A business plan is to a business what a road map is to a journey. This makes business plans one of the most important tools for any entrepreneur. They help you identify your unique strengths and weaknesses, plan for growth, and strategize for success.
In this article, I’ll be showing you how to write an excellent business plan as an entrepreneur or small business owner.
Importance of Writing a Business Plan
- It will help you to focus on your business and its goals, which is important for any entrepreneur. Writing the plan will allow you to prioritize what needs to be done first, second, third etc., so that there are no “ducks” (unfinished projects) left at the end of the day.
- A good plan gives insight into strengths and weaknesses so that these can be improved upon through changes made within the project itself; such as how much is spent on advertising per month versus sales numbers per quarter; how much capital has been raised compared with expenses incurred during operation; whether new markets need exploration before entering existing ones etc.
How to Write a Professional Business Plan
The executive summary is the most important part of your business plan and even though it is the first section of the document, it is usually advised that it is written last. This is because it requires great care and should be written in a way that is enticing and piques the interest of the reader. It should include the following:
- The purpose of the business, which gives an overview of the problem or market need and the solution your business is offering to consumers.
- Structure of your company—the founder(s) or owner(s) and how they work together as a team; where they get their information from when making decisions about what needs doing next in terms of marketing campaigns or product development plans, etc.
- Some key financial details.
A key to writing a great executive summary is to keep it short and engaging.
As the name implies, this is simply a general overview of the business. It should contain a brief summary of the business’s history and basic vital information about the business including whether it is a Limited Liability Company, Sole Proprietorship, Partnership, S or C Corporation and where the business is located. It should also contain the state the business was registered and the date it was founded.
Products and Services
After describing the company, you will then describe in detail, the service or product the company offers.
Be conscious of relating it to the market need your product or service will be solving so in order words, be customer inclined in your narration.
The objective of this section is to not only give an insight into what the company offers but to establish that it caters for an authentic market need and to ascertain how sustainable it will be in coming years.
Identifying your target market is a key step to setting up your business plan. This will help you understand who you are trying to reach and what kind of audience you’re going to sell to. Some data that can help clearly define your target audience are; gender, age range, geographical region, location, income level, marital status, among others. Other details to be included are how to reach customers and the package/delivery method of the product or service.
Understanding customer behavior is an essential trait to selling to them.
What are they looking for when they shop at one store over others (and why)? What do they want from their purchase—a specific product or service; something that makes them feel good about themselves; something that will help them achieve certain goals within their lives, etc. Tailoring your product or service to meeting a unique need in your customer should be top on your mind while carrying out your ideal customer analysis.
Identify your competition.
You must consider who else is in the same industry as you in your immediate environment(for small-scale businesses) and non-immediate environment(for large-scale businesses)? What are their strengths and weaknesses, as well as their customer base, distribution channels and pricing strategies?
What’s different about the approach you intend to adopt compared to theirs? How can you differentiate yourself from competitors who may have already adopted similar strategies/products/services at a similar stage in their development cycle?
In answering these questions, you can easily identify your competition and develop strategies that would keep you on top of your game.
A common tool used by entrepreneurs in combining collected data for market analysis is the SWOT analysis tool. SWOT stands for “Strengths, Weaknesses, Opportunities and Threats”.
Strengths and weaknesses portray the abilities and inadequacies of the company while opportunities and threats portray the current market risks and rewards.
It is therefore of the essence that thorough research be carried out before and while writing this section as it is an essential part of your business plan.
Organization and Management
This section should display the organizational chart of the company and outline every member of the management team including founders/owners, board members, etc., and a summary of their respective roles in the company so far.
Founders should be clear about which tasks are theirs and which are shared between them.
They’ll determine how much equity each will receive in exchange for their contributions. Ideally, they’ll agree on a percentage of ownership that’s fair based on their respective roles in creating the company (or at least something close).
If you don’t have enough money saved up to hire employees yet, it may help if founding members’ pays are based on bulk of work assigned and capital required; however this requires careful planning so that payroll doesn’t become an issue later on down the road!
Marketing and Sales
Marketing and sales are the most important functions of your business, so it’s worth spending time on them. You can easily lose money if you don’t have a well-planned marketing strategy that addresses your target market, or if you have no idea where to find them. Likewise, sales is an essential part of any business plan—without it, the business will collapse.
Your marketing plan will include:
- The message that needs to be communicated (for example: “We’re the best”)
- How this message will be communicated (i.e., through social media posts)
The financial projections is a detailed overview of the company’s finances and comprises a critical component of your business plan. They show how much money you’ll make and how much you’ll spend over time, based on assumptions about factors such as sales growth, operating costs and expenses.
Your financial projections must be realistic—this means they should be conservative (assuming that things will work out better than expected). You also want to keep them grounded in actual data rather than just some fancy math formulas or formulas from college textbooks.
The following items should be included in this section of the business plan:
- Historical financial data: as the name implies, this is financial data of the company from few previous years. It helps potential investors understand the level of risk associated with investing and also with future financial projections.
- Cash flow projection: this is an estimated projection of the in and out cash flow of the business. This projection not only helps determine if the business is a high-risk or low-risk one, but also shows whether it’s best to settle for long-term or short-term financing.
- Income statements: this is simply an overview of the company finances and is usually generated quarterly for already established businesses and monthly for startups. It should show the revenue, expenditure, profit and losses.
- Sales forecast: this is a projection of how many sales to expect with specific measures in place.
- Break-even analysis: the point where total sales cover total expenses is referred to as the break-even point. This section is to analyze whether the business can achieve the financial landmarks that have been set.
This is the trickiest section of the business plan and it is advisable you do it with a professional accountant. This should greatly minimize or erase the chances of error in the projections and calculations.
Read Also: How to Write a Real Estate Business Plan
After you have a clear idea of how your business will operate and how it will grow, it’s time to approach investors. The first step is to write a funding request letter that outlines your idea, goals and plans for success.
The next step is to show investors why they should fund your project by describing its market potential (i.e., what viable problem does this solve?), why this solution is unique compared with similar products or services out there, how much value customers/users would get from using your product/service and why they should pay more than competitors offer when using yours instead.
Lastly, let them know how you intend to use the money and when they can expect their Return on Investment(ROI).
Final Thoughts on How to write a business plan
In the end, writing your business plan is a great way to help you understand what you need to do to get started. It will help you identify the resources and finance available to you, as well as how much time it will take before your company becomes profitable. If done correctly, this can be a huge piece of paper that helps guide future decisions made by everyone involved with the business’s growth.