Trying to implement an idea without a business plan is like going on a long trip without a GPS or map. Relying solely on experience, intuition, and the advice you hear along the way, you are almost guaranteed to get lost. But how to make a business plan?
- What Is a Business Plan?
- Things to Do Before Writing a Business Plan
- Business Plan Example In Simple Steps
- Common Business Plan Mistakes And How To Avoid Them
- Business Plan Format
A business plan is usually not what entrepreneurs do in the first place when they decide to implement their idea. Often they believe that such a document is needed only to have something to submit to the bank or show potential investors to attract financing.
A business plan is a valuable guide for the entrepreneur himself. It allows you to assess the viability of an idea, identify risks, and see opportunities. We've put together valuable tips for writing a marketing paper, so if you want to be successful, read our article carefully.
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What Is a Business Plan?
A business plan is a carefully prepared planning document that reveals all aspects of any embossed commercial project. It allows you to envisage measures to implement a new idea, determine the necessary financial support, and obtain certain benefits. In practice, it can be considered a form of expert assessment of the feasibility and effectiveness of implementing a particular entrepreneurial idea.
A business outline is a document that contains a system of activities and actions linked in time and space and coordinated with the goals and resources, aimed at obtaining maximum profit as a result of the implementation of an entrepreneurial project. Business planning includes three stages:
- the preparatory period - selecting performers, consultants, experts, setting the task, and distributing responsibilities between the performers. The development of a schedule for the performance of work, the collection of initial information;
- business outline development;
- presentation of a business plan - communicating the main provisions of the project to potential investors.
Why Do You Need a Business Plan?
The primary purpose of creating a business is to outline, assess the project's prospects and, at the initial stage, to find the pitfalls. The document is created for internal and external use. In the first case, it is needed as a management tool. It is essential to describe all the enterprise's strengths and weaknesses and the prospects for developing the idea. It is useful for like-minded people to get acquainted with it, clearly understanding the project's goals and objectives, and deciding how to contribute to its implementation. An internal business outline helps assess the costs of the project and raise funds from outside.
An external business outline is needed for those who will give these same funds or provide some other support. It determines the payback period and potential profitability of the project and answers the central question for an investor or partner: is it worth investing in a project? A well-written and well-rounded business plan is the basis for a transaction.
Different Types of Business Plans
A business plan reduces the chances of failure, which is especially important in a high-risk business environment. There are several types of business plans, the choice of which depends on the range of tasks solved by this outline. The following types of the business outline can be used:
- Commercial production business plan. It is necessary to solve commercial and industrial activities in achieving the company's development goals. This business outline is characterized by attention to justifying ways to achieve development goals at the lowest cost. Moreover, the plan's emphasis can be increased either to the commercial or the firm's activities' production side.
- Investment business outline. It is a tool for attracting investors. The purpose of such a plan is the construction of a new facility or a radical change in the applied production technology. That is the use of economic categories associated with the concept of capital investment. This type's business outline provides an increased emphasis in the structure to such issues as ensuring the repayment of loans and the timely payment of interest for their use. There are specific standards for investment business plans developed by banks and investment structures.
- Financial recovery business outline. An insolvent firm draws it up. A complicated procedure characterizes this business outline for agreeing on settlements with creditors and the company owner, a potential bankrupt.
- Business outline for obtaining a loan.
Things to Do Before Writing a Business Plan
In many respects, the project's further development depends on convincing the business plan's presentation to the investor. So, what you need to know to prepare and successfully conduct a presentation:
- Study your audience. Write a business outline in a language that your target audience will understand. For example, if your company is in the scientific field and your potential investors do not understand complex terminology, you must adapt to your investors' needs.
- See an example. Before writing a business outline, it is better to look at a sample in your industry: a cafe, a beauty salon, a car wash, an online store. You will understand how it should look like, how to make calculations correctly, what to include in a business outline, industry specifics, etc.
