A business plan is a written description of your company’s mission and intended methods of expansion. It serves as a road map for your company’s endeavours and, if necessary, as a pitch to potential investors and lenders for financial backing. You may finish your business plan with the least amount of hassle by using a template.
The greatest choices for your company’s expansion may be informed by the data presented in a well-thought-out business plan. An excellent business plan serves three primary functions namely, developing a growth strategy, forecasting future financial demands, and attracting investors and lenders. The purpose of a business plan is simply to assist business owners in translating their ideas into a workable strategy.
A More Detailed Look at the Advantages of Having a Business Plan
The following list helps put into perspective why it’s imperative to have a business plan.
In order to show that you mean business – In order to demonstrate your dedication to the success of your firm to everyone involved — workers, investors, partners, and yourself — you will need to create a formal business plan. Making a strategy compels you to deliberate over and decide upon the actions most likely to provide positive results, which in turn speeds up your progress toward your goals.
To set organizational benchmarks – The most critical long-term objectives for your organization’s development should be spelled out in detail in the business plan.
To learn more about your competition – Planning a business venture requires careful examination of the marketplace. Direct and indirect rivals are always a threat to every business, so it’s important to be aware of how yours stacks up. And to find out what you need to do to achieve competitive advantages if you don’t already have them.
To figure out whether the project you are planning is possible – How fantastic is this chance? Your business plan is a feasibility analysis that should include research into your target market and the competitive environment. You may find that postponing the project is the end outcome of your preparation. One option is to try something else that has a higher chance of success.
To elaborate on your plan for generating income – Just how will you generate money off of your venture? This is a very important question to answer in writing, both for your own benefit and for the benefit of any potential investors. The revenue model’s assumptions and problems may be better addressed with written documentation. In addition, after reviewing your business strategy, people may provide suggestions for new income sources.
To evaluate your budgetary requirements – Can you tell me whether you need to raise money for your company? If so, how much? You may use a business plan to figure out how much money you need and how you’ll spend it. These steps are critical for successful capital formation and use. Planning forward is essential, especially if you anticipate the need for future budget increases, and this will help you do just that.
For the purpose of attracting investors – Loan applications should start with a documented business plan. The business plan addresses concerns of potential backers, such as whether or not there will be demand for the proposed product or service. Can we get a breakdown of the projected costs? When will the firm be ready to shut down? Though investors will likely want to see you face-to-face before they hand you a check, your business plan will nonetheless be studied closely in almost all instances.
To lessen the possibility of wasting time on the incorrect opportunity – Opportunity expenses may be reduced throughout the business plan writing process. The process of writing a business plan allows you to compare the potential of this opportunity to others. That way, you may always choose wisely.
To make you study your market and familiarize yourself with it. Tell me about the most pressing developments in your field. Who or what poses the biggest danger to your business sector? Whether the market is expanding or contracting. How big is the market for your service or product? The process of writing a business plan will provide you with invaluable insight into your target market that will help you make informed decisions. Moreover, you’ll be able to put this information to use in ways that boost the prosperity of your business.
How to Write a Business Plan
?The following strategy, inspired by Nerd Wallet recommendations, will help streamline the process of writing a business plan.
Do a quick executive summary
As the opening page of your company strategy, this is crucial. Take it as though you were doing an elevator pitch. A vision statement, a succinct explanation of the goods and services supplied, and a high-level overview of your intended expansion of capital should all be included.
Investors will likely read the executive summary first, although it may be more convenient to write it last. That way, when you write the more in-depth portions, you can easily reference the material you’ve already uncovered.
Here are the 6 essential stages to writing a compelling synopsis
Describe your organization
- The next section, a description of your firm, should include details like:
The official title of your company. - Please include your company’s physical address.
- Mention the names of some of the company’s most important players. You should showcase the special abilities or technical knowledge of each team member.
- It is important to specify the legal form of your organization (sole proprietorship, partnership, or corporation) and to detail the ownership and activity of each owner.
- Finally, you should discuss the origins and current state of your organization. This sets the stage for the following part, in which you will share your objectives with the reader.
Explain your company’s objectives
An goal statement makes up the third section of a business strategy. Detailed short-term and long-term goals are laid out here. In this area, you may outline the reasons why you need a loan or investment for your business, the ways in which those funds will contribute to your company’s development, and your strategies for achieving your growth goals.
The goal is to articulate exactly how the loan or investment will contribute to the expansion of your business. Explain how the loan will aid in the rollout of a new product line, and project the resulting rise in sales over the following three years.
Briefly explain the goods and services you provide
Provide specifics about the goods and services you’re selling here. The following are some things you need to include:
- A description of how your service or product works.
- The method you use to set prices for your offerings.
- Typical clients that frequent your business.
- The method you use to fulfil orders and manage your supply chain.
- That which you use to make sales, for instance your order fulfilment and supply chain strategy.
How you plan to get your product distributed
Trademarks and patents that apply to your product or service now or in the future might also be discussed.
Investigate your target market
Investors and lenders will want to discover what makes your product superior to others on the market. Market study should include a discussion of who you plan to compete with. Talk about your strengths and their weaknesses. Explain why you’re targeting a niche or unsaturated market if that’s the case.
Describe your sales and advertising strategy
You may use this section to detail your strategies for attracting new clients and keeping existing ones interested in your offerings.
