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A well-written business plan forms a solid foundation for your company. It acts as a defined roadmap for how to establish, structure, manage, and grow your business.
A good business plan clarifies your strategy, identifies what route you want your business to take, points out potential roadblocks, and helps you evaluate whether your business idea will work. It also outlines your business’s financial goals and how you’ll work to achieve them.
A meticulously crafted and highly detailed business plan should serve as a guiding light for your enterprise for a good 3-5 years. Here’s how to curate such an operational plan for your business.
What Is a Business Plan?
A business plan is a detailed document that outlines business goals and how you intend to achieve them. It’s a written roadmap for your company’s marketing, financial, and operational goals.
Business plans are not just for when you start a business. Both new and established businesses can create one to outline future strategies.
A business development plan is a vital document that is intended for both external and internal audiences. It can, for example, be used to attract investment to finance your business before it has established a history of success. It can also aid in obtaining lending from financial institutions.
Conducting day-to-day business operations without a business plan is one of the most common mistakes entrepreneurs make when starting a business. In fact, very few businesses can survive for long without one. There are obvious advantages to developing (and following through on) a good business plan. These include the capacity to process ideas before investing too much money in them and overcoming potential roadblocks to success.
A good business plan should include all projected costs for starting a business and potential pitfalls for each decision made by your company. Even among competitors in the same industry, business plans are rarely identical. They can, however, share the same fundamental elements, such as an executive summary of the company and detailed descriptions of its operations, goods and services, and cash flow projections.
How to Write a Business Plan in 9 Steps
- Draft an executive summary
- Describe your company
- Perform market analysis
- Outline management and organization
- List your products and services
- Perform customer segmentation
- Define a marketing plan
- Provide a logistics and operations plan
- Make a financial plan
Confused about where to begin from? There’s no need to worry because we’ve divided the entire business plan writing process into sections, and thoroughly explained each one to assist you in building your plan step-by-step.
Step 1 – Draft an Executive Summary
An excellent executive summary constitutes arguably the most important section of your business plan. Even though we’ve outlined this as step one, it’s best to leave writing it at the end so that you’ve got a good overview of all aspects of your business plan before you get to it.
The purpose of the business plan’s executive summary is to consolidate everything and provide time-pressed reviewers with an overview of your company that motivates them to continue reading.
It’s important to bear in mind that this is a summary. Emphasize only the key takeaways that you discover while drafting the business plan. As you develop different sections of your business development plan, take notes on a separate document for what you want to include in the overview. Once you’re done with all sections, come back to the overview, trim it down, polish it up, and it should be ready to go!
It is critical to remember that an executive summary should not be longer than one page. This may make cramming in important information a little stressful, but it’s not impossible.
Step 2 – Describe Your Company
This is the first body section of your business plan after the executive summary and should address two basic questions meant to be answered from your company’s point of view:
- Who you are?
- What do you intend to do?
Responding to these questions gives an overview of why you’re in business, what makes you unique, what you’ve got going on, and why you’re a lucrative option for potential investors.
Clearly defining these points is worthwhile, even if you’re the only one who will ever read them. It gives you a chance to pen down some of your company’s more intangible aspects, such as your corporate ideology, principles, and missions.
Some of the elements you should write about in your business overview are
- Your business name (here’s how to come up with a good business name)
- Your company’s legal structure
- Your industry
- Company vision, mission, and values
- Your business goals
- Business history
- Background information on your team
You can write a mission statement once you’ve determined your values. Jot your mission statement in just one sentence that explains why your company exists convincingly.
Create your vision statement next. What impact do you envision your company having on the world once you’ve achieved your goal? Make this impact an assertion by beginning the statement with “We will,” and you’ll be well on your way.
Step 3 – Perform Market Analysis
Market research holds make-or-break importance for your business. This holds true irrespective of the kind of business you start.
Choose the appropriate market for your business, preferably one with a large number of customers who acknowledge, recognize, and require your product. You’re likely to find yourself struggling with each sale if you opt for an unsuitable market or an unsuitable time to start your venture.
A thorough market analysis is undoubtedly an essential component of your business plan. Even if you don’t write a business development plan, or you write one and no one else reads it except you, market research is still going to be as important for business success.
Write About Your Potential Market
The potential market is an assessment of the total number of people who require your product. It’s thrilling to visualize towering revenues, but you want to legitimize your estimated potential market with accurate data.
It’s a difficult undertaking so here are some guidelines to get started:
- Identify your ideal customer persona: Figure out which age group and gender is going to be buying your product or service. Examine projected fluctuations in the number of people in your targeted age segment in upcoming years.
- Investigate market dynamics: For products catering to a specific market segment, try to analyze and identify how the demand will change in the next few years and find other consumption patterns.
- Make educated guesses: You’ll never have absolute, all-encompassing data on your potential customer base, but rough estimates are always possible.
Step 4 – Outline Management and Organization
Your business plan’s management and organization section should inform readers about who runs your company. Describe your company’s legal structure. Discuss whether you’ll register your business as an LLC, S-corporation, an LLP, or sole proprietorship.
If your company has a management team, use an organizational chart to show the internal structure of your company, including the roles, responsibilities, and relationships between individuals in your chart. Don’t forget to communicate how each individual will help your startup succeed!
Step 5 – List Your Products and Services
Although your products or services will be prominently featured frequently in your business plan, it is pivotal to write a component that provides critical information on them for potential investors.
If you plan to sell a lot of things, offer more broad information about your product offerings. If you sell a few, include more detail about each one.
It’s also vital to consider where things are sourced—handmade crafts, for example, are acquired differently than trending products for a dropshipping firm.
