Drafting a winning business plan is the next significant step, once you have decided on a business idea that appears promising and profitable. You’ll need to create a bankable business plan if you’re determined to build a great business.
Your business plan is your road map to a successful business trip, it’s your version of a flight plan. A pilot would never fly from one place to another without a well-thought-out flight plan. Creating a business plan paves way for a prosperous and rewarding business journey.
Some people think you only need a business plan when you’re trying to borrow money or seeking business grants, a business plan is more than a pitching tool for seeking finances, it’s a guide to help you define and achieve your business goals.
A business plan won’t automatically grant you a home run, but it will help you avoid some business pitfalls such as undercapitalization or lack of adequate market.
Hence, creating a business plan enables you to think through your identified business idea and helps you to forecast how much you need to get started and keep running the business.
Table of Contents
In this post, you will learn everything you need to know to create a business plan that works. The following will be extensively discussed in turns:
What’s a business plan?
Why write a business plan?
Key Elements of a business plan
The Do’s & Don’ts for Writing Business Plans
WHAT’S A BUSINESS PLAN?
What’s a business plan, and how do you create one? A business plan is a document that describes and analyses your business goals and the strategies you’ll employ to realize them. A business plan is a written statement that explains a business opportunity, identifies the market to be served, potential problems that may confront your business and ways to solve them, how much money you need to finance your venture and keep it staying afloat till you reach profitability.
WHY WRITE A BUSINESS PLAN?
Finding money to run a startup requires a solid bulletproof, knock-em-dead business plan. No one will spare you his or her money to test run your business idea alone. You’ll need facts and figures to corroborate your written statement. You need a bankable business plan. Without a concrete business plan, you will never attract an investor. A business plan is a veritable tool for obtaining funding.
Seeking funding is not the only reason to write a business plan, there are several other compelling reasons why you need a solid business plan:
Creating a working business plan assists you to avoid fanciful projections. A business plan forces you to figure out all the key elements of your business and requisite assumptions about your unique value proposition, market structure, competitive analysis, operations, organization structure, financial projections, and so forth.
Writing a business plan helps you to overcome the odds. Without a solid business plan, your venture will be a gamble. It may succeed, it may not. A well-thought-out business plan reduces the risk of failure and improves your odds of success.
A solid business plan allows you to improve your business concept, understand your business better, and help you keep on track.
Creating a business plan imposes it upon you to think through your proposed business and how each part of the plan paves ways to increase profits or ease the accomplishment of other business goals.
KEY ELEMENTS
What exactly makes up a business plan? The exact elements in a business plan vary from business to business, but generally speaking, a typical business plan will contain the following key components, though not necessarily in this exact order;
Title page
Table of contents
Executive summary
Business description
The management team
Marketing plan
Operating plan
Financial plan
Risk Analysis
Exit strategy
Appendices
Let’s consider each major element of a business plan in more detail.
TITLE PAGE
The title page is otherwise known as the cover page, the cover of your business plan should include the following information: the name of the business, tagline, your company logo, the business address, the contact person and phone number, e-mail addresses, the business website if you have one, and disclaimer or nondisclosure confidential information.
TABLE OF CONTENTS
A table of contents lists the section titles and page numbers. A detailed table of contents is very essential to help readers easily find the information they want at a glance without necessarily reading the business plan from the beginning to the end.
Your contents should include major sections, subsections, exhibits, and appendices. The table provides the reader with a roadmap to your business plan.
EXECUTIVE SUMMARY
The executive summary is probably the single most important part of your business plan as it’s the first thing the reader sees and determines whether he will read the rest of your business plan. If it hooks the attention, they’ll ask you to come in for a presentation.
If your executive summary fails to arrest the reader’s interest, the game is lost even before its commencement, and the rest of your business plan won’t matter.
An effective executive summary gives a concise but comprehensive description of your business, the problem you solve, how you solve it, the nature of your business, your business model, the target market, your competitive advantage, the team, returns, and the exit strategy.