Evaluate the company’s financial situation via a financial analysis
As a new company, you may not yet have comprehensive financial records. If you’re an established firm, though, you’ll also need to provide statements of income or profit and loss, a balance sheet detailing your assets and liabilities, and a cash flow statement detailing cash inflow and outflow. Using metrics like the following are also acceptable:
- The margin at which your net income exceeds your total revenue.
- Liquidity and debt repayment capacity are quantified by the current ratio.
- The accounts receivable turnover ratio quantifies the number of times per year that receivables are collected.
- To help your readers grasp the financial state of your company, this section is ideal for the inclusion of relevant charts and graphs.
Create budgetary forecasts
If you need funding or investors, this section of your business plan is crucial. It describes how your company will make money and be able to pay back the loan or provide investors with a reasonable return on their investment.
Here, you will detail your company’s expected monthly or quarterly revenues, costs, and profits for at least three years, with projected figures for the future based on the assumption that you have successfully secured a new loan.
Accuracy is of the utmost importance, therefore review your historical financial accounts thoroughly before making estimates. Remember that your objectives might be ambitious, but they still need to be doable.
Complement an appendix with new material
List any supporting information or supplementary items that you couldn’t fit in elsewhere, such as resumes of key personnel, licenses, equipment leases, permits, patents, receipts, bank statements, contracts and personal and company credit history. If the appendix is extensive, it might be helpful to provide a table of contents at the start of your business plan.
Tools and advice for creating a business strategy
- If you want your business plan to stand out, consider the following:
When applying for a company loan with a local bank, the loan officer probably has a good understanding of your industry. - Providing overly optimistic sales projections might reduce your likelihood of receiving a loan.
- Edit carefully for spelling, punctuation, and grammar flaws; they may turn off lenders and investors and divert their attention from your firm. Consider hiring a professional business plan writer, copy editor, or proof-reader if you don’t feel confident in your own writing and editing skills.
- Make use of no-cost resources such as SCORE’s vast network of volunteer business mentors and professionals who may review and critique your business plan. If you need additional help, look for a mentor or visit your neighbourhood SCORE meeting.
- Free business advice and assistance in creating a business plan are available from the Small Business Development Centers of the United States Small Business Administration.
FAQs about How to Write a Business Plan
An optional contingency plan
When confronted with unanticipated obstacles, a modified version of the current strategy is required. You should have a backup plan ready in case anything goes wrong when trying to get bank funding, for instance. You should always have a backup plan in case anything catastrophic happens to your company, such as a significant drop in sales or the departure of an important executive. A backup plan may show a bank or investor that you have thought of more than just the best case scenario, which can help ease their concerns.
If your company is thinking about making an acquisition, a pro forma business plan (sometimes known as a contingency plan )might help you determine whether or not it is a good idea. How about charging more, putting money into employee education, and streamlining processes to eliminate unnecessary redundancies? Such what-if preparation need not be as rigid as, say, a presentation outline. Maybe you’re considering the potential for a huge growth. An “if-then” scenario plan may help you anticipate and account for potential increases in demand for resources like office space, machinery, and staff.
The difference between these and the operating and presentation plans lies in the fact that they don’t focus on the day-to-day operations of the firm. These documents are supplementary to your main business plan and should be treated as such. You should integrate some of the planning that went into these specialized plans into your overall company strategy if you do decide to purchase that competition or expand rapidly.
A mini plan
Many readers prefer the mini plan since it is easier to read on a mobile device and save for later perusal. You include the same basic elements as you would in a more extensive strategy, but you focus just on the most important aspects of the tale. It’s usually all that’s needed for a start-up or a small firm. The extended version may be necessary for a more involved venture.
A working plan
A functional business strategy serves as a useful guide for daily operations. There has to be a lot of information in it, however the presentation might be lacking. A working plan, like a mini plan, might benefit from an increased degree of openness and informality. You might use something like, “competing largely on a pricing basis” if you were to characterize a competitor in a plan you were going to submit to a bank loan committee.
Some details that are unnecessary to explain to oneself might be left out of a plan that is just meant for internal use. Similarly, a separate appendix is generally unnecessary for executive resumes. Likewise, pictures of the finished product wouldn’t add much to a working plan. The selection of what to include or leave out of a working plan may be influenced by internal policy issues. It may be embarrassing or humiliating for some company owners to have their staff learn how much money they personally take home from their ventures. To the extent that leaving out such details from a working plan does not significantly diminish the plan’s usefulness, you may be certain that your privacy will not be compromised.
The shorter, PowerPoint presentation
Many plans have been presented differently since PowerPoint became widely used. The plan is shorter than others, but that doesn’t mean it’s any simpler to deliver. Preparing for a presentation is stressful for most individuals, particularly if it will have a significant impact on the success of their company. However, a deck presentation of your idea might be rather effective. Not everyone who reads your business plan will feel the same way you do about the company, nor will they have the opportunity to ask any follow-up questions. Your whole narrative, from idea and mission statement to financial projections, may be told in only 15 minutes. Don’t just read what is before your audience; offer remarks to emphasize your thoughts and keep your visuals simple. Don’t let the brevity of a presentation plan fool you; it requires substantial preparation. It’s important to address the when, how, and why inquiries as well.
