Are you thinking of starting a business? We have got you the best step-by-step template for writing and building a perfect business plan for your startup.
Well, while starting a business we might feel there is no need to get a step-by-step guide for writing a business plan. On the other hand, you might also feel you don’t need a template for writing a business plan. These thoughts may come to your mind as some of the entrepreneurs succeed even without writing a business plan. Along with great timing, efficient business skills, a great entrepreneurial drive, and a little favor in form of luck, Yes some founders build thriving businesses without even creating an informal business plan.
On the flip side, the chances of failure are more with such entrepreneurs
By Saying above I am definitely not saying that the startup will become inevitable, but efficient planning definitely makes a difference between success and failure. When it comes to be following your dreams I am sure the thought should be not to leave any stones unturned and you should be doing everything possible to hit the stage with success.
And that’s the reason why a great business is going to help.
Here I am presenting the comprehensive guide for creating a great business plan.
First we are going to cover the overview of the key concepts and then we shall be looking at each concept of a typical business plan in detail.
Let’s dive deep into these terms and gain a little perspective on why they are critical for a business plan.
Well designing a a business plan is in most of the case is a fantasy and the major reason to this is aspiring entrepreneurs see a business plan as simply a tool-filled with strategies and projections and a puffery that creates a illusion and convince lenders or investors that business is legit and scalable.
Precisely, that’s a major mistake.
First and most important , the business plan should get registered in your mind and should convince “You” that the idea makes complete sense since your time, money and effort are in the line.
So, indeed a solid business plan is a blueprint for a successful business. It should be a combination of strategic plans, develop marketing and sales plans, create a foundation for smooth business operations and may be create a strong foundation for lender or investor to jump on board.
In most of the cases, aspiring entrepreneurs feel that creating a business plan will indeed help them to decide whether to actually get into the business that will prosper.
What they believe is creating a business plan on paper will help them create a prospective and if they realize that is failing on paper it will will save both time and money on the business.
So, in a nut-shell a business plan should be:
- As objective and logical as possible. While working on business plan it is imperative that the output will decide if the business is good idea or not viable because of any reason including competition, insufficient funding or a non existent market. Sometime even ideas do fall ahead of time.
- Should be serving as a guide to the business’s operations right from day one and in turn creating the blueprint for company to follow.
- Should clearly communicate the company’s vision and mission along with detailed responsibilities of the management and personnel requirements, should be providing the overview of the marketing plans and evaluate current and future competition in the marketplace.
- Most importantly the business plan should create a foundation of a financial proposal for the investors and lenders to evaluate the company.
While a good business plan definitely consists of all above points, but it should also accomplish other objectives. It should be convincing and proving the case. It should provides concrete and factual evidence of showing your idea for a business is in fact sound and reasonable and has every chance of achieving success.
Who must be convinced by your business plan?
The business starts from “You” , so it is imperative that first and foremost the business plan should convince “You” that its not just a dream but can be a viable reality. Entrepreneurs are confident, positive and can-do people. After you objectively evaluate your capital needs, products or services, competition, marketing plans, and potential to make a profit, you’ll have a much better grasp on your chances for success.
And even if you are not convinced, it is perfectly fine, you can take a step back and you may refine your ideas and growth plans.
Who can be convinced by your business plan?
- Personal Financing : If your business needs money from anyone then your business plan can help you make a great case. Financials statement show your past and financial projections describe your future and your business plan carves the way for achieving and reaching there.
- Potential business partners and investors : In order to attract investors and business partners its is imperative to have a great business plan in order to evaluate the viability of the business.
- Future Employees : In order to attract right talent , it is imperative to align them with the vision and mission of the organization and business plan creates the foundation of making them understand that you are still in the startup phase. The belief in the organization will only come once it becomes the reality at later stage. As of now only business plan builds the confidence for all the future employees.
- Potential Joint Ventures : Joint venture is a partnership between two companies. It creates a formal agreement to share the revenues and profits. When you are new company the quantity cannot be predicted due to nature of start up. Getting a joint venture will establish and create marks on the ground for you.
Above all, its extremely important to convince yourself and if that happens it definitely makes sense to move forward.
Creating a business plan lets you effectively spot the risk and opportunities and remove challenges without risk. It is the perfect way to review and revise the ideas and strategies before you even start spending money.
Important is to look “Business Plan” as the perfect way to plan as a no-cost way to explore the viability of the business and avoid costly mistakes.
Now Let’s look at the first section of your business plan:
An executive summary efficiently summarizes a larger business plan while communicating key findings and takeaways from your research, as well as proposed courses of action. It hold the most important place while writing a business plan.
