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How to Write a Business Plan

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How to Write a Business Plan

Date: Jan 19, 2019
Author: Abbakin 14 1 Comment

This is a step by step guide to help on how to write a business plan that will catch the attention of your target audience.  But before then, what is a business plan?

A business plan is a written document containing business goals, the methods on how these goals can be attained, and the time frame that these goals need to be achieved.

It is a document that describes a new or existing business, its products or services, how it will earn money, its leadership and staffing strength, financing options, operational models, and other details that are essential to business success.

In most cases, business plan is a road map designed to convey the business opportunities to the investors. It is made up of different sections but let’s start with the executive summary.

Business-in-a-Box: The Executive Summary provides potential investors a brief description of the key components of the business plan.

To make sure it is clear and comprehensive, it is often the last section to be written after taking each of the business plan sections one by one.

A first-time reader should be able to read your executive summary by itself and know what your business is all about.

The summary should stand-alone, be between one to three pages in length and should motivate readers to continue reading the remaining part of the business plan in more detail.

 

Generally, your Business Plan should include the following:

  • The title page
  • Executive summary
  • Business description
  • Product and services
  • The market
  • The opportunity
  • The solution
  • Competition
  • Operation
  • Management team
  • Risk and opportunity
  • Financial projection
  • Capital requirements

 

Let’s explain all the above in details:

 

How to Write a Business Plan: Steps by Section

 

#1. Business Description

This section provides a brief description of your company. The opening paragraphs should introduce what you do and where.

From this section, the investor must be convinced of the uniqueness of the business and gain a clear idea of the market in which the company will operate.

The legal form of the business such as whether its Limited Liability Company, Partnership, or Proprietorship should be stated as well as the objectives of the business via a mission statement.

Your mission statement should clearly state the business’s purpose and values.  You may include a vision statement as well as where you see the business in five to ten years.

Be sure to answer the following questions that are usually asked by potential investors:

  • What form of business are you in?
  • What type of Business is it: E.g. Manufacturing, Consulting, Reselling, Services Business?
  • Is it a new business, existing, a takeover or a franchise?
  • What is your product or service?

 

#2. Product and Services Section

This should include a very brief overview and description of your products and services, with emphasis on distinguishing features.

Begin by stating your Company Name and the product or service you provide. List all products/services in order of highest to lowest sales or importance of product line.

If possible, try to refer potential investors and loan officers to patents, diagrams, product displays, or other supporting material.

Be sure to answer the following questions in your product/service section:

  • How will the products be made or the services performed?
  • What will they do for the customers/clients?
  • What is different about the product or service your business is offering?
  • What value do you add to your product?
  • What is it that separates your company from the rest of the pack?
  • Is your product or technology proprietary, original, copyrighted?

 

 #3. The Market

In this section, you are to provide a brief description of the market you will be competing in.

Here you will define your market, how large it is, and how much of the market share you expect to capture.

It is important to reference credible sources and include the name of your source(s) of information along with a date.

Indicate how you will market the products/services and which channels will be used to deliver your products/services to your target market(s).

Some popular channels include website, direct sales force, value added resellers, channel partners, distributors, dropshipping, etc.

Be sure to answer the following questions:

  • What are the key drivers, trends, and influences in the market?
  • To whom do you market your products and services?
  • How will you educate your customers to buy from you?
  • Who is your target market?

 

#4. The Opportunity

Describe the problem or the pain that the customer feels in order to establish that your business is really offering value to the customer.

Your business plan will have much scope if it provides a real solution to an existing or even latent needs or problem. Remember to state the problem clearly.

Also outline how the customer is managing to solve the problem at present.

For example;

  • Are they using alternatives?
  • What are those alternatives?
  • Are they simply putting up with it?

 

#5. The Solution

After establishing how much pain customers face and you need to indicate how in demand your solution would become.

This solution is your product or service!

However, if you want to stand apart from the competition, your solution must be different and unique.

To differentiate yourself, you need to have a very good idea of what your customers need or will need in the future. By providing an intelligent solution, you will help to solve a problem smartly.

Furthermore, your products or services need to have a robust set of features. This is because your ability to get and retain customers will be greatly enhanced if your product is feature-rich.

Look beyond the core product or service and anticipate how to enrich your customers’ experience and the image in using your product.

Remember that your customer gets an enhanced elegant experienced not just while using product, but all the way from purchase decision to using and after service.

