How to write a business plan should be the first question to ask for any business thriving to get successful. Whether you are building a physical business or an online business a business plan needs to be the first step of your journey.
The first step to establishing a successful business is the business plan. Without planning for the future carefully, it may be tough for you to make decisions that align with your vision.
Your business plan is the foundation of your entire business. If you want an investor, a bank loan, or a business partner – you will need a solid business plan. Not only does it act as a plan for the future, but the business plan is also your business proposal.
However, writing a business plan is not a piece of cake. There may be a specific format you would like to follow or consider adding a few essential items to the plan. But here is the toughest part, your business plan needs to be unique.
To make this complicated process easier for you, I have a complete guide on what your business plan should include and how you can begin writing it.
Note: If you are a blogger wanting to write a business plan for your blog. please do read my ‘How to write a blog business plan – Ultimate guide’, as the process, in this case, is different from a startup or an online business.
Before you begin
It may sound easy to just open up your laptop and start typing your business plan – but I would recommend you stop right there. Before you engage in writing the first draft of your plan, here are a few things you need to take into consideration:
1. Your audience
Who are you writing the business plan for? The bank, an investor, or a partner? Regardless of your audience, remember to never use jargon in your business plan.
Not everybody who reads your business plan will know about your niche, and it would be best to just stick to simple language.
2. Length of the plan
How long do you want your business plan to be? While some people may want to include all the details of their visions and operations in this document, others prefer to keep it short and simple. Nevertheless, this depends upon the purpose of your business plan.
For instance, if you want an investor, you may want to include all your business details including your vision, process, and goals.
3. The format
This is the most important aspect of your business plan. While there are many different ways you could write the document, there is one basic differentiation you have to make: the traditional route vs. the lean startup.
In the traditional route, you include all of the details, and it is an optimal plan for most situations. However, the lean startup plan is an extremely short and concise plan of the business and contains only the most important details. This is well-suited for businesses who have a noticeably short timeline or are in a rapidly changing industry.
How to write a business plan: The traditional business plan
Since most people will opt for the traditional business plan, it would only be fitting to highlight this first. This business plan will comprise seven different sections, including details about a different aspect of the business venture.
The business plan’s length typically depends upon your own preference – but make sure to consider factors such as the purpose, the audience, and the maturity of your business.
Section 1: The executive summary
This is the most important part of your business plan – and I would suggest that you write it last. This section will serve as the hook of your business plan and will determine whether or not your entire business plan is worth reading.
In this part, you should include:
- Business name
- Business owner(s)
- Experience of the owners
- Purpose of the startup
- Milestones and goals
- Listing of goods/services being offered
After writing your entire business plan in detail, writing the executive summary becomes easier since you only have to summarize the important parts. Your executive summary should be short and concise – meaning you shouldn’t write more than one or two pages.
Section 2: Business description
This is the first part of the business plan that you should write and spare no detail while you’re at it. It is important to highlight the opportunity on which your entire business is based – such as a gap in the market or a new opportunity to capitalize. Remember that there must be a ‘problem’ that your business is providing a ‘solution’ to – regardless of how mundane.
Talk about your target market and include your ‘buyer persona’ – or the ideal customer. Remember to include the market research that helped you determine the target market or to whom you will sell your product or service. The target market needs to be a specific portion of the entire population.
Section 3: Market and competition
Before you enter any market, you should already know everything about it. Whether you’re in the food industry, clothing industry, or any other industry, make sure to describe the industry you operate in more detail here.
Your reader will always appreciate proof of all the research you have done concerning your competitors and the market in question. Your readers will trust you more knowing you are fully educated and skilled in your business niche.
You should also add why and how you differentiate yourself from your competitors and highlight the names and business models of your top competitors.
You can also use a competitor’s matrix to compare your business model with that of the competition. Remember to consider how competitors will react to your new business and include any past trends observed in the market.
In this part, you can also include your PEST and SWOT analyses, which help you determine your business’s strengths and weaknesses before entering a new market or launching a new product.
If you conducted any surveys during your market research, it would be great to add some statistics from this research in this section. This adds more value and insight to your words about the market since you would have a direct response from potential customers.
Section 4: Operations management
Logistics will be an important concern for your business on a day-to-day basis, and your reader would want to know how you are going to manage this.
The first part of the operations management section should include your business plan’s legal structure and ownership. If there are multiple stakeholders involved, it may be beneficial to include a hierarchy or organizational chart that highlights the organization’s structure.
