How to write a business plan Step-by-Step
Business plans are able to determine the success or failure of an entrepreneur’s small business. A well-constructed, thorough plan gives you a clear plan for the future. It makes you think about the viability of an idea, and gives you a better knowledge of your company’s finances as well as the competitive landscape.
A business plan usually stretches out for the period of three or five years and outlines the goals you have set and the steps you’ll take to accomplish these goals. If you’re seeking loans or seeking investors A business plan will show that you’re well-prepared and have checked your business idea according to Craig Allen, a financial consultant who teaches business plan workshops in Southern New Hampshire University.
“If you don’t have a financial plan that’s an essential part of a company’s plan of action, it’s extremely difficult to demonstrate to the bank how you’re going to pay back your loan” Allen says.
1. Executive Summary
The first webpage of your plan for business. It should contain the mission statement, which describes the core purpose of your company, along with a brief description of the services or products that you offer, basic information like ownership structure, and a synopsis of your goals.
2. Description of the company
This section offers a brief overview of your company. It includes important details such as the official name and address, as well as the addresses for physical locations as well as the names of important people who work for the company, their information about the history of the company the nature of the business, and other details regarding the its products or services. offers or will provide.
3. Business goals or objectives in a statement of objective
A statement of objective should clearly outline your company’s objectives and include a strategy for business that outlines the steps you’ll take to reach these goals. It outlines precisely what you’d like your company to achieve in the near time and over the long run.
If you’re seeking outside financing, you can make use of this section to explain the reasons you have a compelling need for the money and how it can help grow your business and what you’re planning to do to meet your growth goals. The most important thing is to provide an accurate explanation of the possibility and the ways in which the investment or loan will help your business.
If, for instance, your company is planning to launch an additional product line, you could discuss how the loan can assist your company in the launch of the new product, and increase the sales of 50% in the course of three years.
4. Management structure and business
In this section, you’ll have to list the company’s formal structure which could include a sole proprietorship or partnership -and also the key employees, managers, or other owners of your business. This should include the amount of ownership each owner owns as well as the amount of the involvement of each owner in the business.
5. Services and products
Within this area, you’ll be able to provide a description of the products or services you provide or are planning to provide. The information should include:
- A description about how the product you offer or service functions
- The pricing structure for your product or service.
- The majority of customers that you serve
- Your sales and distribution strategies
- What makes the product you offer or your service superior than what your competition is providing
- How do you plan to fill orders
It is also possible to discuss any the status of your trademarks or patents related to your service or product.
6. Marketing and sales strategy
This is merely a description of what your strategy for marketing should be, and also how you intend to carry it out. In this section, you will be able to discuss how you will convince clients to purchase your products or services or create loyalty among customers, which will bring repeat customers to your business. This section could also be used to highlight what you are proud of about your company and concentrate on what makes your company apart from competitors.
7. Financial analysis of business
If you’re a new business there’s a chance that you don’t have any information about your financials for your business. But, if you’re a business that is already in operation and seeking business loans for small businesses You’ll need to include profit and loss or income statements and a balance sheet which shows your debts and assets as well as an cash flow statement that illustrates how money enters and out of the business.
It is also possible to include numbers that demonstrate the fiscal health of your company for example:
- Net profit margin is the amount of your revenue that you keep as net income
- Current ratio: a measure of your cash flow and your ability to pay back your debts
- The ratio of turnover in accounts receivables is an indicator of the frequency you receive receivables from your customers per year
8. Financial projections
This is an essential element of your company’s plan, especially if you’re looking for investors or financing. It will outline how your business can generate enough revenue to pay back the loan, or earn an acceptable profit for investors.
In this section, you’ll be able to provide your company’s quarterly or monthly earnings, sales, and expenses estimates for at least three years along with forecasted numbers in the event that you’ve gotten an additional loan. It’s important to be precise and you should carefully review the financial statements of your previous company prior to providing projections.
Your goals might be a bit nimble however, they must be achievable. “It’s acceptable to be optimistic as long as you have a reason to believe the reason,” Allen says. “In general it’s best not to be seen negatively because of being overly optimistic.”
You must prove that your business is able to produce adequate cashflow to pay the monthly debt payments for loans. However, you must also consider the risk factors in the company, Allen says.
