Cooking a new local recipe is one of the most fascinating things every chef wants to do. In this analogy, consider your business as a new local recipe that is set to be made. However, it’s not just about cooking a local recipe that is common in your country. Just imagine a chef that wants something similar to the French cassoulet or the Korean gamjatang. They necessitate various steps of production such that they sometimes take days to finish, as well as technically complex techniques that necessitate some sort of strategy, guide, and precision. Going through this complicated path is very delicate to your time, resources, and health. This is because these complex techniques of preparing these recipes could either make or mar your health and wealth. The same analogy applies to your business. But what is the relationship making a new recipe has with writing an excellent business plan?
In businesses, things like management, competition, expansion, growth, innovation, demand, staff, etc are issues that complicate carrying out a sustainable and growing business. Just like chefs, business owners like you face complications like these in ensuring that the business remains firm. As a business owner, you must have a thorough understanding of all areas of your business as well as the sector you are operating or joining. One of the primary reasons why 90 percent of new businesses fail is due to a lack of insight and diligent preparation. And it’s here that an excellent business comes in handy.
What Is a Business Plan?
A document that describes the complete business overview of a company, which includes the goals, the patterns, and techniques to which you will achieve the goals, and other aspects that are necessary for the company’s growth is known as a Business Plan. It entails information on the business objectives, performance analysis, target, and template for achieving the business goals, etc. It represents the business roadmap to sustainability, profit, growth, and expansion.
Due to the significance and importance of a business plan to any company or startup, it’s necessary for the business owner and her business development team to carefully craft out the roadmap. Thus, developing a business plan requires a lot of time, brainstorming, and research. Asides from the hecticness and time-consuming disadvantages that are involved in developing the business plan, the plans are very important and necessary for all businesses.
However, a good business plan is not a function of the number of pages the plan has. Nowadays, businesses now have short, simple, and precise business plans that are as efficient as the 40–60-page plan. For instance, Airbnb is one of the most strategic, complex, and efficient businesses. However, it’s interesting to know that the company’s business plan is just a paged plan. Thus, it is not about the page numbers, it’s about the coverage and efficiency.
Ultimately, a business plan is not a one-time project/activity. It is a document you revise from time to time. Since your business is dynamic and you have new changes, you will need to update these changes in your business plan.
Why Do You Need a Business Plan?
To build a structure, an engineer will request an architectural plan. To travel through a new country, you will need a guide, strategic planning, etc. And thus, to have a growing and sustainable business, you need to know and understand the reasons why a business plan is needed.
Funding and Business Opportunities
There is always a great success when preparedness meets opportunity. One of the most important tools most businesses use in staying ahead of their fellow competitors is the high proficiency of their business plans. Every investor and sponsor seeking to fund a business always loves to confirm the company’s business viability. But most times, about 27% of businesses around the world fail to secure funding reason being that they do not have what it takes to stand out.
Avery good business plan is one of the surest means of securing funds, grants, or loans for a business, nevertheless, your business plan must give detailed information on your business financial status, growth strategy projected sales and reach, anticipated expenditure, etc. your business plan must be so detailed, strategic, prospective, and compelling such that you can easily convince investors that you deserve to be invested in.
Having a business plan helps in strategically and effectively organize the company’s operations. This is extremely beneficial to startups. It’s one thing having brilliant business ideas, but it’s another thing turning the ideas into figures, projections, and understandable analyses. All businesses from Fortune500 companies to startups with just business ideas all need a workable business plan. The document helps in efficiently and effectively put the business to order, and in the right organization. Once your plans are great, having a stable and efficient organization is inevitable.
Check and Balancing
A business plan helps in preserving and maintaining the company’s records. When examining the document, your get to evaluate the current status of your business, achieved goals, if all boxes have been ticked, etc. A business plan helps you to have a proper check and balance on your company. It helps you measure and quantify your work, identify the places of strengths and opportunities while improving the efficiency of other areas to increase participation.
Different Types of Business Plans
There are two major types of business plans such that all other business plans fall among these two categories. These plans are external and internal business plans, and these plans can either be lean or standard business plans.
