How to Write a Business Plan

How to Write a Business Plan

From childhood we have been taught to have a plan for everything we do in life. Why is planning so essential? According to the a plan is a “Written account of intended future course of action aimed at achieving specific goal within a specific timeframe. It explains in detail what needs to be done, when, how, and by whom, and often includes best case, expected case, and worst case scenarios”. In case of a business where there is  lot of risk involved, it is always advisable to have a business plan written which will guide the businessman in every step. In this highly competitive business world , good planning helps a businessman to identify and monetise his market opportunities  efficiently.Planning is a continuous process though. The business plan should evolve with the growth of  business. How to Write the business plan is therefore a paramount concern for all entrepreneurs.The steps involved in writing the business plan are similar for all business be it textile business, pharmaceuticals, restaurants,etc.

Create a business plan

A business plan is about creating a roadmap for your business to look ahead, allocate resources, grab opportunities and face problems as soon as they arise. It is unfortunate that many people think of business plans as something to be used for starting a new business or applying for a business loan. But business plans can also play a major role in helping you run a business and grow it.

The business plan should ideally contain all your answers, solutions and forecasts for all the issues and decisions that a startup or new business must act upon. Before we get to what things you need to include in it, let’s take a look at how to write a business plan.

What is the Length of a Business Plan?

This is one of the most common questions asked by new entrepreneurs and startup founders. Most business experts say it should be around at least 30 to 50 pages, but the length can vary based on your personal perspective and business model.

Free Business Plan Samples and Templates

Let’s make this very simple. You can download free or paid business plan samples and templates that are designed for your particular type of business and industry. Modify the template and plan you like, and add in your own data.

Bplans has a whole bunch of free business plans, categorised by industry and business type. If you want more options and you are willing to pay for it, check out LivePlan, which has 500 business plans.

Know Your Audience

Your plan should be designed and written keeping in mind the audience that is going to be reading it. For example, it may be just for internal use as a benchmark for you, your partners and your team to compare actual performance against forecasts. In this case, you can simply write it in the technical jargon that you are all comfortable with in conversation.

But if the business plan is also going to be submitted to your bankers, venture capitalists and other investors, then it has to simplified and explained in terms that these non-technical people would understand too. The focus of the plan will also change, with the financial, marketing and sales aspects of the plan now taking center-stage, as opposed to the technology and other processes.

You can still use the appendix of your plan to provide details about all the thrilling geeky stuff that you want to explain but no one else may otherwise easily understand.

Elements of a Good Business Plan

  1. Introduction (3 to 5 pages): The introduction is the executive summary of your business, and is considered the most important section of a business plan. It provides information about the business location, your business model, and your explanation on how you plan to make it successful. If you are seeking loans or funding, the executive summary needs to be written in such a way that it grabs the attention of potential investors.

Key Points to Include in Your Executive Summary

Below are some of the key elements to be discussed in brief in the executive summary:

  • Mission Statement
  • Company Information
  • Growth Highlights of Your Products/Services
  • Financial Projections
  • Summary of Future Plans
  1. Company Description (1 to 2 pages): This section will help your readers and investors understand the goals of your business and its proposition.

Key points to include in company description

  • Describe the nature of your business and your targeted market places to dominate
  • Describe how your products and services meet the market needs
  • List the targeted audience, consumers and businesses that are using your service
  • Explain the competitiveness of your business that you believe will make you successful such as location, employees, operations, or ability to solve customer needs.
  1. Market Analysis (9 to 22 pages)

What to Include in Your Market Analysis

  • Industry Description and Outlook
  • Information About Target Market
  • Distinguishing characteristics
  • Size of the primary target market
  • How much market share can you gain?
  • Pricing and gross margin targets
  • Competitive Analysis
  • Strengths and weaknesses
  • Competition rate in the market
  • Barriers that may hinder you from entering the market
  • What’s is your strategy to enter the market
  • Direct or secondary competitors
  • Any other barriers like changing technology, investment, lack of quality work-force
  • Regulatory Restrictions
  1. Organization & Management (3 to 5 pages)

In this section you should include your company’s organisation structure, ownership of the company, management team with their profiles, and board of directors with their qualifications as well

Organizational Structure

A simple and effective way to lay your company’s structure is by creating organisational charts with a description. This is very important for potential investor.

Ownership Information

The following ownership information should be mentioned in your business plan

  • Names of owners
  • Percentage ownership
  • Extent of involvement with the company
  • Forms of ownership (i.e., common stock, preferred stock, general partner, limited partner)
  • Outstanding equity equivalents (i.e., options, warrants, convertible debt)
  • Common stock (i.e., authorized or issued)
  • Management Profiles

Provide following information of the top management:

  • Name
  • Position (include brief position description along with primary duties)
  • Primary responsibilities and authority
  • Education
  • Unique experience and skills
  • Prior employment
  • Special skills
  • Past track record
  • Industry recognition
  • Community involvement
  • Number of years with company
  • Compensation basis and levels (make sure these are reasonable — not too high or too low)
  • Be sure you quantify achievements (e.g. “Managed a sales force of ten people,” “Managed a department of fifteen people,” “Increased revenue by 15 percent in the first six months,” “Expanded the retail outlets at the rate of two each year,” “Improved the customer service as rated by our customers from a 60 percent to a 90 percent rating”)

Board of Directors’ Qualifications

If you have a board of directors, be sure to gather the following information when developing the outline for your business plan:

  • Names
  • Positions on the board
  • Extent of involvement with company
  • Background
  • Historical and future contribution to the company’s success

Simple Examples are here. Click on the links 1 & 2

  1. Service or Product Line (4 to 10 pages)

In this section, describe your service or product, benefits and why your product will satiate a need for your target customers.

What to Include in Your Service or Product Line Section

  • Description of Your Product / Service
  • Product’s Life Cycle
  • Intellectual Property
  • Research and Development (R&D) Activities
  1. Marketing & Sales (4 to 6 pages)

You should include following four strategies to in the overall marketing strategy

  • Market penetration strategy
  • Growth strategy
  • Channels of distribution strategy
  • Communication strategy

You can define your sales strategy once you are done with the marketing strategy.

Your overall sales strategy should include two elements:

  • sales force strategy
  • sales activities
  1. Funding Request (2 to 4 pages)

If you are expecting funding for your business, outline the requirements here

Your funding request should include the following information:

  • Current Funding requirement
  • Future funding requirement, if any, over the next five years
  • Clearly mention the reason behind requesting for funding
  • Mention, if any strategic plans for the future such as buyout, debt repayment plan, being acquired etc. This will impact your ability while repaying the loans.
  1. Financial Projections (12 to 25 pages)

You can allocate the resources effectively only when you come up with a clear financial objectives.

  • Historical Financial Data

If you have  well established business already, then it is important to provide historical data regarding the performance of the company. Most of the investors or creditors ask for three to five years data depending on the years that the business existed.

  • Prospective Financial Data

All businesses, whether startup or established, need to provide the prospective data because investors want to know the position and scope of the business in next five years.

  1. Appendix

The appendix would include:

  • Credit history (personal & business)
  • Resumes of key managers
  • Product pictures
  • Letters of reference
  • Details of market studies
  • Relevant magazine articles or book references
  • Licenses, permits or patents
  • Legal documents
  • Copies of leases
  • Building permits
  • Contracts
  • List of business consultants, including attorney and accountant

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