Business Plan: How to Write the Perfect One
November 5, 2020
A solid business plan is essential for any business. It can help gain investment, set concrete goals and establish guidelines to steer and keep a business on track. If you are considering starting your own business already have one, you should definitely consider writing one. This article will explain what a business plan is, why you need one, what you should put in it, as well as our top tips on writing an effective business plan.
What is a business plan?
A business plan is a written document that explains in great detail how a company — most often a startup — determines its objectives and what strategy it will use to reach its goals. It establishes guidelines for the company from different standpoints, such as finance, operations, and marketing.
A business plan is a vital document used to hopefully gain investment before the company has actually established a proper track record of success. Business plans are also a great help for companies when it comes to monitoring their progress and performance.
They are very useful for newly-founded companies. However, it is important for every business, regardless of when it was founded or how big it is, to have one. The plan should regularly be reassessed and updated in order to evaluate whether specific targets have been met or need to be modified. It is not uncommon for long-established businesses to develop a new business plan when they choose to change directions and aim for something new.
Why do you need a one?
A business plan will help you explain what your business is to others
- You will need a business plan if you are looking to find investments from either private parties or banks.
- A strong, well-built plan can help draw new senior management or commercial partners to your business.
- Your plan should be written with your target audience in mind. For example, you might write it with the aim of ‘selling’ your business to the investors or bank managers.
- You should always ask the intended audience whether there are any points of the plan which you might need to develop or whether there is a particular template you should follow.
A business plan can help you put into focus your current business activities
- Your business plan will help you set out a clear path and goals for your business over the next few years.
- A crucial part of writing a plan is setting clearly defined goals and how you will achieve these.
- Developing your business plan will help you visualise and elaborate your ideas more clearly.
- You will be able to identify what matters and what doesn’t, meaning you will save precious time.
- Having your business plan written down makes it a lot easier to identify any gaps and where you might need to put in more effort.
- Once your business plan is written down, you will be able to compare your company’s performance to it.
- By having your team involved in the whole business plan writing process, you will develop and boost their commitment to the company.
6 top tips for writing a business plan
Here is a list of 6 tips which you will need to know in order to write a convincing business plan:
You should show a clear understanding of your customer base and market
In order to convince banks and potential investors that your business plan is viable, you should be able to prove that there is a market for the products or services you are offering. You will also need to demonstrate that you have thought through how you stand out from the competition and how you will attract a customer base. Ways to find this information could include conducting surveys, researching industry reports, or asking potential clients what their thoughts are.
You should always be able to back up your information and statements with clear examples and strong evidence
Your business plan will have a lot more impact if you are able to give hard facts to back up your claims. This might mean providing statistics, a quote from a customer, or examples of other similar businesses. You don’t necessarily have to provide loads of details but examples and evidence will make your potential investors feel a lot more confident that your business is a viable investment.
Your business strategies should always tie back to your business’s core objective
Your business plan will set out clear goals and a strategy to achieve these. This means your business objectives should be at the very core of your plan.
Think about what the risks are for your business and how you will manage these
There are always risks attached to doing business, so don’t be scared of highlighting what the risks are for your business within your business plan. The key is to show that you are conscious of these and that you have a clear strategy to minimise or overcome these risks. This will put any potential investors more at ease.
You should be concise and to the point, without giving unnecessary or confusing information
A bank or potential investor will not be interested in knowing every single detail of how your company operates. What they are interested in is having sufficient information to build a clear picture of your business and have confidence that there is a clear plan set up. Using graphs, tables, bullet points and subheadings will help you present your content in a clear and concise way.
Your presentation is important so make sure you have read over it several times and formatted everything properly
First impressions matter a lot. Your business plan should be clearly laid out and structured. There is no need to be a professional designer to produce a professional-looking business plan. The most important thing is to make sure you haven’t made any grammatical or spelling mistakes. Have another person read over your business plan once you have finished, as they might spot the mistakes you missed.
6 elements you will find in most business plans
Business plans will generally vary in length and will differ greatly from one company to another. However, there are some general rules and elements which appear in most business plans. For instance, the information provided should not be more than 15-20 pages long. You might have some documents that are vital to your plan but that are very lengthy. In this case, these documents should be included in an appendix, and only referenced in the main plan.
