How to write a business plan
A business plan is a detailed and concise outline of an enterprise's actions over a specific time frame. Its purpose is to impress potential investors and aid in the formulation of development strategies, market risk assessments and to gain a better understanding of the business. The organised structure of the business plan enables the detection of deficiencies in planning which, individually, could be easily missed. In this article, you will learn how to draft a document and utilize it to establish your presence in the market.
A business plan comprises distinct sections dedicated to various planning aspects. The final draft should bear the cover page, table of contents and summary at the document's beginning. Nevertheless, these elements are written and crafted last.
Section 1
About the company
In this section, disclose:
If the business plan is being developed by a new business owner, the financial figures will take into account present and forthcoming costs. If the business is already operating, this section of the business plan should outline revenue from the past two to three years (or a shorter period for businesses less than a year old), as well as gross and net profits, operating costs, and balance sheet information.
Important
When listing business owners, describe contributions of any nature: ideas, software development, knowledge of secret production technology. But non-monetary assets must be valued in monetary terms. Let the assessment will not be the most accurate, but sober.
Talking about the location of the enterprise, give a description of the area where each of the objects (warehouse, office, shop, bureau, etc.) is located: who lives in this area, how far it is from the city centre, what kind of infrastructure is there. State how well-equipped the premises are and plan what you will improve in the future.
Section 2
Analysing the industry and market
It is difficult to become successful in a market without knowing how it works. Before writing a business plan, do your research and gather as much information as possible about the industry as a whole and your niche in particular. The Classifier of Activities, websites of state statistics agencies, thematic media and internet portals can help with this.
In this section, describe:
To analyse the market and niche in which you have started a business, apply the same methods of analysis, but narrow the scope. Find businesses similar to yours in your city or region. Interview potential customers about who provides similar services and how often they use them, and then document the results in a business plan.
Finally, identify your target audience segment and try to predict its growth.
Section 3
Product and business model
The product is the heart of the business idea, and writing this section will help refine it. Let the reader of the business plan know the following:
Articulate the value of your offering to the customer and compare the business with competitors. Describe the cycle the product goes through before "finding" the customer and how the paths differ for different audience segments. Predict how the product lifecycle may be affected by technology developments and come up with a new offering for the future.
Section 4
Production plan
This section answers the question of what it takes to get the product to market. In the production plan, it is worth reflecting everything that concerns the capacity of the enterprise, the rates for raw materials and supplies, the labour required, namely:
The forecast of resource prices is especially important, because they directly affect the cost of goods and indirectly affect production volumes.
Section 5
Organisational structure of the enterprise
Even if you work alone, you still need this section: as the company grows, contractors, logistics services, and partners will appear in the structure of the business model. All the human resources that business development will require should be recorded in the organisation plan. Describe here:
It is better to present this data in the form of a chart or diagram so that the functions of the officials and the composition of the management team are clear. Characterise the potential of the managers and identify professional development points for each. Don't forget that the inability to delegate a task to a qualified person is also a weakness of the team. Identify the number of employees working in each position and plan salary costs, taking into account salary increases and staff growth.
Section 6
Marketing strategy
Marketing is responsible for attracting customers. When setting marketing objectives, start from the goals of the business. Let's say the overall goal is to increase profits by 15%. Think about how marketing will help achieve this.
What should be spelled out in the section:
Try to assess the competitive advantages of the product from the customer's point of view, and develop a pricing strategy based on the target audience data. Use only those advertising channels that are appropriate for the product. For example, you can advertise dermatological services on social media using before-and-after photos, but whether this will attract customers is a question.
From theory to practice: plan specific actions and budget for this expense.
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Section 7
Sales strategy
Sales strategy should be based on figures and the real situation in the market. For example, it will not be possible to increase sales by 70% if the industry average growth rate is 12% (by the way, you need to know it too). Here fix:
The number of customers in the segment will help you determine the physically possible maximum sales. Select sales tactics according to the sales funnel - the path a customer will take from interest in a product to purchase.
As with a marketing strategy, plan specific actions and budget the necessary costs.
Section 8
Financial plan
It is the financial plan that determines the viability of a business idea in the economic sense. By looking at this section, an investor will decide whether he or she is ready to invest in the project, and a budding entrepreneur will decide whether the business is worth starting. What needs to be described in the financial plan:
Include all costs in this section: fixed costs such as rent for premises, and variable costs such as raw materials, etc. Forecast revenue, net profit and gross margin - the percentage difference between revenue and total cost of sales. Graph the monthly cash flow analysis: how much you will have to pay suppliers and rent, how much product you will sell, how much you will have to pay for raw materials, how much you will have to pay for wages. Take into account that cash flows reflect the inflow and outflow of real money in circulation, they are not directly related to profit - it is quite likely that you will make losses in the first few months.
Section 9
Risk assessment
Considering negative scenarios is also an important part of planning. In this section, list typical risk factors, as well as the company's own strengths and weaknesses, and develop strategies for dealing with undesirable developments. Describe:
Risks are volatile, so when market conditions change, they need to be reassessed. Identify specific risk areas (in terms of sales channels, partners, customers, etc.). Then set risk indicators - indicators that tell you when things are getting out of control.
For example, a 2-day delay in raw material deliveries is not critical. In this case, the beginning of the 3rd day of delay will be a marker that it's time to take action. Think through the actions you will take as soon as each of the risk indicators "lights up". It is advisable to have a person in the team responsible for monitoring risks and auditing actions taken.
Table of Contents
The Table of Contents will guide the reader through the structure of the business plan. Include the titles of all sections with the corresponding pages.
Executive Summary
The executive summary is a distillation of all the sections of the business plan. If you are showing the executive summary to an investor, include financials, graphs, and other visual information in this section that will indicate the financial prospects of the business and the essence of the business idea. Here's what the summary should contain:
A new business will not have business indicators, instead it should indicate the upcoming costs, the amount of equity and credit and payback period. Already existing business should reflect in the CV the size of revenue and net profit for the last 2-3 years, as well as other indicators that illustrate financial stability. Or instability, if the goal of the business plan is to improve the company's position.
Include a sales forecast and cash flow analysis chart, a few conclusions from market and industry analyses, and anti-risk strategies. Be sure to express your goals in numbers or other measurable indicators. For example: annual revenue - 15 million euro. And formulate the company's mission succinctly. It should express the reason for the existence of the business and the nature of its interaction with consumers and society.
Cover page
The cover page is the "face" of the business plan, the first thing an investor sees. Working on the cover page can be an opportunity to develop a logo and overall graphic style, as well as a slogan and a more memorable title.
The ideal business plan cover page contains:
Be sure to also indicate the title of the document: "Business Plan". If the business is new, it can be "business plan for creation and organisation of activities", and if the business already exists, just "organisation of activities". Usually on the cover page make a note: "Strictly confidential. Please return it if you are not interested in the project" and put the date of the document.
How to turn a business plan from a formality into a manual
Use graphs
Once you've converted the data into a visual form, conclusions about the dynamics and patterns of business processes will begin to emerge.
Use numbers
Any metrics, current or future, should be measurable. If you're not good at maths, leave the analysis to a specialist - it's worth it.
Get support
Professionals , can help you review your business plan or evaluate your project idea.
Plan in stages
If the business plan covers a period of several years, make a monthly forecast for the first year, quarterly for the second year, and annually for subsequent years.
Set achievable goals
Let the development be slower, but steady.