A good executive summary is short and businesslike, preferably not more than two pages. You should expend 80% of your efforts in writing a business plan to write an exciting executive summary because the most important part of any business plan is the executive summary.
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BUSINESS DESCRIPTION
The business description section of your business plan offers you a good chance to expand on your executive summary. Here, you expand on your proposed solution to the identified opportunities, you describe how your business will solve your customers’ pain points, you describe the product or service in much greater detail, your venture’s competitive advantages, your company nature as well as the industry, and how you see it growing.
The business description section includes a vivid description of the products or services you will be offering, your market niche or primary target audience, compelling value proposition (why what your offering is irresistible, unique, and different from other options on the market), and so on.
Also, make use of this section to present your persuasive entry strategy and your stimulating growth strategies.
THE MANAGEMENT TEAM
Research shows that the single most important for investors in evaluating your business plan is the composition of your management team. Investors take seriously the background and experience of the team you have assembled. They will want to have a brief background of each member of your team, their skills, qualifications, career progression, experience in the industry, and highlights of their past successes and accomplishments.
An org chart or a table indicating your key team members’ names, positions, responsibilities, and remunerations can be included under this section.
THE MARKETING PLAN
The marketing plan is considered to be the most important part of your planning process because it covers issues surrounding how you will successfully reach your primary target audience and what makes your business fits into the overall market picture.
Under this section, you define your market, its size, structure, growth prospects, tastes, trends, and sales potential. This section should answer questions such as how will you position your offerings in the market? How much of the market will your offerings be able to capture? Who your ideal customers are? How will you determine your pricing strategy, advertising, and marketing strategies? Decision on distribution channels to reach customers and what should be your marketing budget.
Marketing is one of the critical success factors associated with the success or failure of your venture. Make sure you create a concrete and realistic marketing plan that leads to having a solid bond with your customers.
Once you’ve vividly defined your market and spelled out your sales goals, the strategies you’ll adopt to achieve those goals should be well spelled out here as well.
THE OPERATING PLAN
No matter the nature of your business, you will need capable hands to run your business. The operations section of your business plan details how day-to-day operating tasks will be handled internally, and which aspects to outsource, how to successfully hire, manage, motivate and fire people, and a host of other operational issues such as inventory control, facilities management, and relationships with suppliers, partners, vendors, etc. Also, your operating plan must describe processes, demonstrate control, highlight differences and show experience.
Under this section, demonstrate how your business competes and excel on cost, quality, timelines, facilities, and flexibility to articulate your operational competitive advantages and express how your business operations will add value to your primary target audience. You may include a diagram of your production process to illustrate how you add value to various inputs.
THE FINANCIAL PLAN
Your financial plan is the mathematical equivalent of your written statements and graphic description of your business plan, here, you tell your story in figures.
The financial plan is often the most difficult section of a business plan, it’s quite easy to put up verbal and graphic descriptions about the identified opportunity and how you will implement it. Expressing your story in real numbers is an assiduous task. Despite this, you will have to familiarise yourself with the financials to come up with a realistic business plan or rather enlist the help of an accountant to create a financial plan for you.
Essentially, there are three components to include under this section: profit and loss statement, balance sheet, and cash forecast or cash flow statement.
You may start with an income and expense statement, a projection of how much you will sell and how much profit you will make. The profit and loss forecast shows the cash-generating ability of your venture.
The balance sheet simply describes what the company owns (its assets) and the liabilities of the business. It shows the financial healthiness of the business over some time, usually one year.
The cash forecast shows how much cash your venture will need, when, and where it will come from. The cash flow statement reveals the sources and uses of cash monthly, at least for the first two years.
For clarity’s sake, the best place to put your full financial statements is the appendix section of your business plan.
RISK ANALYSIS
Risk is inherent in every endeavor, business is never without risk, every business confronts several risks that may threaten not only the profitability of your venture but also its survival.