Standard Business Plan
A standard business plan gives the entire topography and structure of your business. It contains the company’s information, finance, logistics, target audience and market, products, strategic goals, etc. standard business plans are the original and perfectly crafted plans that are typically used for loans and grants, etc. While creating a business plan for your company, you should use a standard business plan template.
Internal Business Plan
Just as the name suggests, this type of plan is majorly used for internal purposes. This type of plan is known as lean and this implies that they are short and simple plans, unlike the standard ones. This kind of plan only highlights the significant aspect of standard business plans. Internal business plans focus on strategies, deadlines, objectives, budgeting. Since they are for internal purposes, they lack the detailed business overview and all other important information that is only supplied to the third party. In this kind of plan, the use of informal language and bullet points is highly engaged. Examples of lean business plan audience include stakeholders, marketing and sales department, etc.
Startup Business Plan
Startup business plans are plans that are either lean and standard. Although they are more often than not, their structure most of the time usually follows the format of a standard business plan. While crafting a good startup business plan, you should consider providing answers to the following questions:
- Who are you? What is your business all about?
- What are the problems you intend to provide solutions to with your products/services?
- Who are your major competitors? What makes you stand out over them?
- What are the strategies, tactics, principles, goals, and milestones you’re to achieve?
- What are your needs e.g., funding, partnership, and why do you need them?
- Finally, create a section to showcase your business cash flow, financial analysis, and forecast, etc.
Feasibility Business Plan
Just as the name implies, the aim of this business plan is basically to show and defend the product/service you are offering. In this plan, you need to explain and prove if your offering will be accepted and purchased by anybody or a group of people. This plan is also needed to showcase the profitability of the business. Most times, this plan is nicely and locally crafted and thus, it is used for internal purposes. A feasibility plan sometimes can be curated as a standard business plan especially when the purpose is to seek funding.
One-page Business Plan
The one-page business plan is popularly referred to as a business pitch. It is a document that gives a complete, short, and simple summary of your business. This plan is majorly created for standard/external purposes since it is needed to be presented to potential sponsors, investors, partners, etc who are interested in listening and seeing the way you sell yourself rather than or after reading your standard business plan. The document also provides further information which includes your product/service description and justification, market and financial analysis, SWOT, offering solutions, and competitions.
Growth Business Plan
A growth business plan can either be a lean or standard plan and it is usually used internally or externally. Sometimes it is referred to as an expansion plan. This plan like others is not so generic, it is targeted at a specific area of your business, and the potential growth and sustainability. The plan describes several steps that should be taken to achieve growth and expansion. This plan can either be standard or lean. When you are using it to seek an opportunity, it must include components of a standard business plan (e.g., company’s overview, descriptions, etc) otherwise, a lean business plan format can be used.
Strategic Business Plan
This is a business plan that expressively describes and outlines all strategies and techniques of the company’s roadmap. Strategic business plans describe where the business is going and how will the business get to the envisioned areas. This plan is very important in and for every business since it lays the foundational policy for the company’s employees, vision, mission, and objectives. The plan also includes pointers/markers KPIs, milestones, and strategies that are needed to achieve the vision and mission. In this plan, very important attention must be paid to the development of KPIs and SWOT analysis. With these analyses, you can create workable and more efficient strategies for your company.
Operational Business Plan
This plan is also known as an annual business plan. An operational business plan is usually used to outline the distribution and description of work in a year. This plan is usually used within a company but it can also be used to prospect your organizational and managerial advantage to your investors. A workflow is software that is easy to use and provides a better and transparent organization. An operational business plan contains information like tasks description, distribution, deadlines, targets, coverage, and niche, employees’ responsibilities, etc.
Things to Do Before Writing a Business Plan
So far, we’ve journeyed through the meaning of a business plan, the reason why businesses must have one, and in the last section, we discussed the various types of business plans. In this section, we’ll be opening you up to the essential things you need to do before writing a good business plan.
Analyze and Research your Market.
The most important aspect of writing a good and workable business plan is to have a broad knowledge of the business you are running or entering. You should have a good understanding of the market offerings, target market and audience, SWOT, competitors, seasons, etc. Make deep research into the niche of your potential customers, find out about their acceptance level, cultural and religious beliefs, average cost and standard of living, how much they plan to pay for your offering. You will find success in your business when you have the right and complete knowledge of everything about the niche you are in.
