Starting a new business is a very daunting and tricky process, but just having an idea of what your business strategy will look like isn’t enough to properly execute the launch of your new venture. To make your business a reality, you need a ‘good’ business plan and not just quick notes on a piece of paper to guide you through each stage of launching and managing your new company.
What is a business plan, and why is it important?
A business plan is a management tool that maps out your company’s core business activities, what products and services it plans to offer, which customers to sell to, and what marketing strategy to undertake. It can also include a financial outline that can help with budget forecasting for the future and also help attract outside investors.
Launching a business without a business plan is never a good idea, and it’s just setting it up for failure — a good business plan serves as a roadmap for your company’s plans to help with smart decision-making and also help reduce investment risk. Scientific research has also shown that business plans are necessary in starting a business because taking the time to ‘plan’ allows you to formulate a proper strategy and better understand how your business might grow. Hence, it’s less likely to fail. A well-written business plan will also increase your chances of securing funding from investors and banks, if applicable, and getting more executive talent involved.
Writing your business plan
When writing a business plan, it’s important to understand that no business plan is identical. Every business has its unique niche and approach, but knowing the specific elements to follow will help you create a very effective management tool that will benefit you and potential investors. In practice, there are two types of business plans: the traditional type and the lean start-up type. While traditional types are much more in-depth compared to the modernized lean start-up type, both methods still contain the necessary information to formulate an effective business plan. Below are the fundamental steps you need to follow when writing a business plan:
Describing your products and services
Illustrating the products or services your company aims to offer is a critical element in your business plan. This section of your document should involve highlighting the problem your company desires to solve. It’s also essential to address your company’s competitive advantages over other businesses and what sets you apart from the rest of the industry.
Knowing your potential customers
This section of your business plan should consist of your market analysis: a deeper look into your ideal customer, how and where to find them, and how your product or service will stand out to them. Specifying your target market and understanding their niche will make it easier for you to create a marketing strategy which in turn will undoubtedly better position your company on the market.
Defining your marketing and sales strategy
Now that you have identified your target market, here comes the part where you plot your action on how you plan to sell and distribute your product or service to your customers. This section should include logistics, potential product costs, and an analysis of how to position your company above your competitors.
Detailing your company profile and management team
In this section, your document should outline your business’ legal structure, including existing key members, their relevance to the team, and operational roles that need to be filled. This section should describe how your company is organized.
Laying out your financial projections
Figuring out the numbers can be daunting, but setting up a financial plan doesn’t need to be complicated. Ideally, laying out your business financials can help improve investor confidence and also reduce any budgetary complications in the long run. This detail can also be advantageous when seeking funding from banks or capital firms. This section can include sales and revenue projections, a profit and loss statement, a cash flow statement, or a balance sheet of assets and liabilities.
Composing your executive summary
The executive summary is the most crucial part of your business plan and is the first thing investors need to see. Thus, this section comes at the very top of your document. However, writing your executive summary is always last since it encompasses just about everything else in your business plan. Your executive summary should be brief and should contain an overview of your company, what your business is all about, what problem it intends to solve, your product or service, your target market, and other highlights about your new venture. Essentially, this is the section that most investors look for when evaluating your business before deciding whether your company is worth investing into.
Assembling your appendix
The appendix comes at the very end of your business plan, but most businesses do without one. However, setting up an appendix helps document any additional information such as charts, tables, legal notes, illustrations, and other material that does not fit in any other section of your document.
Overall, a business plan will help maintain business confidence because planning helps us be accountable and keeps us on the right track. Remember that while there’s no right or wrong when writing a business plan, it’s always important to avoid setting unrealistic expectations, especially regarding financial projections. It’s also highly recommended to have someone review your document before finalization to polish and refine any errors or inconsistencies. Ultimately, writing a business plan can be a tedious and time-consuming process, but it can be worthwhile in the end.