It is not easy to start a business. In reality, it involves numerous risk factors. If you have an idea to start a business, then prepare a business plan before moving forward. Do you know what a business plan means? Are you aware of how to write an effective business plan? In case, you have no idea, continue reading this blog post. Here you will know everything about the business plan and the steps for writing it.
What is a Business Plan?
A business plan is a written document that helps you visualize your business idea and includes information about your products or services, goals, business strategy, costs, and other details. It describes what your company is all about and how you intend to put your business idea into action. Before you begin your business journey, you can gain a clear understanding of your business strategy, evaluate your idea, and identify obstacles with the help of a business plan.
Writing a business plan is not mandatory for every business, but it is a practice many business founders follow to understand the market they wish to enter,learn the business scope, research their business idea, and prepare a strategy.
Benefits of Preparing a Business Plan
You must present your business plan to investors in order to obtain funding or a loan for your company. If your idea is feasible, you will only receive financial support for your business. A well-written business plan is essential if you want to convince investors of your concept.
In addition to the financial aspects, the business plan assists in
- Determining and achieving the company’s objectives
- Finding the feasibility of the business idea
- Measuring actual and expected performance
- Making strategic decisions
- Establishing an organizational structure
- Spotting new business opportunities
- Locating business partners, and
- Recruiting desired candidates by communicating the vision.
Learn How to Write a Business Plan
To write an effective business plan, you need to work on the following aspects.
Choose a plan suitable to your business purpose
Your plan should be practical to execute and earn income. So, think of your business purpose from all the perspectives and prepare a well-structured business plan matching your business purpose.
Check whether your business idea is feasible
Some business ideas will sound exciting, intelligent, and fresh, but they will not give any returns.
If you implement such ideas without proper analysis, then your business will not progress, and all your hard work and investments will go in vain.
To take your business on a successful path, check whether or not your idea is feasible before starting your venture. Ask yourself the following questions and find the answers.
- Do we have customers for the products or services we wish to offer?
- How many customers will buy?
- Will the customers pay the price for it?
- How much will the customers pay?
- What are the risks involved in the business?
- What are the ways to tackle business risks?
If your answers are convincing, then you can move forward. For a feasible business idea, you can create an effective business plan.
Study the market you wish to enter
It is mandatory to mention the market details in the business plan. Before you start a business, make sure to understand the market or the industry.
To get to know about an industry, you can visit industry chambers, trade associations, government websites, publications, etc.
While you study your market, you should gain information about
- The nature of the industry
- Key players in the industry
- SWOT analysis of Competitors
- Growth and success factors
- Advanced Developments
- Government policies associated with the industry
List out the products or services you wish to sell
Prepare the list of products or services you wish to offer. Also, mention in brief about each product or service, their benefits, the cost, manufacturer details, etc.
Your product or service should be unique in the market when compared to your competitors. So, identify a valid idea for that and specify the value that you wish to develop for your customers.
Conduct Management Analysis
Every business needs a proper management structure to control business activities from the top to the bottom. Hence, create roles and assign responsibilities for each role. Also, list out the skills, qualifications, and experience you need for each role.
In addition to that, make sure to understand the cost associated with each role. To make it easy, prepare a payroll structure for each role along with the compensation and employee benefits you wish to offer your employees.
Prepare the financial statement and evaluate the cash flow
For an effective business plan, a cash plan and financial statement are necessary. If you run out of cash, then you will not be able to sustain yourself in the industry.
Your business should have an impressive income statement and sufficient cash to make payments for the day-to-day expenses to stand at the top of the industry. So, you need to regularly keep an eye on your financial statement and inventory to maintain a proper cash balance.
To understand the financial position of your company, you need to have a projected balance sheet. With the financial statements available, you can compare your growth with the industry standards and take necessary measures if you stand below.
Identify your marketing strategy
Every business should have a marketing strategy to be successful. Highlight the focus areas of your business and your priorities to position your brand and to avail a product opportunity.
Along with listing the priorities, make sure to mention the activities and the approaches that will help to achieve those priorities.
Prepare a sales strategy
With marketing strategies, you can increase brand awareness and set the visibility of your business. Also, it helps to generate leads and boost sales. To get an increased ROI, your business should have an effective marketing and sales strategy.
Create a budget plan
To maintain the management structure and to prepare a marketing strategy, sales strategy, etc., a budget is required. For proper execution of a business plan, you need to carefully handle the expense projections and resource allocations. Your budget plan should be realistic and should be synced with the milestones.
Plan for business strategy implementation
To implement the business strategy successfully, you should have a proper business plan. If the plan is realistic, contains budget expenses, deadlines, and responsibilities of the stakeholders, and then it is easy to implement.
Apart from the business plan, you should track and follow up on the process for successful implementation. Also, you can review the plan and make changes if there is any variance in the performance.
Standard Structure and Format of a Business Plan
A business plan should be written in a formal structure. The standard Business Plan template should contain the following components.
- Executive Summary
- Overview of the company
- Market Analysis
- Products and Services
- Management Overview
- Business Strategy and Implementation
- Logistics and Operations Plan
- Financial Plan
Executive Summary
It is the business plan’s outline. The main objective of the executive summary is to mention the focus points of the plan. It should be written in a way to holds the attention of the readers and should tempt them to read further.
This section should not exceed one page and should include the following
- Business Name and Contact Information
- Information about the Business Owner (Education, skills, and experience)
- Business Concept
- List of Business Offerings
- Purpose of writing a business plan
- Target Market
- Marketing and Sales plan
- Current and projected financial plan
- Plan to execute a strategy
Overview of the Company
Add this section to inform your investors or any outsiders to know about your company. This section should contain
- Company Name
- Business Location
- Company History
- Business Goals and Vision
- Competitive Advantage
- Business offer
- Type of Ownership
- Business Objectives
- Team members and their salaries
Market Analysis
This section of the business plan focuses on the marketing aspects and the connection of the business with the customers. It must define the customers the business has, their size and the business tactics you have formulated to sell your business to the customers.
The market analysis section of the business plan should include the following in detail.
- Industry Overview
- SWOT Analysis
- Competitive Analysis
- Target Market
- Market Share Forecasting
Products and Services
As the title indicates, this section deals with a detailed description of the products or services the business has decided to sell. This component of the business plan should contain
- Business Offerings
- Cost of Business Offerings
- Value Proposition of Business Offerings
- Competitive Advantage
Management Overview
This section should highlight the organization’s hierarchy, information about the executives on the management board, salary details, and employee benefits.
Under this section, include the following details.
- Organization Structure
- Personnel Cost Projections
- Management Background
Business Strategy and Implementation
This is one of the important sections in the plan where you need to define your plans to build visibility for your business and the effective ways to convert your potential buyers to customers.
In this component, explain the following in detail.
- Marketing Strategy
- Sales Strategy
The marketing strategy should touch on important points such as product differentiation, cost of the product, and promotional ideas.
Logistics and Operations Plan
If your business is about the selling of products, then include this section and mention the ways you have planned to maintain your inventory and shipping.
Under this section, include the following details.
- Supplier details
- Production
- Equipment
- Facilities
- Inventory
- Shipping and fulfillment
Financial Plan
It is necessary to plan the cash flow of your business. Here, in this section, mention the following details.
- Cash flow statement
- Income Statement
- Balance Sheet
- Break-Even Analysis
- Business Ratios
Conclusion
We hope you are now clear about what a business plan means and how to write it effectively. When you are on the verge of preparing a business plan, make sure to follow the steps discussed above. But, while creating your business plan, consider all the perspectives of your business. Note that, the business plan that you develop should be concise and to the point.
