Have you ever wondered about what a business plan is, or its importance to a business entity? Do you own a company, or you intend to start one? If you answered yes to any of these questions, then you have to patiently go through how to write a business plan where you can find all the necessary answers.
What is a business plan?
A business plan can be explained as a written document that shows a detailed summary of your business idea and how you intend to make it succeed. It covers every aspect that will contribute to the success of the business.
There are basic rules to writing a business plan, this includes
1. Ensure to keep it short or make it brief
If you desire attention or audience for your business plan, you must ensure you provide brief but detailed information as most people do not take an interest in lengthy write-ups. So if you desire real attention, try to keep it short.
Also, the business plan should be reviewed often, so a short business plan makes it easy for regular revision.
2. Keep it simple
When writing a business plan, ensure you accommodate your investors by avoiding the use of ambiguous words or language. Avoid coding that will wear out your audience but instead use simple and easy to understand language. Make your explanations direct and straightforward as much as possible and use terms that your audience will understand and flow with.
3. Avoid unhealthy comparison
Note that every great business started small, so you ensure that you operate at the level your business is. You can have what is called a 'Lean Business plan'. Your business plan can just be a page but never feel intimidated as you will surely grow out of the point you are. Never feel intimidated, never compare yourself with others instead of competing with yourself by ensuring you improve daily.
Contents of a business plan
Having highlighted the rules guiding how to write a business plan, the next stage is to know what a business plan should contain, how it should be arranged and what message each heading should carry.
1. Executive summary
Ideally, this should come first in a business plan though some people make it come last. It contains an overview of a business and the plans, just like a movie trailer that helps you to have a good knowledge of what a movie is all about. It shouldn't be too detailed so that your readers or audience will have a reason to read through the other parts of the business plan.
A statement containing the purpose of your company’s existence, what it offers to customers, and its importance.
Brief detail about the company’s products or services and place emphasis on reasons for their uniqueness.
Market Opportunity Summary
A brief explanation of a few key problems that your product or service tend to address and how this can become a big opportunity in the long run to both the company and investors.
Select a few of the company's most significant achievements and describe how these achievements represent a foundation of what lies ahead.
List out the next milestones or target you are aiming at and its significance to the growth of the company
This statement shows a larger picture of the company's future intentions or the company's bigger dream. It contains how big the company will become in the future.
2. Company Survey
This is the section where readers get to have a deeper knowledge about the company and what it has to offer.
Before your audience care about your financial assumptions or marketing strategy, they will be interested in the fundamental details required to set up the remaining part of the plan that follows;
- What painful challenge are you solving for your customers?
- What is the approach to providing a solution to the challenge?
You might be privileged to be the inventor of the best revolutionary product that has ever existed. But in this section, if you fail to expressly define the purpose of the product’s existence and how it can help customers to solve a specific problem in a unique and better way when compared to other options, you can lose your customers or potential investors because your readers are more interested in this subject when compared to other plans of your company.
So ensure you do very well here to get them to love your company that they will love to be a part of its success. You may build an interesting scenario that your readers can best relate with. It will help them understand this aspect well.
Once you have done justice to explaining the problem that you are set to solve, the motive here is to tell your investors how beautifully your product or service can solve the problem you just stated or figured out.
Here are the main questions to consider:
- What type of product or service are you offering?
- How does your product or service stand as the perfect solution to customers’ most terrifying problem?
- What is the impact of the product or service on the lives of the customers?
- How does this product or service address the shortcomings that are currently in the market?
3. Market Overview
Your problem and solution statement set the ground for your customers to see the reason for starting your company.
Firstly, you have to define your market as this helps you to get attention to industry and trends conditions, which clearly shows the assurance of your company’s success.
You might want to enhance your expertise with a lot of evidence, such as market research and statistics, which will act as proof of your expertise in your industry to your readers.
The motive of the market overview is to help in illustrating the following;
- The size of the targeted market or the market opportunity that is open to your company due to the product or service you want to provide.
- The level of growth in your market
- The trends that drive the demand for your product or service.
- The success stories of companies in the same industry as yours.