 

#6. The Competition

It is important to show the reader that you have investigated who the competitions are through your market research.

Identify the direct and indirect competitors, with analysis of their pricing and promotional strategies, as well as an assessment of their competitive advantage.

Based on this analysis, you can identify key obstacles for your business, the opportunities and additional services you might offer competitively.

 Be sure to answer the following questions:

  • Is your service better, faster, cheaper and if so why?
  • Is your advantage a temporary “window” and are there steps you can take to protect your position?
  • What have you learned from the competitions? From their advertising?
  • How is their business or sales currently? Steady? Increasing? Decreasing?

 

#7. Operations

The operation section is defined the processes used to deliver your products and services to the marketplace or to the final consumer.

This can include manufacturing process, transportation, logistics, travel, printing, consulting, after-sales service, and so on.

This section should outline how you will implement all of the above and include a brief description of the organizational structure and the expense and capital requirements for operation.

Be sure to answer the following questions:

  • Have you prepared a contingency plan if some difficulties should occur?
  • What facilities and equipment do you require? How much does they cost?
  • What inventory will you have on hand? Where will you keep it?
  • What is your staffing requirements, is your pay and benefits package appropriate?
  • Have you considered the possibility of a unionized staff?
  • Have you contacted suppliers and distributors and decided which you will choose?
  • Do you have insurance? If so, does it provide adequate coverage?

 

#8. Management Team

The quality of a company’s management team is one of the best predictors of success, and investors will always look very closely at the individuals who will be managing the company.

The ideal scenario is that: senior managers should have previously started and successfully managed companies in the same business.

If your management team cannot show this kind of background, you should emphasize the previous relevant experiences of the team.

Write a brief biography of each member and mention their past experiences, education, positions held and milestones achieved.

 Be sure to answer the following questions:

  • Can the management team reach the desired goals set for the business?
  • What about the future needs of management, will you hire new team members? What if a member of your management team leaves?
  • What is the chain of command or responsibility?
  • Why did your current management leave their previous position?
  • What will be the main duties of each individual member of management?

 

 #9. Risks & Opportunity

Risks are part of any business, especially a new one. Most entrepreneurs should be aware of this fact.

In this section, it is important to show potential investors and loan officers (lenders) you have taken into consideration the risk involved with starting or expanding your venture.

Illustrate the market, pricing, product, and management risks as well as how you plan to overcome these risks successfully and move the business forward.

Describe and quantify the opportunity and where your product fit. Explain why you are in business along with the reasons why you will be able to take advantage of this opportunity.

Be sure to answer the following questions:

  • Have you considered all the possible risks involved?
  • Does your business have a contingency plan for all of the risks mentioned?
  • What makes this opportunity unique and what can you see out of the weaknesses?
  • What are the financial risks for your business? How will these risks be minimized?
  • What is the worst-case scenario? And how will your business handle it?

 

 #10. Financial Projection

The financial section of the business plan will help you and potential investors to estimate how much money that will be required and how much profit and sales will be generated.

This process will force you to think through the various scenarios that may arise at the course of business and the respective responses to each.

Be sure to answer the following questions:

  • Have you stated your break-even point?
  • What are the potential problems you are certain your business will face and what are the solutions to these problems?
  • Are the balance sheet and income statement completed for first three – five years?

 

 

Wrapping up: How to Write a Business Plan

The Executive Summary provides the overall outline of the business plan and it comes immediately after the title page.

Other sections of the business plan may include the Business Description, Market Strategies, Competitive Analysis, Design & Development Plan, Operations & Management Plan, and Financial Factors.

If you are seeking further detailed information about how to write a business plan, visit our resource center for free sample business plan that can help you organize your ideas and start writing your own business plan today.

One of the most common causes of new business failures is under-capitalization.

While writing a business plan, your capital expenditure budget should clearly state the capital requirement needed to start or expand your business.

If you’re just starting out, you should have a very clear idea of how much money you will need to operate your business for the first full year, purchase the required equipment and supplies, pay salaries, etc.

If it’s an existing business, you cannot forget to state how much money you have invested in the business and how it is being used.

In addition, describe why you need external funds and how the opportunity is exciting.

Investors and loan officers want to know when they will get their money back, so be sure to explain how and when they will recoup their investment or when you will repay the loan.

If the loan for initial capital will be based on security instead of equity, you should also specify the source of collateral.

 

1 Comment:
    • Kay

      financial projection is the best though, also the easirst.

      December 28, 2018
      Reply

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