You may find it tough to limit the length of executive summary but a good summary should include:
- An overview of Products & Services
- A summary of business objectives
- An analysis of the target market
- A bird’s eye view of viability of business
- A snapshot of growth potential
- A brief description of funding requirements
It majorly decides the make or break section of your business plan.
A great executive summary should be helping to accomplish the following:
- Keep it short & simple (KISS) :
Remember writing an elevator pitch (which if of course not short), the executive summary should include the most important and critical points leaving behind the issues and factors with less priority.
Include all pointers that may contribute most to potential success. Describe the business in several sentences not in pages.
- Decide your priorities :
Use a structured way to describe in order of priority and what is more important to you. this is extremely critical for others to understand your vision and focused approach which ultimately decides the rest of the business plan.
- Create engagement :
While in most of the cases the summary is going to be used to design the rest of the plan on the other side it should be engaging enough to create excitement for the reader to flip the pages.
This is extremely critical at the stage where you are going to approach lenders and investors for funding.
Hence it needs a meticulous thought to work hard and set the stage right for rest of the plan.
Want to know how to do this, read this beautiful article by Asana. In short, it should contain Introduction, Company & management details, Market Opportunities, Competition Analysis & Financial projections.
In nutshell , keep it short and simple with focus on priories and engagement.
Overview and Objectives
Writing around overview and objectives is going to be a tricky in the planning stage. For old entrepreneurs it might be a simple process of summarizing your current operation. It also harder to explain what you plan to become.
So let’s take a step back.
Think point by point around products and answer the following questions:
- Who will you provide
- What will you provide to run the business
- Who will service your customers
- Who are going to be your customers (Target Audience)
Look at the business basics and answer the above questions in the following steps:
- Identify your industry
- Identify your customer
- Highlight the problem
- Highlight how you solve the problem
Still confused, you can go for self analysis by asking following questions:
- Who is my average customer? Who am I targeting? (Unless you plan to open a grocery store, you should be unlikely to answer, “Everyone!”)
- What pain point do I solve for my customers?
- How will I overcome that paint point?
- Where will I fail to solve a customer problem, and what can I do to overcome that issue? (In our rental example, one problem is a potential lack of convenience; we will overcome that issue by offering online reservations, on-resort deliveries, and drive-up equipment returns.)
- Where will I locate my business?
- What products, services, and equipment do I need to run my business?
- What skills do my employees need, and how many do I need?
- How will I beat my competition?
- How can I differentiate myself from my competition in the eyes of my customers? (You can have a great plan to beat your competition, but you also must win the perception battle among your customers. If customers don’t feel you are different, then you aren’t truly different. Perception is critical.) (Source- inc.com )
Working on the above will give you complete detail. Just summarize and start building.
Products and Services
In this section the focus would be to clearly describe the products and services the business is going to provide using simple terms and avoiding industry jargons.
While you describe your products and services it is also critical and important to provide knowledge on how your products and services differ from that of competition. It is also critical to describe how your products will make a difference even if there is no market that exists.
Include all information about Integral Property Rights (IPR) including patents, copyrights and trademarks you own or have applied for.
It fairly depends on the nature of your business that will decide the length of this section. If the business is product centric you may need to spend more time describing about products.
In case you are planning to sell a commodity item, your focus might not be to describe significant product detail. Or if you plan to sell a commodity readily available in a variety of outlets, the key to your business may not be the commodity itself but your ability to market in a more cost-effective way than your competition.
But, only if you are creating a new product (or service) , please ensure to explain the nature of the product in detail along with its uses and value so that readers have maximum information to evaluate your business.
You may use follow key question to write this section:
- Are products or services in development or existing (and on the market)?
- What is the timeline for bringing new products and services to market?
- What makes your products or services different? Are there competitive advantages compared with offerings from other competitors? Are there competitive disadvantages you will need to overcome? (And if so, how?)
- Is price an issue? Will your operating costs be low enough to allow a reasonable profit margin?
- How will you acquire your products? Are you the manufacturer? Do you assemble products using components provided by others? Do you purchase products from suppliers or wholesalers? If your business takes off, is a steady supply of products available? (Source – inc.com)
While drafting this section think of yourself as a reader who has very less information about your business. Hence be clear and precise.
Market research is critical to business success. A good business plan analyzes and evaluates customer demographics, purchasing habits, buying cycles, and willingness to adopt new products and services.
You cannot write this section without doing research. It is critical to have a viable market for what you are planning to offer.
There are a number of questions that you may ask to understand the market which start by evaluating the market at relatively high level, answering some questions about your market and industry:
- What is the size of the market? Is it growing, stable, or in decline?
- Is the overall industry growing, stable, or in decline?
- What segment of the market do I plan to target? What demographics and behaviors make up the market I plan to target?
- Is demand for my specific products and services rising or falling?
