How to write a business plan
In my previous article, I talked about how you can plan to start your business. I defined a business plan as a written description of the future of your business. This is a document that indicates what you intend to do and how you intend to do it. I further explained that if all you have is a paragraph on the back of an envelope that describes your business strategy, you have written a plan, or at least the beginning of a plan. I also said that a business plan consists of a narrative and several financial worksheets.
I mentioned that ‘writing a business plan’ is one of the fundamental steps in establishing a successful business. By now, you should understand the need to write a business plan. Writing a business plan, for a traditional brick and mortar business, will probably take a long time. It can take up to 100 hours or even longer. For obvious reasons, a startup needs to carry out a great deal of research before a business plan can even be developed.
For an online business, a detailed and in-depth business plan is generally not necessary, unless you are trying to combine your online business with a traditional business. For most online startups, the details related to planning a traditional business are not required. However, it would still be beneficial to you if most of the topics were still covered, even if only briefly. Having a written plan in front of you will help you focus on important aspects of the business.
You may not have given much thought to your competition or outsourcing some of your work, but things like that will affect your ability to make a profit. And you will find it especially in the early stages of your business. Even if you’re just opening a front yard lemonade stand, you’ll still need to know what Susie sells her lemonade for on the next street!
So while a detailed business plan may not be required for an online business, I’ll include it here so that you can at least look at and consider each section and determine for yourself if it applies to your business.
Here I will discuss the basic steps involved in writing a business plan:
1. Executive Summary: The first step involved in writing a business plan is the executive summary. Here, include everything you would cover in a five-minute interview.
Explain the fundamentals of the proposed business: What will your product be? Who will be your customers? Who are the owners? What do you think the future holds for your business and your industry?
Make it enthusiastic, professional, complete, and concise.
If you apply for a loan, clearly indicate how much you need and be precise in how you are going to use it. Also include details on how the money will make your business more profitable, thus ensuring repayment of the loan.
2. Commercial description: After the executive summary, you should write a short description of the business you are targeting. You should provide an overview of the industry your business belongs to. You will write about your company’s mission statement, goals and objectives, business philosophy, as well as your legal form of ownership (sole proprietorship, corporation, LLC, etc.).
Describe the most important core strengths and competencies of your company. What factors will make the company successful? What do you think will be your greatest competitive strengths? What background, experience, skills, and strengths do you personally bring to this new company?
3. Marketing strategy / analysis: The next thing to write (after the overview) should be your marketing strategy. For new or existing businesses, market analysis is an important basis for the marketing plan and will help justify the sales forecast. Existing businesses will rely heavily on past performance as a proxy for the future. New companies have a greater challenge: they will depend more on market research using libraries, trade associations, government statistics, surveys, observations of the competition, etc. In all cases, make sure your market analysis is relevant to establishing the viability of your new business and the reasonableness of the sales forecast.
4. Rent: Writing down the location of your business is very important. Locations with higher customer traffic generally cost more to buy or rent, but require less advertising spend to attract customers. This is especially true in retail businesses where traffic and accessibility are critical.
If you are an online business, you need to detail how you will attract customers to your website. General statements like “I will use Facebook ads and email marketing” will do almost nothing to help your cause unless you have a detailed statistical analysis of the tests you have conducted or another similar business that you have been associated with. If you don’t have any data to reference your estimates on, it could show a lack of proper reflection on the rest of your business plan.
5. Competitive analysis: Businesses by nature are competitive, and few businesses are entirely new. If there are no competitors, be careful; there may be no market for your products. Expand your concept of competition. If you plan to open the first roller skating rink in the city, your competition will include cinemas, shopping malls, bowling alleys, etc.
6. Management and operations: Since management problems are the main cause of business failures, it is important to analyze the qualifications and structure of management. Directors’ resumes should be included in the supporting data. If your company will have few employees and will rely heavily on outside professionals, list these key people and their qualifications. If you are seeking financing, please include personal financial statements of all principals in the supporting data section.
7. Personnel: The success of any business depends on its ability to recruit, train and retain quality employees. The amount of emphasis in your plan for this section will depend on the number and type of employees required.
8. Projected financial statements: These statements are often helpful, but not necessary. You will develop and describe your business strategies throughout your Business Plan. In the financial section, you will need to estimate the financial impact of those strategies by developing projected income statements, balance sheets, and cash flow statements.
It is generally recommended that these projected statements be made monthly for at least the first twelve months or until the business is projected to be profitable and stable. Activity that is displayed beyond the monthly breakdown can be in summary form (such as quarterly or yearly). The forecast period for most business plans is two to four years.
9. Summary section: This section is where you can attach or explain any detail that is not applicable to the previous sections. This section should be used to provide the financial statements of the Principles involved in the business and any other data that you think an investor would be interested in seeing.
The main thing to remember in this section is not to provide new data, but to explain in detail the data that has already been provided and to provide the support for that data.
When you sit down to compile all the elements of your business plan, make sure each section can stand on its own. This means that you should not reference other sections by sending the reader (your potential investor) from one section to another.
Don’t try to write your business plan all at once. As I mentioned at the beginning, for a traditional brick and mortar business, it could take more than 100 hours to compile all the necessary information into a comprehensive yet understandable document. For online businesses, probably not for that long. But your end product must be well thought out, well documented, and easily understandable.