- Try to hire an outside expert to help you outline. It may be a more experienced entrepreneur from a related industry, which will give you a fresh perspective on business prospects.
- Organize all the information you have and study financial data. If you see that there is not enough information at the preparation stage, you can attract specialists to evaluate the company or work out the missing aspects yourself.
Business Plan Example In Simple Steps
At StudyBay, we receive applications from people who want to draw up a business outline every day. Most of them experience difficulties when there is no way to turn to experts. For this reason, we decided to summarize our experience and draw up step-by-step instructions for drawing up a business outline. Use our instructions, and you will be able to create a document yourself.
A summary is essentially a small document that contains a short of the entire project. Why do we start with it? It's simple. Because it is with the summary that your investor will begin to get acquainted. Only then will he decide whether it is worth spending time on a detailed study of your project. In summary, you must specify the following elements:
- The purpose of your project.
- How much money do you need and why?
- When the investor returns this money.
- Why are you sure that he will return the money invested.
- Who are your potential customers, and why they will go to you, and not to competitors, that is, your differences and advantages?
- If you have any other financial indicators, be sure to include them in the summary. Investors love the language of numbers, not pretty promises.
In this part, you need to draw up a document about your company's development history, mission and vision of the company, and the shareholding structure. If possible, this block should be illustrated with photographs.
This section is significant for investors, as they want to understand who will manage their money. Therefore, tell as much about all the specialists to whom you outline to entrust managerial positions. Indicate their work experience, list successful cases, if any. Do not forget about the reward scheduled for them.
Market analysis is necessary for a company to understand development prospects, opportunities for expanding sales boundaries, launching a new product, and understanding how resources should be allocated. To estimate the size of the market, you can use the following tools:
- Market assessment by international consulting companies;
- Market assessment by the participants of this market. Often public companies in their annual reports pay great attention to the description and assessment of the market;
- Assessment by industry experts. For example, you can conduct interviews with former top managers of companies operating in this market who are willing to share their market assessments;
- Own calculations based on available statistical information or your estimates of the popularity of your product/service. It is always best to have benchmarks from comparable markets to help the investor base your market assessment.
To understand the dynamics of the market, you can also look at Google's analytical tools, which display the primary metrics for the number of requests for your chosen market. Market assessment means assessing market volumes, segmenting the market and assessing the volume of segments, assessing the key success factors in a particular market segment, the level of penetration of your product or service in the market.
Organization And Management Structure
Do not forget to introduce the leaders and managers of the company. In this part of the document, you need to describe the strengths of each employee. Also, we recommend writing a list of employees that you may need for work. Also, indicate the cost in case you need to expand the team. Also, if the company has extensive experience providing services or selling goods, it must explain its legal structure, location, and other details. If you are a startup, give a quick overview of the company's best aspects and describe your plans.
Products And Services
This section of the business outline is necessary to describe the specific goods and services that will profit the company. You can create a table showing the advantages and disadvantages of each product. The section should describe the value chain and the process of supplying products (if applicable).
Once the value chain has been identified, you can determine if your business has strategic control or is entirely dependent on other market players. It is worth paying attention to additional documentation that will need to be drawn up to implement a business idea.
For example, if you decide to create a 3D printer-constructor sold in children's stores, you will need to undergo the product's certification as a children's toy. If you outline how to sell the same assembled 3D printer for offices, then the certificate will be different. Business planning of such details shows the investor the depth of elaboration.
Sales And Marketing Plan
The marketing plan is necessary for the company to determine the tools for promoting the goods and outline to finance sales promotion. First, you need to analyze the demand in a given market segment, then determine the average prices, demand variability, and ways to stimulate sales.
It's worth segmenting your customers and identifying the marketing tools that are most appropriate for each segment in which you outline to work. If the buyers' groups are very different, you will have to work out a separate sales system for each segment. It is essential to think about the way to attract customers. It will not be superfluous to make a sales forecast for the near future. Perhaps, at the initial stage, until it attracts significant customers, the business will suffer losses.