- Can I differentiate myself from the competition in a way customers will find meaningful? If so, can I differentiate myself in a cost-effective manner?
- What do customers expect to pay for my products and services? Are they considered to be a commodity or to be custom and individualized? (Source – inc.com)
Please focus on your goal which is to thoroughly understand the characteristics and purchasing ability of potential customers in your market. A little Googling can yield a tremendous amount of data.
For the market you serve , please ensure to determine:
- Your potential customers
- Total household
- Median Income
- Income by Demographics
The key is to understand the market in general terms and then to dig deeper to understand whether there are specific segments within that market–the segments you plan to target–that can become customers and support the growth of your business. Also, it is important to keep in mind that if you plan to sell products online the global marketplace is incredibly crowded and competitive.
Always remember it’s much easier to serve a market you can define and quantify.
After you complete your research you may feel a little overwhelmed. While data is good, and more data is great, sifting through and making sense of too much data can be daunting.
For the purposes of your business plan, narrow your focus and focus on answering these main questions:
- What is your market? Include geographic descriptions, target demographics, and company profiles (if you’re B2B). In short: Who are your customers?
- What segment of your market will you focus on? What niche will you attempt to carve out? What percentage of that market do you hope to penetrate and acquire?
- What is the size of your intended market? What is the population and spending habits and levels?
- Why do customers need and why will they be willing to purchase your products and services?
- How will you price your products and services? Will you be the low cost provider or provide value-added services at higher prices?
- Is your market likely to grow? How much? Why?
- How can you increase your market share over time? (Source – inc.com)
Sales & Marketing
If you are providing great products & services its wonderful, but customer would be curious to know if these really exist and that is where marketing plans and strategies play a critical role.
Marketing is not just advertising, it needs to be well thought through as it is going to be the investment for the growth of business and it will generate a return like any other investment in business. So doing a proper homework is important to create a smart marketing plan.
Some of the basic steps involved during the process are:
- Focus on your target market. Who are your customers? Who will you target? Who makes the decisions? Determine how you can best reach potential customers.
- Evaluate your competition. Your marketing plan must set you apart from your competition, and you can’t stand out unless you know your competition. (It’s hard to stand out from a crowd if you don’t know where the crowd stands.) Know your competitors by gathering information about their products, service, quality, pricing, and advertising campaigns. In marketing terms, what does your competition do that works well? What are their weaknesses? How can you create a marketing plan that highlights the advantages you offer to customers?
- Consider your brand. How customers perceive your business makes a dramatic impact on sales. Your marketing program should consistently reinforce and extend your brand. Before you start to market your business, think about how you want your marketing to reflect on your business and your products and services. Marketing is the face of your to potential customers–make sure you put your best face forward.
- Focus on benefits. What problems do you solve? What benefits do you deliver? Customers don’t think in terms of products–they think in terms of benefits and solutions. Your marketing plan should clearly identify benefits customers will receive. Focus on what customers get instead of on what you provide. (Take Dominos; theoretically they’re in the pizza business, but really they’re a delivery business.)
- Focus on differentiation. Your products and services have to stand out from the competition in some way. How will you compete in terms of price, product, or service?
Then focus on providing detail and backup for your marketing plan.
Key questions to answer:
- What is your budget for sales and marketing efforts?
- How will you determine if your initial marketing efforts are successful? In what ways will you adapt if your initial efforts do not succeed?
- Will you need sales representatives (inside or external) to promote your products?
- Can you set up public relations activities to help market your business?
The key is to show you understand your market and you understand how you will reach your market. Marketing and promotions must result in customers–your goal is to thoroughly describe how you will acquire and keep your customers. Also don’t forget to include examples
Analyzing your competition is critical and it includes both your current and future competitors or new entrants who might get into similar business as yours.
Every business has competition. Understanding the strengths and weaknesses of your competition or potential competition is critical to making sure your business survives and grows. In fact the truth is that new companies are especially vulnerable to competition.
Here is the simple process flow that you can follow:
- Profile current competitors focussing on direct competition and answer the following questions:
- What are their strengths? Price, service, convenience, and extensive inventory are all areas where you may be vulnerable.
- What are their weaknesses? Weaknesses are opportunities you should plan to take advantage of.
- What are their basic objectives? Do they seek to gain market share? Do they attempt to capture premium clients? See your industry through their eyes. What are they trying to achieve?
- What marketing strategies do they use? Look at their advertising, public relations, etc.
- How can you take market share away from their business?
- How will they respond when you enter the market?
Use their website and modern research tools to complete this analysis. This analysis will help you understand your competition along with helping you identify what mistakes you should NOT do in your business or what strategies you need to change. Learn from competitor strengths, take advantage of competitor’s weaknesses, and apply the same analysis to your own business plan.