“The person who is negotiating the loan is going want to know you’ve considered all the possible risks and that you’ve minimized these risks in some manner,” he says.
Include any additional information that is supporting the claim or other information cannot be found elsewhere, like the resumes of your key employees licensing and permits, equipment leases and receipts for patents and bank accounts, agreements, as well as the credit history of your business and personal. If the appendix seems long you might want to think about the addition of a table of content at the top in this part.
Business plan advice and sources
Once you’ve finished writing the business strategy, here are a few ways to make your efforts make an impact:
Be cautious about over-optimism. If you’re applying for a loan for your business at a local bank the loan officer is likely to know your market quite well. Making sales estimates that aren’t accurate could hurt your chances of getting a loan.
“They know what you should expect to see in sales for this type of business in the area,” Allen says. “If you show up with a forecast for sales that is 50% higher than the other companies, they’re going be aware that you’re not realistic, and that’s going to be against your.”
Make it short You only need about 15-25 pages to write a great business plan, so long as your plan is simple, concise and has all of the necessary details, Allen says.
Concentrate on the most important aspects in your plan for business. Avoid getting bogged down in details of your business , or using too much industry terminology. It is always possible to include additional information or information within the annexes.
Proofread: Punctuation, spelling and grammatical mistakes can leap off the page, and deter investors and potential lenders by taking their attention away from your business and placing it on the mistakes you’ve made. If editing and writing aren’t your forte then you might want to engage an experienced business plan writer as well as a copy editor or proofreader.
“I always feel as when someone doesn’t take the time to proofread something was written, just how meticulous is this person when it comes to managing their company?” Allen says.
Utilize free sources: SCORE is an association of non-profits that provides an extensive network of volunteers business experts and mentors who can assist you with writing or editing an effective business plan. Search for the mentor you want or look for an area SCORE chapter to get more advice.
There are the U.S. Small Business Administration’s Small Business Development Centers offer free business consultation and assistance in the development of a business plan, can also be a source of information.
Advanced Tips :How to make a business plan, Step by Step
Business plans have been for a long time important documents for all companies that are starting up. Is it still valid? If yes, what methods and information can aid you in creating an effective document that can aid your business in obtaining the funds you need to ensure that your venture will last?
Before you start looking into the best method of creating an effective business plan that will help you succeed before you spend many hours or dollars the commissioning of the plan, would you really have a need for one?
Ten years ago, anyone who approached you with a business idea that didn’t have any plan was likely to have laughed at you and shunned away. Your family and friends or even the most ardent angel investors. The world has changed.
As I explain in my book the art of Startup Fundraising A business plan is still required for some situations and for some motives. However, some might believe that pitch decks or clever presentations could replace these plans. Every startup and entrepreneur has a plan. Before deciding what this is and the way to develop the plan, you must consider crucial questions to ask and the factors to consider.
What’s a business plan for?
Simply because it’s the norm, it shouldn’t be considered a valid argument in the language of a founder of a new venture today. Traditional business plans are massive beasts which drain your time, cash and energy at the most crucial moment. Do not do it unless you understand the reasons behind it and what you want to accomplish with it.
In actual fact, Silicon Valley angel investor, VC and founder of 500 Startups, David McClure claims that entrepreneurs “don’t make a business plan.” We’ll tell you the things David is likely to look for in case you are hoping to receive an investment check from him within a minute. But the truth is that the majority of entrepreneurs aren’t even trying to connect their objectives with what they believe they ought to be doing.
You must have a plan to get organized and ensure that you have a feasible commercial opportunity. You’re focused and you won’t have to run out of cash or become starving before you get started. If you’re just looking for that and you do not plan to raise funds, apply for loans and don’t plan to partner with anyone If you don’t, then you definitely don’t need a large manuscript. Be simple. In reality, Brian Chesky (founder of Airbnb) is well-known for his simple business plan to dominate the world.
If you’re thinking of visiting an institution in your area for business loans, or you are contacting your circle of influence to get backing that is used to seeing legitimate businesses plans then must make something they can understand in a format that they are familiar with.
If the goal is to raise money and your business will not be able to grow without it, make sure everything you decide to design will be able to fit into the current fundraising landscape.
Business Plans Vs. Pitch Decks
Pitch decks and business plans are two distinct things. They are both a great deal of cross-over factors. However, one of them is for the presentation and specifically to get money from Angels or VCs. The other one is more of an organizational and internal.
