Thinking about starting your own small business and even have some basic ideas about what you intend to do? Well, unfortunately, it may turn out to be a little bit more complicated than you think. You cannot just rent a building and set up shop – or rather you can, but such an approach is very unlikely to be successful. You will probably encounter unforeseen problems and expenses you won’t be able to deal with. It is even worse if you don’t have enough capital and intend to look for investors to help you start out – nobody is going to lend you money unless you can prove beyond reasonable doubt that you know what you are doing and can provide sufficient return on investment.
The best way to do so is to draft a quality business plan that will take into account all potential contingencies and clearly demonstrate that you can build a profitable business. But how does one do it? What does one need to know to create a good business plan? Let’s find out in this article.
1. Understand What Should Be Included in a Business Plan
In some ways, all business plans are similar to each other in the sense that they are written more or less according to the same template that is available at Bplans. Each business plan should contain the following parts:
- Executive summary – a general description of your future business, what it is devoted to, how it will make money, who are its target customers and so on;
- Market analysis – preliminary research of the market you will work in, existing competition and the current state of the industry;
- Organization and management – internal workings of the business, its structure;
- Service/product – a detailed description of what kind of products or services you are going to offer to your clients;
- Sales and marketing – your marketing and sales strategy, the description of how you intend to promote your business;
- Funding request – your evaluation of the amount of capital you will need for the creation and development of business for the duration from 3 to 5 years;
- Financial projections – what the financial position of your business is going to be over the next few years when it is going to break even and so on;
- Appendix – if in your case, there is a need for some resumes, permits and other similar documents, this section should contain them.
2. Approach Business Plan Writing Step by Step
At a glance, creating a business plan that would contain all these sections seems like an overwhelming task. However, this problem can be solved if you approach the task carefully and consistently, without trying to do everything at the same time – analyzing a market, calculate costs and writing a business plan. Develop it step by step! Only after examing all possible issues in the field, think through business management, you can proceed with the financial aspect of running a business. Imagine as if when you are writing a business plan, you are walking with the help of a road map. So if your thoughts start wandering from “How to write my business plan” to “How to present my business to an audience”, you’ll fail to complete both these tasks. Focus on the former, then switch to the latter.
3. Do Your Own In-Depth Research
Contrary to a popular belief, it isn’t time-consuming to develop a business plan. If you do your job properly, most of the time you are going to spend on it will be dedicated not to writing the plan per se but to doing the preliminary research. Spend at least two times as much time on research as you spend on business plan writing.
What exactly should you study? The short answer would be “everything”. You shouldn’t neglect anything that has any relation to your future business and study it:
- What are the benefits and advantages of the product you offer?
- Does it have any potential drawbacks?
- What is the state of the market you will release it in?
- What kind of expertise do you have?
- What human resources you will have to work with?
- What kind of competition exists in your niche?
You have to know all this intimately before you even consider opening up a business. Until you know absolutely everything about your business and the conditions, in which it is going to exist, you are not ready to start anything.
4. Study Examples as Many as Possible
The best way to learn how to draw business plans is to study how successful people do it. Even if you examine examples of “how not to do a business plan”, it will help you as well. On the Internet, you will easily be able to find a sample or two of businesses that are close to the one you intend to start. Read them and see how their authors write up each specific part of them. The theory is all good, but until you see how things are done in practice, you won’t be able to fully understand what is expected of you in a business plan. Even if you understand how to write a plan in general, some specifics of the format may elude you – and studying a few examples is a quick and simple way to get things right.
5. Define the Purpose of Writing Business Plans
Before you set about making a new business plan, you should make it clear for yourself why you do so and what is your main goal. There are two general reasons why people prepare business plans. Firstly, if they want to define the set of actions, they need to carry out to found the business in question, set the direction in which they intend to develop their future company, plan its future, decide how it is going to deal with potential problems and avoid setbacks. This approach is used by those who are capable of financing their business enterprise themselves in its entirety, without the need to attract investors. This means that in this case you write the plan for yourself and are free to make it as detailed as you want.
Secondly, you may concentrate on preparing a business plan that would make your enterprise attractive to potential investors. In a sense, it will not be just a plan, but a business proposal aimed at people from whom you expect to receive money for the development of your idea. In this case, you should make the plan as short and clear as possible. You may even prepare two different versions: one for potential investors covering the most important points and demonstrating that your idea is viable, and a more detailed one, for yourself and those of the investors who show more than an average interest in your enterprise.
6. Think about a Business Plan as a Process, not a Document
Keep in mind that a business plan isn’t something you prepare once never to think about it again. Sooner or later, there will come the time when you will have to rethink how you understand your business, what are your goals, how you see its future and what you intend to do. The economic situation in general and in your industry change all the time. As a result, what was a perfect business plan a couple of years ago may turn out to be useless in the new conditions. You should take it into account and keep your plan up to date, always studying the situation in which you have to work and making the necessary changes. There are 3 apps that can simplify the often tedious and complicated process of writing a well-prepared business plan. Try them out!
7. Prepare a Business Company Profile
The company profile is a core of your entire business plan and is among the first parts of the plan to be written. It includes information about:
- Your company in its current state as well as its history,
- What kind of products or services you offer,
- What markets you are present in and where you want to expand,
- Who are your customers,
- What resources you have at your disposal,
- What problems of your customers you intend to solve and how,
- What makes your company unique among all its competitors, etc.
8. Consider Every Aspect of Your Business
When you prepare a business plan, you have to carefully document every seemingly small thing about your company. It is important if you write the business plan for your own use. But it is especially true if you intend to attract investors with its help. Investors don’t put their money in businesses out of the goodness of their hearts. They are interested in enterprises that will make them more money than they put into them. That is why they are willing to know absolutely everything about your company, beginning with obvious things like cash flow, expenses, and industry projections and never actually ending. Depending on who you deal with, you may be asked most unusual questions about your business. And you should have all the necessary information to be able to answer them when the time comes.
9. Define Your Business Goals and Tactics
Each good business plan doesn’t just include the information on the existing condition of your business, but also the goals you set in front of it and tactics you intend to use to achieve them in the course of at least the next following year. To make it easier to understand, this part of the plan can be divided into objectives, implementation and costs sections. The ‘Aims and Objectives’ section concentrates on what you intend to achieve and why you believe these goals to be important. The ‘Implementation’ section deals with practical matters: what exactly will be done to achieve these goals. The ‘Costs’ section allocates funds for each planned activity and demonstrates that the expenses in question are justified.
10. Make Sure Your Business Plan Is Easily Modified
Not just in case the situation on the market changes, but also to demonstrate it to different groups of people. There is a number of audience types that may be interested in your plan. Each of them has its own specific sets of interests and things they want to pay special attention to. For example, bankers are more interested in information on your financial balance and cash flow statements while team members and managers are going to dedicate more time to goals and objectives.
All in all, writing a business plan is a complicated and arduous task that can take a lot of time and effort. However, when it is done right, it significantly decreases the chances of failure – which is why it pays to put as much of yourself in it as possible.