Start writing the risk analysis of your business plan by acknowledging these potential risks, highlighting the main dangers they may cause (without scaring investors), and then stating your contingency plan or ways of mitigating the risks. Your investors will want to know beforehand and are rest assured that you can not only face eventualities but also be equipped enough to deal with possible difficulties.
The typical risks small business owners face include; stiffer competition than anticipated, sales falling short of expectations, operating expenses exceeding the forecast or occurrence of major operational problems, difficulty in accessing the needed finance, adverse effects of slow times, cycles, and trends, and so on.
The key is to envisage what might likely happen and how you prepare to control or eliminate those risks if they eventually arise.
EXIT STRATEGY
End your business plan with a proposed exit strategy, which may be a sale of the business, a stock market flotation, or eventual retirement. Always remember when stating the exit plan to indicate a time frame, 3 to 5 years or more.
APPENDIX
You’re at liberty to decide what to include under the appendix, you may include any additional information that will help the reader understand your business plan
Commonly, the appendix section includes:
- The confidential letter or Non-Disclosure Agreement.
- Full financial statements
- Proposed land lease agreement
- Curriculum vitae of key employees
- A checklist of what will be purchased as opening inventory
- Insurance documents
The Do’s & Don’ts for Writing Business Plans
Do:
● Grab the reader’s attention immediately. Explain upfront: products, markets, and the business model.
● Be brief, direct, and detailed. Discuss the bottom line as quickly as possible!
● State the compelling reasons why the business will thrive, grow and customers will buy.
● Explain details about the customer pain points.
● Vividly define the Value Proposition as manifest by the impact on the personas of your customers.
● Clearly state the barriers to entry.
● Be compelling! Why this business? Why will customers buy? Why now?
● Breakthrough the business plan clutter. Convince your reader about this success with facts and figures!
● Be truthful to yourself. Your investment is more than money, your career and reputation are at stake as well.
● State the company’s short- and long-term objectives for the next 12 – 24 months.
● Describe just three primary business strategies that will enable the company to reach its objectives.
● Be meticulous and practicable in making projections and in evaluating your market and revenue potential.
● Spell out your primary business strategies and tactics with detailed, quantified assumptions.
● Authenticate facts and figures with underlying business data and accepted market research.
● Dictate objectively, but not negatively, your company’s business risks.
● Attach details on both traditional and online sales and marketing strategies.
● Indicate the actual money you will need and how the funds will be used.
● Explain in detail how you will create value for your investors and your “exit strategy”.
Don’t:
● Write much about history. A business plan is expected to be futuristic.
● Ignore your customers’ needs. The business plan is not only about you or your technology.
● Failure to focus on the customer value you will deliver. Nothing more; nothing less!
● Include internal financial plans and detailed budgets. You are just presenting summaries.
● Usage of overly technical words to describe your products, processes, or operations.
● Fail to recognize the importance of detailed market data and objective customer research.
● Present vague or unsubstantiated statements or claims.
● Assume anything. Question everything. If you don’t, your potential investors will.
● Derail from the main objectives of the investment audience that you are addressing. They care most about:
✓ Experienced management we team
✓ Large and growing markets
✓ Focused Value Propositions
✓ Cash flow
✓ Exit strategies
✓ Proven sales channels & tactics
✓ Leadership
✓ Innovative technologies and most importantly, scalable and sustainable competitive advantage
● Think only about your country or your locality. Most growth businesses must look worldwide.
● Define valuations in the actual plan as they will later become parts of many negotiations.
● Compose the whole business plan by yourself without major contributions from others.
● Attempt to write over a protracted period. Focus on a timeline of two months or less.
● Attach copies of resumes, technical papers, or reams of marketing materials.
● Failure to proofread, edit out unnecessary phrases and then proofread three more times.
Conclusion
Finally, creating a winning business plan involves a lot of work, considering the benefits of a good business plan, it will be worth it. We hope that you have been introduced to everything you need to know to write a business plan that works.