Market size and growth
You will make your readers excited when you make them realize that your product or service will help to address a major problem that affects a larger part of the market. This enough will make them give their full support in helping your company achieve its dreams.
At this point, you must do more research that will help to position your reader for better comprehension on:
- How large the market is
- An estimate of how much revenue is generated yearly.
- The growth rate
- The expected growth rate over a while
- What are the upcoming trends that your products have been designed to respond to?
- Are there new technologies that help to boost the relevance of your product or service?
- Are there similar brands like yours?
Industry success story
- Can you identify similar companies that have previously been supported by investors?
- Are there previous occurrences of company acquisition that provides a similar product or service like yours? For example, a bigger company acquiring smaller companies likes yours?
- Are there similar companies that have gone public recently?
It is the ‘how it works’ section that will be used to access the details of the secret that makes it work. This section is different from the company survey section, which deals with how the product or service benefits the consumers.
This section should include questions such as:
- What are some of the bullet features of the product?
- How will your customers use the products or services?
- Are there technologies underlying the solution your company has provided that you will need to explain to your customers to understand better?
Note that you don't have to tell your customers the exact source of your product, otherwise, you might have someone steal that idea from you. Instead, you can explain it better by relating it to the problem that the product can help the customers address.
5. Revenue model
It is an important section of the company. It contains details of how the company intends to generate its revenue.
As a business owner, you must be able to show your investor how you intend to transform your product or service into sales. This helps the company to earn lending credibility to the business plan.
The following will want to be determined:
What are the methods of generating revenues from your customers? Is it via one-time payment or transaction-based? Is it the time spent in providing service to customers or via service revenue-based?
- What are the product price points?
- Why has the price been set that way?
- What is your pricing when compared with companies with similar products?
Cost of goods sold
It consists of all the costs incurred by the company to get the product or service to the point of sale.
After you deduct the cost of goods sold from your sales, the percentage of the balance of sales is referred to as margin. For example, if your inventory cost you $15 and you sold it for $20, your margin will be 25%
Questions to consider includes:
- Is the revenue model chosen the right one for this product?
- Do you have other revenue sources you intend to include down the line?
- Has any revenue been generated up to date? If yes, how much?
- What knowledge have you gained from your previous revenue efforts?
- If you are yet to generate revenue, when do you intend to start?
6. Operating model
This section entails how the cost will be managed and the efficiencies to achieve it. It is basically how your business will operate or run.
Your areas of focus may include:
These costs determine, to a large extent, the success of your business. You must be able to manage these costs as it will determine the profitability of the business.
Over time, your critical cost matures. It either grows or shrinks. For instance, you might incur $50 in acquiring 100 users, but later on, $80 was incurred to acquire 1,000 users.
You need to inform your customers about the likely changes in cost.
7. Competitive analysis
Under this section, you have details of your competitors. You will make sure that your research surrounds both direct competitors and your indirect competitors.
8. Customer definition
This aspect is concerned with your targeted customers. What categories of people were the product or service designed for?
9. Customer acquisition
Since you have identified your targeted customers, this aspect is concerned with the strategies put in place to get them to purchase the product or service.
In this section, you must do all you must to convince your potential investor as they desire to see your results first, and this can compel them to invest.
This section shows information about your team members. You must make sure the team members are made up of the individuals who can give your readers more conviction about the success of your company.
For example, if your company deals with electrical gadgets, your team must consist of members who have a deep background and still relevant in that field.
In this section, you seek funding from potential investors and make them see what they stand to gain if they help you to achieve your goals.
This section usually comes last. It is dominated by figures, but you need to still explain how you intend to achieve what you have presented. At this point, you communicate the projections of your company to your investors. You present your charts, graphs, spreadsheets, and tables.
This section will include:
- Income statement (that shows the profitability f your company).
- Balance sheet (shows the net worth of the company at a particular time)
- Cash flow projection (how money is expected to come in and go out or how money is to be made and spent)
- Break-even analysis (this is the point your total income equates your total expenses).
Thus, as you see, to write a wonderful business-plan is not an easy task, but with good consideration and desire, it can surely be coped with.