Putting together your first business plan can be daunting. Below are 10 easy steps to make the task more manageable.
No matter what type of company you want to start, one thing is for certain: you’re going to need an effective and comprehensive business plan. To achieve this goal, your business plan needs to specify what short-term operations need to be carried out to achieve your longer term goals. This, however, often turns out to be easier said than done. These 10 steps should make writing your winning business plan a bit easier.
1. Write to your audience
Business plans are usually written up with a particular audience in mind. The plan might be to attract investors or to communicate the vision of your business to partners and/or employees. Whoever it is for, be sure to write the plan with your audience in mind. Different readers will have different requirements. For example, in the case of attracting investors, potential investors will want to see estimated monetary returns and how safe their investment is.
2. Know your business
Prior to writing out your plan, ensure you have a thorough knowledge of your own company.
Any serious start-up knows exactly what their business is offering, who their competition is and who is buying or paying for their product. This is of the utmost importance for the first point, write to your audience. Anyone reading your plan must be able to share in your vision for your company.
3. Research and know your market
It’s far too easy to rush into writing a business plan in tremendous detail without actually knowing if there are customers who want what you’re offering. Your plan must predict things like your current market size (how many customers would be interested in your product) and future market growth. Not only this, but you must know exactly why your customers would be interested in what you have to offer. Why do they need or want your company around? You need to be able to answer this in your business plan through extensive market research.
4. Love your enemies
Understanding your competition is everything. Why have their businesses succeeded? What are you going to do to be better than them? How many customers do they have? Does your intended industry have lots of competition or only a little? Be realistic in your plan when you outline how you intend on competing with the existing companies. On the other hand, being able to talk to people already in the industry to gain insight can be invaluable. Include any useful information from people in the industry in your business plan.
5. Treat your business plan as more than, “just a document.”
Your plan should be a dynamic, living document that gets updated as more information comes to light. It has to be actionable and easy to read. A document that simply has everything written down in it with no structure will never be referred to and is ineffective. Remember that a plan of 15-20 slides on PowerPoint, if created efficiently, can convey as much information as a 100 page document that nobody is going to read. Here is an example of a great business plan.
6. Cover all the necessary sections
It is true that your business plan should be as simple as possibly without skimping on any useful details, you also need to include various sections. You should include these sections: Business, Product or Service, Customer Base, Competition, Management, Operations and Financials. The Bplans website is a good place to find information on what a business plan should include. Remember that simple, easy to read visuals like bar graphs and tables are effective visual tools that can be used to convey large quantities of information.
7. Do the math
This is where potential investors will be most interested. Your business plan should include hopeful costs and realistic costs as well as projected earnings and a break-even chart (to help the reader easily understand how many sales it will take to break-even). If crunching the numbers isn’t your strong point, get some help from a friend or even an accountant. Be very careful not to overestimate how much money you think your company is going to make. The best way to do this is to get a third party who has no emotional investment in your business to review your numbers to check how valid they are. Remember that investors will often scrutinize your projections to check how realistic they are.
8. The executive summary
This is often considered the most important part of the whole business plan. This executive summary is a very short summary of the entire plan. It should include everything from a short description of the business to a summary of your numbers. The Executive Summary is usually included at the beginning of your plan and is the first thing that the reader will go through if under time pressure. If the Executive Summary is enticing enough, potential investors and others will be inclined to read further.
9. Plan for the end
Interestingly, investors mostly care about your exit from the company. They are interested in the end result, or in other words, the return they can expect on their money. If you intend on staying permanently with your company, outline their projected return on investments at different times in the future.
10. Peer review
When you have completely finished your business plan, have an independent reader evaluate it. This should be an individual who is detached from your business and can offer criticism and suggestions. In general, this review process will result in finding more questions that need answering in your business plan.
Trying to start writing your business plan, or even reading about them, can sound hopelessly confusing. The key is just to start. Things will fall together as you start writing it out. You will see where you need to find more information and through peer review, you will be able to tell if your plan is as effective and comprehensive as it needs to be.
Check out this video for an example of how to write a business plan.
There are thousands of free templates and samples of business plans online. Download one as an initial guide when starting out. Mentioned earlier, the Bplans website has free templates that can help.