A business plan clarifies your strategy, resources you’ll need, potential roadblocks, and viability of your idea. It must have three C’s which include business concept, ideal customer, and how cashflow will work.
Successful business owners research their ideas, potential markets, and strategy to reach the top. The business plan has essential features and the general ones include an executive summary, marketing plan, key managers, and financials.
In this post, we’ll discuss how to write a business plan step by step.
What Is A Business Plan?
A business plan is a document summarizing the operational and financial objectives of your business. It’s the roadmap to business success including detailed plans and budgets that portray how to realize your goals.
The plan documents your services, how you’ll earn, business leadership, financing, and operational model. It includes a description of your business and an overview of its future. The plan explains your strategy, key goals, where you’re now, and where you want to be in the future.
Why Should You Write A Business Plan?
Investors must evaluate the feasibility of a business before providing funding. So, knowing how to make a business plan is very important when looking to get funding.
Here are compelling reasons to write a business plan even when you don’t need funding.
To Prove Seriousness About Your Business Idea
Building a business plan shows anyone, including partners, investors, employees, and yourself seriousness about your business idea. It proves your commitment to seeing your business idea come to life.
Writing a plan allows thinking through and choose the best strategies that will propel your business to success.
To Understand Your Competitors
Creating a business plan encourages analyzing your competitors. Every business has direct and indirect competitors. Researching competition is essential to establish your competitive advantage.
To Understand Your Target Customers
You must understand your potential customers, why they buy, and when they buy before establishing a business. An in-depth customer analysis is essential when making a business plan.
Understanding your customers allows offering better services. It also allows for determining more cost-effective promotion and marketing strategies.
To Evaluate The Feasibility Of Your Business Idea
It’s always necessary to determine how good your business idea is. Creating a business plan requires researching potential customers and competitors. It works as a feasibility study to ensure the success of your venture.
To Establish Financial Needs
If you have to raise funding for your business, a plan is very important. It helps determine how much capital you need and how you’ll use it effectively. You’ll also be able to plan ahead in case you need additional funding in the future.
The best time to write your business plan is any moment when you have time and direction. It may be when exploring a new idea. You can also write the plan when committed to make it come real.
Alternatively, you can also learn how to create a business plan when you’ve been running your business for some time without one. On average, business owners who write their business plan within six to 12 months after deciding to start a business have 8% more chances of success.
Create An Executive Summary
An executive summary is the first section of a startup business plan. It can be a page or two with your mission and vision statements. The executive summary has a brief sketch of your plan and goals. It also takes a quick look at your business outlining a strategy, financial status, and needs.
Essential things that make up an executive summary include:
- Hook – The first sentence and paragraph determine whether to read the whole summary or not.
- Business description – Describes how the idea of the business came about
- Processes – Gives an account of all departments, their contribution, and timeframe. It also includes key challenges during project implementation.
- Results and conclusions – Briefly explain key findings and critical problems that were resolved.
- Recommendations – Explains how findings and results are to be turned into actual policy. Describes the creation of a new strategy, its impact on the business, and other features affecting business direction.
What Is An Executive Summary?
It’s a document designed to capture the reader’s attention with a brief description of your business, key solutions it offers, target customers, and financial information. An executive summary is an overview of a business plan by summarizing the key points to the reader.
The ideal executive summary is comprehensive and engaging. It’s ideally below two pages and comprises about 10% of your business plan. A plan of 20 pages must have an executive summary on one page. Every page is about five to eight sentences long and straight to the point.
Example Of An Executive Summary
Create Your Company Description
A business description highlights key aspects of your business. These include your services and what makes it unique. The description should give the reader a scope of your business. Funders have to see how your business fits in the market and how it benefits customers.
When writing a description for your business, ensure it captures the reader’s interest. It must answer who, what, when, where, and how.
Here’s a brief review of the questions your description should answer.
- Who are you?
- Who are your target customers?
- What services are you offering?
- What are your business goals?
- Where’s your business located?
- What is the timeline for achieving your goals?
- How are you going to structure the business?
- How are you going to achieve your goals?
Writing a description of your business is an opportunity to reveal your business idea is a way that entices funders or partners to come onboard.
Describe A Company’s Mission
Your mission statement is an action-based declaration of your business and how to solve customers’ problems. The statement makes readers realize something is happening now.
A mission statement is a short summary of your business’ purpose. It perfectly clarifies the what, who, and why of your company. An ideal mission statement includes guidelines by which your business operates.
Here are simple steps to write a mission statement:
- Free write about starting your business
- Explain what your business does
- Describe your potential customers
- Determine your core values
- Revise and polish the mission statement
Describe A Company’s History
A well-written business history entices funders, partners, and employees. It plays a significant role in building trust and respect. Your business history must include the most compelling highlights of your business journey. It should also highlight significant achievements such as major awards.
Your business history must include four essential elements including:
- Why you started the business
- Brief profile of founders
- Major turning points encountered
- Amusing and inspirational events that have happened along the way
What Are Your Business Goals?