Additionally, this section should include all the inputs and outputs of the business on a daily basis. Depending upon the nature of your business, this can include supply chain management, use of technology, and distribution channels.
Apart from these technicalities, remember to focus on the business’s everyday operations and how your business model is sustainable.
Section 5: Products and services
This is where you finally discuss your tangible product or intangible service. I would recommend that you include all additional details in this section, especially since it determines whether your business model would be successful in the reader’s eyes.
Since there will always be competition in the market, you need to be confident about how your product or service differs from the rest. This can be highlighted by adding a detailed list of the products or services you will offer, including short descriptions.
For instance, if you start a bakery business, the product ‘chocolate cake’ will not be sufficient. You should include a description such as a ‘chocolate sponge with a chocolate ganache and topped with American buttercream’.
Section 6: Marketing
Everyone knows about the 7Ps of Marketing – and so you need to include them here. Skip writing about your product or service again since you have already done that in the previous section and jump straight to determine the pricing for each of your products. Talk about your pricing strategy and compare it with the competitors.
After price, you should highlight your distribution channels and determine how and where you will be selling your product or service.
Then comes the most important part: marketing. Your business will never be successful if people don’t know about your brand, product, or service, and that is exactly when the role of marketing comes in.
In this section, you need to highlight all the different and unique ways to market your business. Highlight the different ways you can encourage brand awareness and brand loyalty.
In the modern world, it may be a good idea to include technology-related options here, such as SEO and SEM, Facebook, Twitter, Snapchat, TikTok, or Instagram Ads, building a strong social media presence, or involving social media influencers to promote your brand.
Apart from these details, remember to include your marketing budget here. This is an important part of determining how much money you can invest in promoting your business and how much of it you are likely to earn back in sales if the marketing tactics were to work.
Section 7: Financial analysis
Whether or not you are requesting funding with your business plan, you still need to include a detailed financial analysis.
In case you are looking for an investor, the first part of this section will include a funding request to raise capital for your startup. Remember that you need to be specific about the amount of money you require and a clear process concerning how this money will be utilized.
The second part of this section will include your initial financial dealings as a startup. Consider all startup costs, such as land, furniture, crockery, etc. This will be a statement that highlights how you will utilize your capital in the beginning.
The third part of this section will be financial projections for the future. To be successful, your business requires a specific plan to work on.
Through predictions of how much your business is likely to earn in the first quarter, you can draw up important statements such as a forecast cash flow statement, forecast income statement, and a forecast balance sheet. Here, you need to include your research from your competitor’s financial statements and analyze how they have performed over the years.
Remember that you should be realistic with all of your projections. A 50% increase in sales per quarter sounds highly unrealistic, but a 5% increase seems achievable. Always state the logic behind such projections since the reader will want to know your reasoning for devising such data.
Is that all?
And with this, you are done with a simple, traditional business plan. However, you are not quite achieved yet. The first time you complete your business plan will feel like an accomplishment, but you will most probably have to return back to your business plan to make eventual changes that will happen in the future.
Remember to take your time in developing the best version of your business plan before presenting it to potential investors or other stakeholders. This will allow you to think profusely and carefully about your business decisions as well as your business model’s feasibility before you get into all the practical work.
How to write a business plan: The lean startup plan
At the beginning of this article, I mentioned something about a lean startup plan. You can just think of it as a much smaller version of the traditional business plan in simple terms.
The logic behind a lean business plan is that not every investor will be interested in reading a 50-page document about your business model’s feasibility. Instead, they want shorter plans that give them all the essential details they need to know about. You can view it as a summary of your traditional business plan.
In a lean business plan, all aspects of a traditional business plan are further broken down into nine segments that can describe all the essential parts of your business. These include:
- Customer segments
- Value proposition
- Customer relationships
- Distribution channels
- Streams of revenue
- Key resources
- Key activities
- Cost and value
It can be quite confusing to start writing your own business plan, but I hope that this guide has helped you learn the importance of a business and how to effectively write the best business plan for your business.
Remember to be efficient and to the point with your business plan. This means that each and every word that you write must serve a specific purpose.
It may sound convenient to window dress some facts and figures to attract investors, but you should never do so. Having a realistic and concise vision and goals is the only method of ensuring success for your business venture in the future.
If you don’t have an effective business plan then it can be very tough for your business in the long run. Having ample financial resources without a proper business plan is going to lead you nowhere.