HOW TO WRITE A BULLET-PROOF BUSINESS PLAN: A Step-By-Step Guide For Entrepreneurs

If you are writing a business plan, it means you are at a pivotal moment in your entrepreneurial journey. Whether you're seeking funding or aiming for a game-changing approval getting your business plan right is essential. In this article, I'll walk you through a simple framework that breaks down the process into 6 clear steps.

STEP 1 [clearing the ground]: AVOID COMMON PITFALLS

Understanding frequent problems from the very beginning can help you avoid them. Here are the top two common mistakes in business plans that you need to be aware of from the start.

1. Unsupported assumptions: they undermine credibility.
2. Misaligned sections: they reveal gaps in analysis and accuracy.

We want to write a bullet-proof business plan. Let's explore this in more detail in the next steps.

STEP 2: [laying the foundation]: ADOPT THE RIGHT ATTITUDE

This may sound obvious to many, but a business plan is not a superficial school assignment. You would be surprised to know how often this is misunderstood. For this reason, it’s worth keeping in mind that on a diligence meter business plan writing lies far on the thoroughness end.

Though there’s nothing wrong with cutting corners and often this may be a definition of being smart, at the same time, do not underestimate the amount of work needed for deep research, testing assumptions, and writing things down clearly.

That’s why, we’ll focus on diligent preparation that implies a lot of work, but at the same time guarantees that the business plan will not be rejected due to poor analysis and documentation.

STEP 3: [setting up the frame]: DEFINE THE CORE BUSINESS PLAN STRUCTURE

Depending on its purpose and target audience, a business plan structure may vary but will likely include the following sections:

• Project / Company description
• Market analysis
• Description of products or services
• Marketing and sales strategy
• Organization and management
• Funding requirements
• Financial projections

Regardless of the purpose, business plan addresses 2 important points:

1. guiding the business in achieving its objectives, and
2. communicating its vision to stakeholders, including investors who have a vested interest in the company's success.

However, understanding the purpose of a business plan is crucial to ensure the right focus, content, and structure.

The primary purpose of writing a business plan is often fundraising. Investors and creditors, as the audience, will be interested in seeing a clear path to profitability, detailed financial projections, and evidence of market demand and growth potential as the key components of a business plan.

STEP 4: [using excellent materials]: MEET QUALITY CRITERIA

Your business plan targets three key groups:

1. Decision-makers
2. Reviewers
3. Users

To serve these audiences well, a quality business plan should:

1. Satisfy decision-makers: Align the conclusions with the criteria decision-makers use to assess feasibility and profitability, ensuring your project is perceived as worthwhile.
2. Be defensible: Reviewers will scrutinize the plan for potential flaws and gaps, so ensure your data, assumptions, and strategies can withstand rigorous questioning.
3. Communicate clearly: Present information in a clear, concise manner to convey ideas effectively and ensure understanding.

A good starting point for providing the right quality is to ensure that your business plan meets the general requirements for effective communication in business documentation. It should convey information accurately, logically, and convincingly, much like scientific documents.

STEP 5: [inspecting]: THINK LIKE A REVIEWER

Once your business plan is drafted, let’s put on a reviewer’s hat and try to challenge it. The most likely groups of problems during the business plan review are often the following:

1. Incompleteness: Not considering all critical aspects, like evidence of demand, target audience, growth potential, or regulatory challenges, can undermine a business plan's credibility.
2. Misalignment: Discrepancies between different sections of the business plan, such as market research not aligning with financial forecasts, can signal poor quality of analysis.
3. Not meeting the criteria of decision-makers Failing to address the specific criteria and expectations of decision-makers, such as clear profitability paths, detailed risk assessments, and strategic alignment, can result in rejection even if the business plan is well-written otherwise.
4. Lack of support: Unsupported assumptions or statistics can significantly weaken a business plan's persuasiveness and defensibility.

STEP 6: [fortifying]: BULLET-PROOF YOUR BUSINESS PLAN

Let’s tackle the common pitfalls that we outlined in step 5.

1. Ensure completeness of the analysis Use accepted frameworks, guidelines, and methodologies. For example, when conducting market analysis, consider Porter’s Five Forces, PESTELE, and SWOT analysis to ensure you do not miss critical considerations. For financial projections, adhere to standard financial statements framework, accounting standards, as well as generally accepted forecast methodologies. Those will ensure the completeness of your analysis. For performance analysis, consider sector-specific indicators that are common to your target industry.
2. Ensure coherence of business plan sections Ensure interlinking between sections. It's important to both cover essential aspects within each section and maintain consistency between sections. An underlying financial model is a powerful tool to tie together all assumptions and projections for coherence.
3. Meet the criteria of decision-makers Ensure your business plan addresses the expectations of decision-makers. Tailor it to highlight these aspects to meet their standards. This attention to detail is crucial.
4. Document sources All assumptions and statistics must be supported by credible sources. Use studies by subject matter specialists and provide your analysis with disclosure of the approach and reliance on proven methodologies. If you aim to collect solid support, think about the following:

• Can you demonstrate actual performance confirming your assumptions? (This will be particularly relevant for mature businesses).
• Can you find comparable companies and show that your assumption falls within a reasonable range? Ideally, you aim to have 5-10 relevant comparables, but even one relevant and well-supported point of reference improves credibility a lot.
• If you do not have any direct references, you may do an analytical exercise that shows how you have arrived at your assumption. Your base inputs must rely on credible sources as well.

RECAP

Whether seeking funding or approval, a solid business plan is essential for the future of your project. Here's a simple framework to guide you:

1. Avoid common pitfalls by addressing potential issues early.
2. Adopt a thorough and diligent approach.
3. Tailor the structure to fit your purpose.
4. Ensure high quality of research and analysis.
5. Think like a reviewer to identify flaws.
6. Bullet-proof your business plan by ensuring completeness, coherence, solid documentation, and meeting decision-maker criteria.

If you need more guidance, you may find useful our business plan checklist:

https://modelix.co/business-plan-checklist/

Good luck in your entrepreneurial journey!