If you are looking to be funding from David McClure David McClure says he would like to be able to see “a useful product that is used by people. We are looking for practical prototypes, customer development and, most important scaling. Are you able to scale customer acquisition inexpensively and efficiently?”
Contrary to old-fashioned business plans, McClure recommends:
- 12-month expense projections
- Marketing plans
- Costs of acquisition for customers
- Customer value
- The results of the tests (i.e. an overview of KPIs)
- Evidence of continuous improvement
- Understanding your burn rate and ensuring that you never fall less than 6 months of cash
A lot of this information is easy to fit into a pitch deck or at the very least an adequate appendix.
Recently, I reviewed the template for a pitch deck that was developed with the help of Silicon Valley legend, Peter Thiel ( see it here) in which the most crucial slide are highlighted. In addition, I provided some commentary on pitch decks from an Uber competitor, which has raised more than $400 million ( see it here)
Business Plans Vs. Executive Summary
A executive summaries is a distinct document. It’s an effective tool , and a must include as a part of the business plans you have. This is particularly true for those who are thinking about funding which involves commercial real estate, or an SBA loan.
This is a short, 3 to 4 pages of text that summarizes your company and strategy, and gives readers enough information to determine whether they’d like to view additional details or not. Much like a pitch deck when it’s done well, it could be enough to persuade investors and lenders to agree to collaborate together, and then discuss the details throughout the process.
The Best Practices to Create the Brilliant Business Plan
What is a good business plan?
Format content, substance, and the key data viewers are all vital. Also, the amount of amount of time you invest in it, as well as the frequency at which you’re doing it.
When to create the Business Plan
The main issue of business plans is business owners often become absorbed in them. The time spent repeating and revising the business plan over at least a year can make your startup lose the best opportunity to go to market and also the most lucrative financing opportunities. Many founders have attempted to squeeze the same information of a business plan in an e-pitch deck, but only to discover it’s not able to achieve the desired results.
Harvard Business Review (HBR) declares “the main factor in achieving success in business is to be open and flexible to new opportunities. Entrepreneurs are often forced to change the direction of their business when it becomes apparent that the customer they initially chose isn’t the best customer, or if it becomes apparent your product is better in an alternative market. In these instances the business plans that are written from the beginning become just a fable.”
Additional statistics from HBR reveal that:
- The “most successful entrepreneurs ” were those who created their business plans between 6 and 12 months after making the decision to start the business. They claimed it “increased the likelihood of success for the venture by 8 percent.”
- The odds of success increased by 12 percent for those who did not spend more than three months on their plans. Any longer isn’t going to be successful.
- Chances of success for startups increased by 27% if the plan was developed in the perfect time when the founders were talking with customers and planning marketing.
Based on Entrepreneur.com and Rule’s Book of Business Plans for Startups founders must be taking into account these aspects when drafting their plans.
- What will the business do to be invested
- Principal goals
- Mission statement
- Strategies to be successful
- Analysis of the industry
- Market analysis
- Analyzing competitors
- The core strategies
- Marketing plans
- Organizational structure
- Key operations
- Pro formas and projections
- Break-even analysis
- Financial needs
The good news is that drafting an effective business plan has become significantly easier in the present. There are a lot of information sources to prove the assumptions and complete research. There are many great freelancers on the internet who can help with the time-consuming elements of the process such as formatting and research as well as interactive Pro-formas.
There are templates that you can download and print, so you don’t have to figure out what you should include.
SCORE provides customizable worksheets for these important pages of the business plans of your new company:
- Executive Summary
- Description of the Company
- and Services. and Services
- Marketing Plan
- Operational Plan
- Management & Organization
- Startup Expenses & Capitalization
- Financial Plan
The SBA (US Small Business Administration) provides template designs for traditional business plans as well as modern, lean startup business plans with examples to review.
A business plan is still crucial roles in launching an effective and sustainable business in the present. Recent trends and data suggest that the most effective moment to develop a strong plan might be later as it used to. It’s more crucial to begin, test and then secure funds first.
In terms of business plans, there are more templates and more streamlined formats being adapted in order to allow for faster-moving and smaller businesses. Be sure to not let this portion of the process slow you down.
Whatever way you go about it, and who you present your plans to, make sure that someone with experience look over your plan on your behalf.