The sales forecast for a new product may be approximate, but having exact numbers makes it easier to strive for the set indicators. The marketing strategy should reflect characteristics such as:
- Cost. It should be optimal and reasonable, taking into account the price level in the industry.
- Sales method (website, offline point).
- Implementation methods (independently, through intermediaries).
- Promotion methods (advertising, participation in exhibitions, direct sales, cold calls).
Financial Analysis And Projections
One of the most considerable sections in terms of volume is that it contains many tables and calculations. Many investors, reading the project summary, go straight to the financial outline. And only if the financial indicators look realistic, read other points of the business plan.
The main sections of the financial plan:
- Cash flow planning. At the beginning of the journey, the most important thing is to control the cash balances and understand why they will be enough. To have an action outline for attracting the next investment round, for example, to understand what functionality or what sales metrics must be achieved to attract investment.
- Sales metrics. It must be planned to which customers and at what cost the company will sell its product and the growth and churn rate.
- Gains and losses report. It is essential to develop a culture of control over your financial condition at the startup stage and monitor as objectively as possible how the company is doing.
After completing the financial plan, tell the investors how you will put your ideas into practice and forecasts for the future. This section should focus on the following aspects: marketing and sales, operations, success metrics, and the milestones you outline to achieve.
In this section, you need to submit a funding request and indicate how much money you need, where you will spend it. You can indicate this earlier by adding a note to the above sections. But if you have a great need to explain the financial waste, then highlight it in a separate paragraph.
The application is not a required part of the business plan. However, it is rare for a business plan to do without attachments that include charts, tables, definitions, legal notes, and other important information not included in the finished business outline due to its large size or inappropriateness. It may also include patent information or product illustrations. Look up how to properly write appendix.
Common Business Plan Mistakes And How To Avoid Them
Let's take a look at the typical mistakes that business planners make:
- You are refusing help while writing the plan. Writing a business plan alone can be difficult. To work through all the essential issues in detail, you need the assistance of more experienced people. A large amount of useful information on the topic can be obtained for free. To do this, study the public domain's sample plans, attend exhibitions, and other events. Your employees involved in setting up the business, such as accountants and lawyers, can also help draw up a business outline.
- No time to create a business outline. Do not follow the example of those entrepreneurs who only remember to write a business plan when asked by bank representatives or investors. The constant employment of a businessman is not a reason to postpone work on this document, but, on the contrary, a signal of its necessity. Scheduling helps you organize your time and organize things. Of course, drawing up a business outline takes time, so you need to do it before implementing a new project. Business development begins with setting goals and developing ways to achieve them - this is why business plans are created.
- There are no clear goals. Imagine that you are meeting with an investor whose investments could provide the basis for a new round in your business development. A person who is going to invest his money in a project needs proof of its profitability. And you tell him general phrases that you were a leader in your segment, but you cannot tell us specifically and in detail about your place in the market. An investor is unlikely to be satisfied with this answer.
- Too ambitious forecasts. When the audience pays attention to a new product and considers it competitive at a particular stage of business development, it seems to novice business people that everything will only get better. This makes overly optimistic forecasts. But such predictions are not always justified. Yes, ambition and desire to achieve something are significant in business, but this requires a long and hard work. Don't expect your new product to take over the entire market in a short time.
Business Plan Format
As a rule, the size of a business plan should not exceed 70-80 pages. It is essential for you to clearly, in detail, but concisely state the main points related to your business's development. Which ones? They will be different for each specific business. But we will tell you about the general provisions of business plans.
The business plan format includes three main parts:
- Title page and content;
- Directly a business plan.
You can add your sections, but you must follow the structure described above. This structure will help you organize your thoughts and successfully present your project.
P.S. If you want to hire a business plan writer, you know where to go. ;)