Define the Purpose of your Plan.
Having explained the various types of plans, you should be able to identify the best plan for your business. You must define and determine where and why you want to use the plan. Plans used internally do not need information (like the company’s overview, management, etc). when plans are to be used externally, they have to be exclusive packed and more detailed. In this situation, hiring the best business plan developer is one of the best decisions. However, if you don’t trust a developer/writer, apply the DIY approach.
Know your Audience.
Again, writing a business plan must be as strategic as possible. Putting the reader in mind is one of the best ways of crafting a good and relatable business plan. While having the reader in mind, you will be able to know the type of business plan to write (standard or lean). Also, you will be able to know the type of tone you will be using (formal/informal, generic/industrial-specific). Writing a plan like this must be carefully done to suit the taste of the readers and convince them about the profitability of your business. For instance, assume your company is a growing tech company in Miami, and you need to present your plan to an investor with a background in agriculture. Including tech grammars and keywords might be unnecessary. Thus, you must choose your words with wisdom and care in a way that the investor will understand.
Keep your Business Plan Concise.
Don’t forget the principle “it is not about the length of your plan; it is about the effectiveness and efficiency”. You just need to learn how to use the “KISS” approach (Keep it short and simple) in writing your plan. No real investor or business-oriented individual is ready to read your bulky business plan. Thus, you must be on point, mention the important thing, and give a chance/allowance for future revision.
Choose the Right Time to Write your Business Plan.
A wise man once said, “there is time for everything under the Sun”, and yes, there is. Just as almost everything has a perfect time to be effectively carried out, business plans are also best written at a certain stage of your business. The perfect time to write a business plan for a startup has been considered as a time between 6-12 months of establishment. According to a Harvard Business Review research, developing a plan during this time raises the likelihood of your concept succeeding by 8%. Nevertheless, you will still need to spend around three months drafting your plan. According to the same study, this period has been considered as the ideal time for the plan’s creation. This raises the likelihood of establishing a viable business by 12%.
How to Write a Standard (Traditional) Business Plan in Ten Simple Steps
1. Cover Page
As funny as this may appear, the business cover page is an essential part of the business plan. The way you arrange, design, and structure your cover page might determine how quick it will take to identifying and reading your document. For instance, assume all business plans are scattered in a basket and the reader is picking, the reader will pick the plan that is most alluring and eye-catching, after all, first impression matters.
On your cover page, remember to add a very good design to your cover page. The company’s logo, slogan, brand color, company’s name, etc must be included on the cover page.
2. Executive Summary
Your executive summary is one of the most important sections of your business plan. This is the section through which you sell off your whole plan to the reader. You must be able to use your executive summary to convince and impress your reader that your business plan is worthy of being read.
Since this section is the summary of your complete plan, it’s advised that this section should be the last aspect of your plan that should be written. It must give a brief highlight of what each section of your plan is talking about.
Don’t forget that the objectives of the summary include introducing the business in a short way to the reader, highlighting the whole plan, and grabbing the reader’s attention from the first paragraph. Importantly, the section must be kept simple, short, and precise.
3. Company Description
Just as the name implies, the section is used to describe your company, your business offerings, an overview of the problems and solutions you are solving and providing respectively. Describe your strengths, competitive advantages, and your outstanding features.
4. Market Analysis
To convince someone about something, you need to show off your vast level of knowledge about that particular thing. In market analysis, that’s exactly what you are expected to do. In this section, you need to tell the reader about your target market and audience, their size, scope, needs, factors that may influence them, etc. To create this section, you need an in-depth study of that market to have the right answers. Your market analysis should have information regarding your offering pricing, estimated market share, anticipated stumbling blocks, and estimated potential for expansion. This section may also include competitive analysis or the analysis should be placed alone.
5. Organization and Management Structure
This section allows you to present a detailed introduction of yourself, your team, and your organizational layout. You should emphasize the qualities of your team in this chapter. Include any future jobs you may require as your company grows. If your business is already in operation, you’ll need to explain your legal structure, location, history, and other pertinent information. If it isn’t, you should give a concise explanation of the company’s possible structure and location.
