seems. Business financials for most startups are less complicated than you think, and a business degree is certainly not required to build a solid financial forecast. That said, if you need additional help, there are plenty of tools and resources out there to help you build a solid financial plan.
Sections to include when seeking funding
If you plan to raise funds from investors, include a brief section of your business plan that details how you intend to use the money. This is commonly referred to as “Use of Funds.”
Investors will also be interested in a brief section on your exit strategy. An exit strategy is your plan for eventually selling your company, either to another company or to the general public through an IPO. If you have investors, they will want to know what you think about this. If you’re running a business that you intend to keep ownership of indefinitely and aren’t looking for angel or venture capital funding, you can skip the exit strategy section.
Finally, go over any assumptions and significant risks for your company. Knowing what your assumptions are when starting a business can mean the difference between success and failure. Once you’ve identified your assumptions, you can set out to prove that they’re correct. The fewer assumptions you have, the more likely it is that your business will succeed.