Like all businesses, your business idea should have a well-written business plan before execution. It serves many purposes, most of which will greatly benefit your new venture. From attracting investors to providing direction, a good business plan ensures the success of your organization. Like all things, though, it is integral to understand the many complexities of a business plan before actually learning how to write a business plan. This guide seeks to help you fully grasp the idea of a business plan - its purpose, its parts, and of course, how to write a business plan.
What is a Business Plan?
Before you begin asking us how to write a business letter, let us first discuss the nature of a business plan. Simply put, a business plan helps you evaluate the feasibility of your business idea, leaning towards an objective, critical, and logical perspective. Through its marketing aspect, a business plan takes a look at your possible target market, along with the marketing mix, which is basically the quality and quantity of products or services you will be selling. For management, the business plan will help you look into your current management team’s skills. Its financial aspect, on the other hand, will help you determine whether or not your business is and will be profitable in the long run.
A business plan also serves as your operating plan, which assists you in the actualization of the business. Here, you will be required to identify opportunities, thereby allowing you to avoid mistakes. A business plan will also help you with production and marketing, along with budget and other projections.
A business plan has the capacity to communicate your idea to your intended audience. As a selling tool, it provides for a strong foundation of your financing proposals.
The Significance of Writing a Business Plan
Writing a business plan serves two main purposes. First, as discussed, it serves as your ultimate business guide as the story of your journey progresses. It is essentially the blueprint of your business, and should things go astray, it will redirect you to the right path. To continue to be of value, however, your business plan should be kept updated. Keep in mind that the more you spend time planning ahead, the many failures and pitfalls you will be able to avoid. Secondly, business plans are needed for loan funds. Your business plan will provide lenders the necessary information to approve your financial request. Here, aspects of the company’s past and current operations will be discussed, along with future opportunities for growth. For it to be potent, your business plan should be concise yet loaded with information. Though contradicting, the idea is to use as keywords, plenty of which can be answered by the following as you write:
- How Much
At the beginning of each section of the business plan, answer those key questions in a single paragraph. Expand on the statement further by discussing further. If you are worried about your business plan’s length, set it aside as business plans do not have set lengths. By research, the average plans fall between 30 to 40 pages, which already includes the section containing the supporting documents.
Writing the Business Plan
With those in mind, it is now time for a thorough discussion of the business plan and the process of writing said business plan. As the number of pages provided suggests, writing a business plan requires a lot of time. Entrepreneurs reveal that crafting a business plan demands for a 100 hours and more, as first and foremost, a business plan’s foundation lies on research. Starting the research process may sound simple, but always remember that a business plan cannot succeed without a solid foundation. The typical business plan has three sections: the marketing and management aspect of the business, the financial projections, and the supplemental information.
More complex business plans come with an Executive Summary, which is takes up 3 to 5 pages of the business plan. To further understand each section, read on below:
• Section One. This section’s information should be written thoroughly, but information should remain concise and to-the-point. To achieve this, make sure to make use of headlines, graphs and even "bullets" to better readability. This section usually takes up 10 to 20 pages of the entire business plan.
• Section Two. This section describes the plan in numbers, which pertains to the general outcome of your business plans and various strategies. As with the rigid rules of research, your financial projection should be based on facts only. All information provided here should be supported.
• Section Three. This section contains supporting details that reinforce your first two sections. Contents provided here will vary according to business.
The Outline of the Business Plan
Steps to Writing an Effective Business Plan
From the technical side, we now move on to tips and tricks on how to write a business plan. It is one thing to be well-read on its aspects, of course, but quite another when seeking to write an effective business plan. Because of this, we have gathered some tips from various entrepreneurs and business experts, guaranteed to help you craft the best business plan for your newest venture:
- Research, research, research! According to William Pirraglia, a financial management executive, now retiree, a business plan should always showcase thorough research and analysis of your product, market, and of course, your objectives. A heavy amount of time should be dedicated to evaluating, researching, and much critical thinking. To be able to write the perfect business plan, you must know your company by heart. Your product, competition, and target market should be known intimately as well.
- Establish the purpose of your business plan. According to the Entrepreneur magazine, a business plan is a written document that describes the nature of the business, its sales and marketing strategy, and the necessary financial background, which should contain a loss statement and projected profit. Your business plan, however, can actually serve other purposes. Keep in mind that your business is also a road map, as it provides directions that point to the success of the business. Furthermore, it helps an entrepreneur avoid possible bumps in the road. This is important to remember if you are building a business from your own finances. If you want to attract investors, however, that is a different purpose and your business plan should be crafted accordingly. As you begin defining your plan, ensure that you have already defined your goals.
- Create your company profile. This essentially carries the core of your branding. It should include the history of your business, your products and services, resources, your intended audience and target market, and of course, your unique selling proposition. While a company profile is often used to attract potential customers, it can also be used to establish your company in the business plan. As an essential part of your business plan, it should be part of the foundation.
- Remember to document all aspects of your business. As you may well know by now, the language of business is money. That said, investors will want to ensure that your business will provide them with profit. Considering this fact, it is only natural that your potential investors would require you to share everything about your business. This is a grueling process, but it can be made easy by documenting every single process. Document your cash flow, industry projections, as well as your expenses. Other minor details like licensing agreements and location strategy should also be included.
- You should have a strategic marketing plan up your sleeve. The perfect business plan should always contain an aggressive and equally strategic marketing plan. Such marketing objectives include the following:
According to experts, potential readers of your business plan varies. They could be investors, bankers, and even employees. Although a diverse group, they are predetermined. Each of them have their own interests, but in this case, you will already know their interests up-front. Take these into account as you prepare your business plan. The solution? Your marketing plan in the business plan, of course.
- Discuss why your company cares. No matter who the audience is, your business plan should reflect your passion and dedication, along with reasons why you care about your company and its goals. Do not hesitate to share your mistakes and what you have learned, the problems you wish to solve, and the values you would like to remain intact. You should also establish what makes you unique from competitors. The most successful businesses today rely on the impact of emotions. By playing on emotions, you build stronger bonds and connections.
Things to Avoid When Writing a Business Plan
As you begin to write your business plan, inconveniences and errors will surely arise. These, then, will undermine the credibility of your business plan, possibly even harming your chances of receiving investor financing. Here are things to avoid when writing a business plan:
• Quite obvious, but never submit a “rough copy” of your business plan. When we say rough, we mean rough: coffee stains, folded edges, and typos. This sends a clear message to the reader – you do not take the planning process seriously, so why should they bother?
• Do not supply your business plan with an outdated history of financial information, along with an unrealistic industry comparison of competition. Doing so will plant doubts about your planning capability.
• Remember: unsubstantiated assumptions not only hurts the business plan but your entire business. As the planner and owner, each information should be supported by facts and can be justified when presented - what good will a potent Powerpoint Presentation do if you cannot justify the numbers?
• Your “silver lining” and too much optimism can unfortunately ruin your plan. Failure to consider prospective pitfalls can lead to assumptions that your business plan, along with its ideas, is not realistic and attainable.
• Study the financial information. Even if you have asked someone else to prepare financial projections, you must be able to explain and defend them. Your credibility will suffer if you cannot.
• If your business plan lacks specific and detailed strategies, people will begin to question it. Remember that a business plan that only discusses general statements of strategy without important details will be immediately be dismissed as fluff.
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