6. Products and Services
This is another important part of your plan. This is a section where you give a detailed explanation of the product(s) and/or service(s) that you are or will be offering. This is the core of your business and the source of your revenue; thus, you must be ready to give convincing and correct information. You should provide answers to questions like:
- What is your business offering?
- What are the problems your product/service is or will be solving?
- What distinguishes it from related products or services?
Furthermore, outline the development/creation process. If you’re manufacturing, describe how and where you will get your materials.
7. Sales and Marketing Plan
Your sales and marketing plan is a section where you need to tell the reader how you will generate and retain customers, how you will turn your customers into a publicity channel, what are your pricing options, sales structure or strategy, expansion, and publicity strategies, etc. Finally, you will need to mention your advertisement, promotion, distribution, customer service plans.
8. Financial Analysis and Projections
Your business plan will only be considered as a business summary when it is void of a financial statement. It is usually positioned among the final sections of the plan. And yes, the financial analysis is very important to your business, and the reader of your plan. For an existing business, you need to give detailed information and analysis on the business balance sheet, cash flow statement, etc. new businesses are just required to make a relatable projection of these analyses. You should leverage the use of tables and graphs in software like PowerBI and excel for excellent data communication and interpretation.
9. Funding Request
If the business plan is targeted at accessing funding opportunities, you can either use a new section like this or join the funding request with your financials. This section is usually where you justify the amount of money you will be needing and what you needed the money for. Your funding request will also demonstrate to your investors (or the bank) how much return (ROI) they will receive or how you plan to repay your loan.
This is an optional section of your plan. Most business plans do not require the use of an appendix, they are only added when there is supplementary information that can not fit into any of the above-named sections. Things like charts, permits, images, resumes, legal agreements, registration licenses, and certifications, etc.
Common Business Plan Mistakes and How to Avoid Them
Don’t put off writing your Business Plan.
A common mistake most businesses make is not being prepared for opportunities. A business that wants to grow must be ready at all times. Although business plans are not always needed, except when they are requested by partners, investors, etc, they must be prepared beforehand. Avoid procrastination and laxity in deciding and taking actions on writing a workable and proper business plan.
Whether it is requested for or not, prepare it nicely.
Set Realistic Goals.
Business plans are not created to exaggerate information and figures about your business, nor are they developed for inspiring the readers. Ensure that your business plan is exceptionally an original and quality outline of your business. You must sincerely talk about your business strengths, threats, and weaknesses. Don’t get too excited about the future in terms of money. A chart with rising sales projections could payout better than some cautious pessimism.
Writing a business plan isn’t about overestimating the value of your idea. Nor is it about impressing banks and investors. It’s a document where you should be brutally honest, admit your weaknesses, and share the threats you’ll face. In terms of finances, don’t be overly optimistic about the future. Some conservative pessimism could pay off better than a chart with skyrocketing sales predictions.
Do your Research Well.
Research is not a child’s play! It is not a “rush and does” affair! It is something you must commit your time and intellectuals to. Avoid the use of incorrect and unverified facts, figures, and statistics in your business plan. Make use of credible sources and do your research. With this, you will have an understanding of where your company stands in the sea of competitors. Don’t forget about the competition. Whatever business you’re in, it’s out there. Compare your company to others in its industry and your SWOT analysis to theirs.
Edit, edit, edit. And when you are done – edit again.
This is another common mistake that business owners sometimes make. When you are done with writing your business plan, make sure there are no typos and grammatical errors in your text. Correct formatting of the plan makes the plan more alluring and easier to read. Furthermore, avoid being a lone ranger, let others revise your completed work before submitting it. This will allow you to get work on all modifications, comments, and generally every other feedback which will help in reviewing the planning bit by bit.
Finally, ensure consistency with figures and statistics. Always keep it as short as possible, honest, and strategic. Once again, don’t delay the process -JUST DO IT NOW!!! Winston Churchill once said – “He who fails to plan is planning to fail.” So, start preparing today
Now that we’ve concluded the short introduction to writing a workable business plan, you must keep this information close to you. The article has been made so simple and relatable to a layman. We hope you’ve learned a lot from the types, why, steps involved, and common mistakes to avoid in writing a business plan.