What is a business plan? A business plan is a planning document which summarises the operational and financial objectives of a business. It contains detailed plans and budgets showing how the business will pursue and realise its set goals.
Why do you need a business plan for your business? A business plan is a vital first step for anyone starting a business. It is the due diligence needed to prevent you from wasting time and money on a business idea that might not work. If you have a business idea, you need a business plan to determine if it will make money, since you would not want to start a business when you are not sure that it has a good chance of being profitable.
Your business plan will help you to secure the buy-in of the people who will work with you in the business, particularly members of your senior management. Your business plan will help you to convince potential investors that your business is likely to succeed. Your business plan will show the capacity of your business if you need to borrow money from a lending institution.
Your business plan is your tool for thinking through the key elements of your business and serves as the roadmap for starting, growing and scaling your business. It guides you through every stage of your business. It is the foundation for your business.
How do you write your business plan? Here is a step by step outline you can use to write your business plan, with a listing of the key sections and essential components of the plan:
- Executive Summary: This section comes first, but it is the last one you write. It is the summary of the key elements of the business plan. It gives a bird’s eye view of the plan. It goes without saying that this make or break section is critical in the sense that this is where the reader will decide whether to continue reading, not to speak of considering the substance of, the plan.
- Industry Overview: This requires a general overview of the industry that your business is venturing into. It should include trends, major players and aggregate sales estimates. It should also indicate how your business plans to place its stake and position itself within the industry.
- Market Analysis: Examine your primary target market. Focus on your geographic location, the demographics of the market, and how your product or service will meet the needs of its consumers. This is where to show your knowledge of the people who are likely to patronise your product or service. It should contain informed estimates about the volume and value of products or services you may be able to sell to your target market.
- Competitive Analysis: Investigate your direct and indirect competitors. Assess their competitive advantage. Analyse how your product or service will enter your target market. State the unique selling proposition of your product or service, if any. Articulate how your business will distinguish itself and compete successfully in the marketplace. Explain your strategy for gaining a share of the market.
- Sales and Marketing Plan: Outline your sales strategy. Talk about your pricing plan. Discuss your proposed advertising and promotion activities. Showcase the benefits of your product or service. Present what is unique about your business and your product or service. Describe how you will get your product or service to your target market, and how you will persuade people to buy them.
- Ownership and Management: State the legal structure of the business, including its management and staff requirements. Name the key players in the senior management team. Indicate the internal and external resources available to the business.
- Operating Plan: Disclose the physical location of the business, including its facilities and equipment. List inventory and supply requirements, and employees needed to run the business. Include such operating details as manufacturing process, if applicable.
- Financial Plan: Describe your funding needs. Provide detailed financial statements. Analyse your financial statement. Present your three main financial documents: Balance Sheet, Income Statement and Cash Flow Statement. For a start-up, the third document will be your Cash Flow Projection.
- Appendices and Exhibits: These include any document to support the foregoing sections. The essence is to provide additional information to give credibility to the business plan. Examples include, but are not limited to, market studies, photos of your product, contracts, etc. that are relevant to your business.
- Title Page and Table of Contents: After completing all sections of the plan, create a title page and insert it at the beginning of the plan. Create a table of contents, which assigns a page number to the start of each section, and insert it immediately after the title page.
By the time you work through this process, you will have a complete and well thought out business plan, a living document that will guide you in starting, growing and scaling your business.
If you need help in writing your business plan, please contact us at the SME Clinic. https://smefinance.org/sme-clinic/