Your business goals are what you seek to achieve in the short or long term. Business goals vary and are either inspirational or motivational. General goals of all businesses usually include financial gain, customer satisfaction, business growth, and employee development.
All business goals must be SMART with elements including:
Market Potential Research
Analyzing market potential is essential for established and new businesses. It allows knowing the potential size and value of your target market. Market potential evaluates the sales expected from your services.
Conducting market potential research involves:
- Identifying market size and demand
- Examining competition
- Evaluating the market growth rate
- Determining profitability
- Considering external influences
Conduct Competitive Analysis
A competitive analysis is an assessment of your competitors services to evaluate their strengths and weaknesses compared to yours. Conducting the process is an essential aspect when writing a business plan.
The analysis allows realizing your advantages and potential barriers to success. It strengthens your business and marketing strategies.
The competitive analysis goes into steps including:
- Identifying your competitors
- Gathering information about the competitors
- Analyzing competitor’s strengths and weaknesses
- Determining your competitive advantage
Create Your Service Description
This section is the centerpiece of how to build a business plan. It’s the essence of your venture and other aspects of the plan depend on this. The section highlights your services, market demand, and how your business will compete with other businesses to sell its services.
The section includes a description of your offerings or future services. It must also highlight how your prices compare to those of other businesses. You should include your selling plans and marketing material.
Some handy tips on writing a service description include:
- Indicate why your services are on demand
- Highlight features of your services
- Don’t forget to highlight your services’ benefits
- Be clear and concise
- Talk about expertise, awards, and recognition
- Describe what makes your services special
- Speak to your customers
Develop A Marketing And Sales Strategy
The market and sales strategy explains how you’re to reach target customers and how to market your services to those customers. Your sales and marketing strategy must consider the four Ps.
It covers your services and their potential benefits to customers. You should also talks about your location and how you’re delivering the service to customers. Another important consideration is determining the price for your services.
A market analysis helps determine pricing. You must also understand how you’re going to reach your target customers. Equally important is to understand the return on investment from each promotional strategy.
The marketing and sales section hones key elements of your marketing strategy. Implementing sales and marketing initiatives happens before you launch.
Compile Your Business Financials
The financials section of your business plan determines its viability. Potential investors usually focus on it to make up their minds. This section includes four financial statements income statement, cash flow projection, balance sheet, and statement of shareholder’s equity.
It also includes a brief explanation of and analysis of the statements. The section outlines past, current, and projected financial situations. It includes all the numbers and hard data required for the future of your business and to appeal to potential customers.
Describe Your Organization And Management
Every business plan must have an organization and management plan. It conveys your vision regarding the structure of the business. The section highlights your corporate structure and management hierarchy.
It includes the board of directors, details about the owners, and professional partners. The section clarifies who is in charge of different aspects of your business. It also highlights their contribution to the business’s success.
The organization and management section in the business plan highlights your experience and that of your team. It helps in attracting potential investors and partners when creating pitches.
Explain Your Funding Request
You need a funding request section to attract potential investors. The section is only necessary when planning to seek outside funding. It highlights future funding requirements for your business. The usual time scale is five years for startups whose future is uncertain.
This section provides information regarding the business’s future financial plans. It includes funding required, at various growth phases and potential capital sources. You must specify whether you need a short/long-term loan, investment for the stake, or board membership.
The features of a good funding request include:
- Outline of your business
- Current financial situation
- Amount of money you need currently and in the future
- How you’re to use the funds
- Current and future financial plans
When writing your funding request, personalize each to the potential funder. Each may require different information such as loan repayment period and potential return on investment. Understanding the requirements of each funding source is crucial. Lastly, ask for enough funding to keep the business going.
The funding options for small businesses vary. Grants don’t need to be paid back. Equity financing allows receiving financing in exchange for profits and ownership of your business. Debt financing is borrowing that you must pay back.
Compile An Appendix For Official Documents
The appendix is the last section of your business plan. It offers additional documents and validates the business plan. An appendix includes legal documents and other supporting paperwork. This assures readers that you did research and are prepared for success.
An appendix offers a snapshot of your business’s overall plan using well-organized documents. It also includes additional information missing in other sections of the plan to solidify the quality of your plan.
The contents of the appendix may include:
- Financial reports and projections
- Sales and marketing materials
- Copies of tax returns
- Vendor agreements
- Relevant spreadsheets, tables, graphs, and other visuals
- Resumes of the management team
- Credible references
- Credit history
- Partnership contractors
When creating the section, be aware that some people may only read this section. So, ensure to prepare accordingly to impress them. Give the section a table of contents to appear organized and easy accessibility.
To Sum Things Up.
A business plan is essential for the success of any business. It lays the foundation for the steps to take to achieve business success. The plan also makes reaching short and long-term objectives a breeze.
With your business plan handy, you also need job management software such as Field Complete. The software puts managing functions including reporting, invoicing, communication, and scheduling in the palm of your hands.