- Identify Potential Competitors by thinking about your business and industry and if following conditions exist you may face competition on the road.
- The industry enjoys relatively high profit margins
- Entering the market is relatively easy and inexpensive
- The market is growing–the more rapidly it is growing the greater the risk of competition
- Supply and demand is off–supply is low and demand is high
- Very little competition exists, so there is plenty of “room” for others to enter the market
Now based on your above learnings answer these question in your business plan:
- Who are my current competitors? What is their market share? How successful are they?
- What market do current competitors target? Do they focus on a specific customer type, on serving the mass market, or on a particular niche?
- Are competing businesses growing or scaling back their operations? Why? What does that mean for your business?
- How will your company be different from the competition? What competitor weaknesses can you exploit? What competitor strengths will you need to overcome to be successful?
- What will you do if competitors drop out of the marketplace? What will you do to take advantage of the opportunity?
- What will you do if new competitors enter the marketplace? How will you react to and overcome new challenges?
While your business plan is primarily intended to convince you that your business makes sense, keep in mind most investors look closely at your competitive analysis. A common mistake made by entrepreneurs is assuming they will simply “do it better” than any competition.
It is critical for a business to keep operating costs in line and that is where this section is focussed on to ensure profitability. This section will details strategies for managing, staffing, manufacturing, fulfilment and all the stuff involved in day to day operations.
Your goal here is to identify following:
- What facilities, equipment, and supplies do you need?
- What is your organizational structure? Who is responsible for which aspects of the business?
- Is research and development required, either during start up or as an ongoing operation? If so, how will you accomplish this task?
- What are your initial staffing needs? When and how will you add staff?
- How will you establish business relationships with vendors and suppliers? How will those relationships impact your day-to-day operations?
- How will your operations change as the company grows? What steps will you take to cut costs if the company initially does not perform up to expectations?
The operational plan need to be highly specific to your industry, market and customers. Some of the key elements which can be considered are as follows:
- Location & Facility Management
- Daily Operations
- Personal Requirements
Think and create a detailed plan for each category, but you won’t need to share all results as part of the business plan.
When it comes to lending and investing, many of them do look at the quality and experience of management team. This section not only helps people who read it but also helps you to create a evaluation criteria for the kind of people you need which is going to have major chances of success.
Few of the key questions to answer:
- Who are the key leaders? (If actual people have not been identified, describe the type of people needed.) What are their experiences, educational backgrounds, and skills?
- Do your key leaders have industry experience? If not, what experience do they bring to the business that is applicable?
- What duties will each position perform? (Creating an organization chart might be helpful.) What authority is granted to and what responsibilities are expected in each position?
- What salary levels will be required to attract qualified candidates for each position? What is the salary structure for the company, by position?
Please note its not important to put a name of the person who are not going to work but include the names of people who are actually going to work.
Finally, when you create your Management section, focus on credentials but pay extra attention to what each person actually will do. Experience and reputation are great, but action is everything.
Yes, finally numbers tell all the story of both the success and failure of any business.
It’s a key element for entrepreneurs, lenders and investors to evaluate company’s potential for success. Most importantly these numbers help you to understand the chance of being viable and if not what can you do to make it viable.
Following are the five basic reports or projections:
- Balance Sheet: Describes the company cash position including assets, liabilities, shareholders, and earnings retained to fund future operations or to serve as funding for expansion and growth. It indicates the financial health of a business.
- Income Statement: Also called a Profit and Loss statement, this report lists projected revenue and expenses. It shows whether a company will be profitable during a given time period.
- Cash Flow Statement: A projection of cash receipts and expense payments. It shows how and when cash will flow through the business; without cash, payments (including salaries) cannot be made.
- Operating Budget: A detailed breakdown of income and expenses; provides a guide for how the company will operate from a “dollars” point of view.
- Break-Even Analysis: A projection of the revenue required to cover all fixed and variable expenses. Shows when, under specific conditions, a business can expect to become profitable.
A most basic accounting software can help you to get basic templates for the above or internet or Google can be used as well. While you don’t need to be an accountant to run a business, you do need to understand your numbers, and the best way to understand your numbers is usually to actually work with your numbers.
Only required to included if you’re seeking financing or hoping to bring in partners or investors.
Some business plans include less essential but potentially important information in an Appendix section. You may decide to include, as backup or additional information:
- Resumes of key leaders
- Additional descriptions of products and services
- Legal agreements
- Organizational charts
- Examples of marketing and advertising collateral
- Photographs of potential facilities, products, etc.
- Backup for market research or competitive analysis
- Additional financial documents or projections
While you may use your business plan to attract investors, partners, suppliers, etc., never forget that the goal of your business plan is to convince you that your idea makes sense. Because ultimately it’s your time, your money, and your effort on the line. Happy Building!!