Step 6 – Perform Customer Segmentation
Your consumers, also called your target market, serve as the core of your marketing strategy. You must keep your ideal customer in mind when you make strategic business decisions. This is why understanding and including them in your business plan is critical.
Describe a variety of general and particular demographic traits to provide a comprehensive summary of your potential customer. Customer segmentation frequently involves the following:
- Demographic segmentation
- Psychographic segmentation
- Behavioral segmentation
- Geographic segmentation
Step 7 – Define a Marketing Plan
Your ideal consumer has a direct impact on your marketing efforts. Your marketing strategy should detail your present decisions as well as your future plan, with an emphasis on how your business ideas are a good fit for that target customer.
Promotional campaigns usually include data on the 4Ps. The level of detail you offer on each of these P’s is determined by your company and your audience. The 4 P’s are
- Price: What are the prices of your products?
- Product: What do you sell, and how do you stand out?
- Place: Where would you sell your goods?
- Promotion: How do you intend to get your product in the sights of your target market?
Step 8 – Provide a Logistics and Operations Plan
Understanding where you’ll store your goods and how you’ll ship them is a critical component of a business plan, especially if you’re going to run a brick-and-mortar, product-based business.
The workflows you’ll employ to turn your business idea into reality are called logistics and operations. If you’re developing a business plan for forecasting purposes, this is still a very important component to consider.
Cover all aspects of your intended operations, such as
- Suppliers
- Production
- Facilities
- Equipment
- Inventory
This part should demonstrate to the reader that you have a comprehensive knowledge of your distribution network and good contingency strategies in place to deal with any potential instability.
Step 9 – Make a Financial Plan
A business’s success depends on its monetary well-being, regardless of how much effort you’ve put into it. After all, when push comes to shove, individuals will only stick with a company that they believe will be around for the conceivable future.
Generally speaking, you should normally include three primary financial views: an income statement, a balance sheet, and a cash-flow statement. Depending upon your use case, it may also be necessary to give financial facts and estimates.
Income Statement
Your income statement is intended to provide readers with an overview of your sources of income and expenditures over a specific period of time. Readers can examine the bottom line or the cash flow your organization had over that time period using just those two pieces of information. If you haven’t yet established your company, you can project future milestones of the same data.
Balance Sheet
Now the balance sheet is a financial document that shows the equity you hold within your company. By listing your company’s assets, and liabilities, you can get a glimpse of your company’s shareholder equity, which is determined as follows:
Equity = Assets – Liabilities
Cash Flow Statement
A business’s cash flow statement is identical to its income statement, with one key difference: it factors in when you collect revenues and when you pay your expenses.
When the amount of money coming in exceeds the amount of outgoing money, the cash flow is said to be positive and vice versa. Forecasting your cash-flow statement can be useful for identifying discrepancies or cash-flow deficiencies and adjusting activities as needed.
Why Write a Business Plan?
The advantages associated with writing a business plan are countless. Below we’ve included the 4 most popular reasons why you should write a business plan:
- Raise money for your business
- Improve your decision-making abilities
- Identification of potential weaknesses
- Thoroughly communicate ideas to stakeholders
Common Mistakes to Avoid When You Write a Business Plan
Unrealistic Financial Forecasts
Lenders and investors expect to see a realistic picture of where your company is today and where it hopes to be in the future. Therefore if the plan is unduly optimistic with no explanation of the forecasts, it will raise red flags and cause the plan to be rejected.
Failure to Define the Target Audience
When it comes to businesses, there’s no “one size fits all”. Naturally, your business may not appeal to the entire market. You must define your specific target market, explain how you arrived at these assumptions, and outline how you intend to target this market specifically.
No Emphasis on Your Competitors
Even if you believe you have a ‘unique’ business idea and are certain that no other company like yours exists, double-check. After all, when it comes to the industry, there’s no such thing as no competition.
How to Write a Business Plan – FAQ
Yes, you should ideally create a business plan even if you don’t need financing. You must know where you’re going, how you’re going to get there, and how long it’ll take you for your small business to flourish. Developing a business plan encourages you to identify goals, establish the assets you’d need to execute your plan, and anticipate any obstacles.
Don’t expect everyone to thoroughly read your business plan. You can only rely on investors to skim through it. Here’s what investors want to see in a business plan: a business that will grow quickly and return a good profit faster than other investment options.
Venture capital firms receive multiple business plans every day. This equates to several hundred plans per year. They only invest in a few – less than 1%.
Expect your business plan to be reviewed by a junior-level employee who will scan it, possibly highlight some key points, and then forward it to a partner if you pass. If the partner is interested, you will most likely be called in for an interview, or the partners will come to your place of business.
Conclusion
A well-structured business plan will help steer your company in the right direction as your business grows. It will help guide you through every phase of your business, such as the initial stages. You will learn to manage your business better with the help of your business plan.
Avoid making mistakes when writing your plan and review everything once you’re done. Use this helpful guide as a starting point in creating your ideal business plan and you are good to go.
Do you need help with your business? Read about the different business incubator programs in our article to learn more.
About the author
Dr. Gabriel O'Neill, Esq., a distinguished legal scholar with a business law degree and a Doctor of Juridical Science, is a leading expert in business registration and diverse business departments. Renowned for his academic excellence and practical insights, Dr. O'Neill guides businesses through legal complexities, offering invaluable expertise in compliance, corporate governance, and registration processes.
As an accomplished author, his forthcoming book is anticipated to be a comprehensive guide for navigating the dynamic intersection of law and business, providing clarity and practical wisdom for entrepreneurs and legal professionals alike. With a commitment to legal excellence, Dr. Gabriel O'Neill, Esq., is a trusted authority dedicated to empowering businesses within the ever-evolving legal landscape.