How to Write a Business Plan
A business plan is just what it sounds like – a plan for the future of your business and how you plan to do it.
Many small business owners and entrepreneurs starting out on a new venture neglect the business plan in favour of an “active approach”, but there is an enormous value in planning your business properly from the beginning. So whether you are starting a restaurant or an accounting company, the following guide will help you get started.
The Value of a Business Plan
Business plans can help perform a number of tasks
- Writing a business plan can help you to properly assess and clarify your business idea and identify potential pitfalls
- A business plan can help you to stay focused on your primary business goals
- A business plan can be used to convey your vision to potential investors or partners
- A business plan can help you to understand how to run your existing company better
What’s In a Business Plan?
A business plan is designed to contain all the information about your business goals:
- A summary and description of your company
- Your business strategies
- Problems that you may encounter and how to solve them
- The organisational structure of your business including roles and responsibilities
- The amount of capital you will need to begin your venture and sustain it until it begins to generate income
How to Put a Business Plan Together
There are several parts to your business plan.
1. Executive Summary
The executive summary is just that – a summary of your overall plan. It might be the first section of your plan, but it’s probably the last section you will write. Included in this section is a brief review of the business and its owners, the industry and target markets, competition, and required capital.
2. Company Analysis
This section looks at an overview of your company and discusses your business idea. It describes how it is organised, what products and services it offers and details about how and how you plan to make your business a success for your target market.
3. Industry/Market Analysis
This section looks at the market and the industry that your business will be in. You look in detail at industry trends and at your competition: How big are they? Which customers are they after? What is their strategy? What is their market share? This section required a research – don’t be afraid to look carefully at your competition.
4. Analysis of Customers.
Another vital section is your customer analysis. This covers the potential market that your company will serve. You will assess and describe your potential customers: Who is buying? What do they buy? Why do they buy? The section should also convey the needs of your target customers and show how your products and services satisfy these needs to an extent that the customer will pay for them. Remember – there are three ways to win:
- Cut costs to the bone
- Offer something unique
- Focus on one customer group
This section identifies what positions and staff you will require to run your business effectively. It outlines the functions of each employee and what each resource will cost. These costs include salaries, benefits, training, and miscellaneous expenses incurred through hiring.
While you have already done a brief summary of your business function, the operations section outlines the day-to-day operations in detail. This could include the following:
- Hours of operation
- Business location
- Furniture and equipment required
- Suppliers and vendors that your business will use
- Products or services required and the cost of these
- Any other important operational details specific to your business
Following on from the operations section, the marketing section will take a deeper look into your company’s processes. Here you will include a list of your business products or services and the cost to your customers for each. You will relook at your target market and how you intend to capture and retain customers.
The marketing plan also relooks at your competition and their marketing strengths and weaknesses, and how your business will counteract or improve on those strategies.
Lastly, this section also includes information about your business’ other marketing endeavours, such as a website, social media and advertising, and how you will most effectively use these.
Although every business is unique, the financial section of the business plan is fairly similar for every business plan. It outlines your income and financial statements, balance sheet and other financial ratios, such as break-even analyses.
Financial statements are formal records of your business’ financial activities; they provide a summary of your financial condition. The four basic financial statements are:
- Income statement: Your bottom line – this is calculated by subtracting costs from revenue to come up with net profit
- Balance sheet: A financial snapshot that shows what you own, what you owe, and what your company is worth
- Cash flow statement: This monitors the flow of cash in and out of your company
- Budget: Your financial forecast that indicates where you plan to make and spend money
The financial section may require help from your accountant and a good spreadsheet software programme. Each owner should also include his own personal financial statement.
The appendix section provides documents that support the validity of the information in your business plan. This includes documents such as tax returns, bank statements, lease agreements, marketing research, insurance policies and building appraisals. The documents in this section should be appropriately labelled and appear in the order of reference.
How Long Your Business Plan Should Be
An especially detailed business plan can span many pages, but the length depends on what your business plan is for. A typical business plan averages 15 to 20 pages, but this is not a definite.
The length of your plan will also depend very much on the nature of your business. A simple concept will result in a simpler, shorter plan. Conversely, a proposition for a new kind of business or even a new industry could require lengthy explanation.
The purpose of your plan also determines its length. Using your plan to seek high capital investment will require a much more detailed plan. Using your plan to start a small business or manage an on-going business will require a much shorter version.
Common Business Plan Mistakes
There are two major mistakes that many businesses make when doing their business plans; a lack of research and a lack of preparation. These mistakes can potentially lead to failure down the line, so make sure to do your planning properly from the start. Avoid these errors in your plan:
- Avoid a lack of a long-term company vision – think carefully about your vision
- Avoid vague goals and objectives – make sure they are clearly and thoughtfully outlined
- Carefully research what your customers want to avoid misunderstanding the requirements
- Never underestimate the competition – be very clear on what your competitors are doing and of your expectations within your industry
- Inadequate financial planning will result in constant financial problems, so make sure to do your research and plan properly
- Ineffective procedures and systems are a major problem in the management of a business – be sure to assess and identify these in detail in your plan
- A business plan that will be presented to investors needs to be clear and detailed. Failure to communicate the plan properly will stop your business before it even gets started.
Remember; the long-term success of your business takes guts, stamina and determination. A well thought out business plan can go a long way to keeping you on track and motivated!
What do you think? Do you have any questions about writing a business plan? Feel free to ask us – we’ll do our best to give a good answer!
Drop us a comment, an or find us on Facebook!
As the owner of a small business herself, Jain is passionate about small business and helping other SME’s succeed. She started the Small Business Forum to network and join forces with other SME’s and entrepreneurs in order to share knowledge, support and grow businesses together.