Here is a list of 6 elements which you will find in more business plans:
The executive summary gives an overview of the business and presents the mission statement. It will also include information about the business’s leadership, employees, location, and operations.
Products and services
In the products and services section, there will be a description of the products and services offered by the business, as well as additional information such as product lifespan, benefits to the customer, and pricing. This section can also feature details about manufacturing processes, specific patents owned by the business, or proprietary technology. R&D information will also be included in this section of the business plan if there is any.
A business should always have a good understanding of the industry which it is in, as well as the market it wishes to target. The market analysis section will put forward who the different competitors are and how this influences the industry, as well as the weaknesses and strengths of the business. The market analysis also outlines what kind of consumer demand there is for the goods and services offered by the business, and how challenging they think it will be to build a market share in that industry.
The marketing strategy section explains how the business plans to attract and maintain its client base, as well as how it plans on approaching and getting through to the customers. Clear distribution channels will be put forward and marketing and advertising campaign plans will be laid out. The marketing strategy section will also include information on how these campaigns will be put into place.
To appeal to the people reading the business plan, the company will need to add in a section about the business’s financial plan and projections for the future. Financial information such as balance sheets and financial statements might also be present in this section for companies that have been around for a while. Start-ups and younger businesses will include estimates and targets for the upcoming years instead.
Another crucial section is the budget, which any good company should have set up. This will present business costs such as manufacturing, staffing, production, development, and anything else relating to company expenses.
When should you start writing yours?
An important issue with business plans is that businesspeople often get encumbered and stuck wiring them. The process can often drag on and be viewed and reviewed unnecessarily. When the process drags on for a year or even more, this can have hugely negative consequences for a business. This time could cost them crucial opportunities to enter a market or gain funding from investors. Founders also fall into the trap of attempting to cram their business plan into a pitch deck, which might not actually get them the result they were looking for.
Here are a few statistics put forward by the Harvard Business Review:
- The “most successful entrepreneurs were those that wrote their plan between 6-12 months after deciding to start a business. Stating that this “increased the probability of venture viability success by 8%.”
- Chances of success rose by 12% for those that spent no longer than 3 months on their plan. With any longer proving futile.
- Startups’ chances of venture viability rose by 27% if the plan was created in the sweet spot when founders were talking to customers and preparing marketing.
What business plan format should you pick for your business?
Each business plan will be different and there is no one right way to write one. The most important thing when writing a business plan is that it should meet your needs.
There are two general categories which business plans will most often fall under the traditional or the lean startup.
It is a lot more common to see traditional business plans, which use a standard structure and will generally contain more detailed information in each section. Traditional business plans generally take more work at the start and will generally be longer.
A traditional plan format will be better suited for you if you are very detail-oriented, want a comprehensive plan, or plan to request financing from traditional sources.
It is less common to come across lead startup business plans. They still follow a standard structure but will contain much shorter and concisely summarised information, presenting only the most important facts and elements of the plan. They generally take a lot less time to make and can fit onto a single page.
A lean startup format might be better suited to your needs if you are looking to present or start your business quickly, your business is relatively simple, or you plan to regularly change and refine your business plan.
Business plan examples
When writing your business plan, it can be very helpful to get an idea of how other people have written theirs as well as look at a few templates.
Bplans is an online platform which offers a huge range of free sample business plans. They also provide useful guides and tools to help entrepreneurs manage their business more effectively. They offer interactive tools and calculators, concrete advice on planning, regularly post advice on their website about how to grow your business.
If you are interested, you can find a whole range of sample business plans on their website. You will find lots of business plan categories; from “Accounting, Insurance & Compliance” to “Food & Beverage”.
Linking your business continuity plan to your business plan
Business continuity planning and writing your business plan should go hand in hand. Creating a business continuity plan is the process involved in creating a system of prevention and recovery from potential threats to a company.
When you are writing your business plan, one of the key elements mentioned above is the awareness of risks and how to overcome these. This means that a lot of the research you do when writing your business plan will come in handy when you create your business continuity plan later on.
If you are interested in learning more, you can read our article about business continuity planning.
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