Business planning gives you a competitive advantage – plain and simple. As a business owner who is just starting, you need a rock-solid business plan. Why is that, you ask? It is true some entrepreneurs make millions without putting a single word to paper but do you really want to run the risk of winging it?
A business plan is a crucial part of any new small business, but it isn’t everything. Other factors that come into play include:
- Good timing
- The drive of the business owners
- The quality of the value proposition
- Business skills and experience
- Plain luck
There isn’t a fool-proof way to create a successful startup. Too many things can go wrong, many of which are outside of your control. A step-by-step roadmap of your next business venture will help remove the element of luck. Planning gives you control over market factors you can influence in your favor and this is what makes business plans so crucial.
How Do You Create a Rock-Solid Business Plan?
There’s more than one way to build a successful business. However, you can increase your chance of success by implementing certain guidelines. There are templates for business and marketing planning that have stood the test of time. Market researchers, business people, and marketing strategy gurus continue to hone them as you read.
Spend some time studying the different sections of the perfect business plan. The more you research before you start writing, the better the outcome.
There are several vital components if you want your business plan to be effective. They include:
- Executive summary
- Overview of the objectives
- Services and products
- Market research
- Competitive analysis
- Financial analysis
- Management team
This section gives details about the goals of your business plan. Think of it as your mission statement. The summary should be short and on-point. Try to include as much specific info as you can, without wasting space.
The purpose of your summary is to hook the reader on your business idea. It will convince potential investors to give your business proposal a chance. Don’t forget experienced lenders read dozens of plans a week. They tend to skip the boring stuff.
Overview of the objectives
Tell the reader what you hope to accomplish with your business. Every company has five main goals:
- Market expansion
- Resource optimization
- Production and supply
There’s a slim chance you’ll think of something new and exciting. A creative spin on these good-old goals is what you should aim for. Tell your potential investors what makes your company more likely to succeed. Don’t forget the most vital detail – how?
Services and products
This is where you get to go into detail about the product line and services your company is going to offer. The services and products section is where you give the reader the essence of your business. Don’t forget to give details about:
- All associated costs
- Supply chain
- Market sector
One important tip to remember is that you should avoid technical jargon. Even if you are planning on starting the next IT revolution, your business plan is not the place to go nerdy. Think about your reader. They probably don’t have all the technical knowledge you do. On the other hand, you want them to get the gist of your idea and why it is as brilliant as it is. It’s a very fine balance.
The products and services section of your business plan is the place to discuss some vital issues. These include similar products, copyright and accreditation, and the lifecycle for your type of business.
Sales are the reason someone would fund your idea. Your potential backers will show a keen interest in this section. Don’t make the mistake of thinking it is the most important part of your business plan, though. The truth is all sections need to work together to give a complete idea of how competent you are.
The sales section is where you get to shine a light on vital questions such as:
How many units do you hope to sell? How many subscribers do you need to turn a profit? Is the goal feasible?
Marketing and sales tactics work hand in hand. The most crucial part of a sales tactic is to define how you’re going to make the sales. Clarify who will bear the responsibility of optimizing your profitability and selling to the target audience.
Potential investors like to know when they can expect a return on their investment. Your business plan needs to show them you care about the timeline as well. Define what goals you’ll have achieved by the first year and the tenth. However, the length of the timeline depends on the type of company, product, and service you’re creating.
A business plan helps you determine how to become a market power. It doesn’t stop there either. You’ve already won over your customers, so now comes the time to grow your audience. Lenders are more likely to back startups with clear potential and a will to grow.
Marketing and sales tend to work together. Before you have a customer at your door to sell your product to, you have to get them to said door. A marketing plan will help you do that. Keep the four Ps of marketing in mind:
- Product: You need to make sure your ideal customer knows your new product or service is better than the competition. Find its unique aspects and exploit them for your marketing campaign. Your product is the face of the new company. Spend enough time on marketing planning and research to reap their potential.
- Place: This is the relationship between your products, customers, and business location. Will you have a traditional brick-and-mortar store? Will you go fully online? How about the production and distribution? Tell your reader how you plan to reach crucial marketing milestones.
- Pricing: Customers love to know the price they’ll pay. It’s not necessary to sell cheap, but keeping prices at a competitive level is a good idea. You have to strike the perfect balance between production costs and profits. The price part of the marketing section in the business plan is crucial for the people with the money. Flesh it out with care to avoid the risk of being rejected.
- Promotion: Marketing is all about getting your brand message out there. Tell your readers about your ad campaign ideas. What channels of communication would you ideally use? How much is it going to cost? What returns on your investments in ads do you expect?
Market Research – Opportunities and Demographics
You might have a genius idea for a product in mind, but think about the scale of a true tech revolution. It’s all great but will people want to buy your product? This is what matters to your investors.
The market analysis section will explain the details. Your task here is to explore how big your potential audience is. Demographics play a crucial role in any business plan. They help you create the ideal customer profile based on:
- Income level
- Various other factors
The more detail you give about your potential customers, the clearer the picture. When you create the demographic profile of your audience, check the statistics. Are there enough people in your area of operation to buy your products and services? Is there room left for growth? Your lenders would like to know about it.
The operations section of your business plan is where you show the people with the money you know what you’re doing. It is the place where you go into detail and length about the logistics of your future business. Tell the reader one more time about your business’s goals and objectives. Explain the methods and procedures that will make them happen. Establish a clear, confident timeline.
The operations section will help you secure funding. It has the benefit of providing structure for you and your employees as well. It stimulates you to think about your strategy and sets deadlines. Investors, creative people, and regular employees work better when there’s a deadline to aim for.
In this section, you dig deep into the market. Competitive analysis will help determine how you’re going to beat other companies in your area. Its role for the investor is to demonstrate to them you know how to do just this.
Competitive analysis can be a long and complex section of your business plan so remember to keep your paragraphs short and your language clear. There are two types of competitors for you to profile: current and future ones.
These are companies and individuals who are selling similar products and services at the current moment. They can be both online retailers and brick-and-mortar stores. If you’ll be running a local business, current competitors are firms in the same area.
Think about everything even remotely related to your competition:
- Their strengths
- Their weaknesses
- Marketing strategies
These details will help you determine who you’ll have to compete against. If you do your job well, you’ll manage to think of a strategy that will bring you success. Make sure you share all your findings on current competitors in the business plan. Other points you have to consider here are how you’ll take a market share from them. The strategy you focus on will determine your startup’s future. It will also convince investors to give you the money you need.
Think About the Future
Don’t forget that once you establish your presence on the market, the competition will respond. Try to figure out how they might do it. Prevention and preparation are the two most effective tools in the competition for customers. It’s always better to know what to anticipate. There isn’t a way to be a hundred percent right here. Nonetheless, the competitors’ response needs to find a place in your business plan.
How To Research the Competition for Your Business Plan
The simple fact is that you already know more about your competition than you expect. If you know your industry and sector, you know the major players as well. So you probably have the answers to most questions for the competition section of your business plan.
A little additional research can’t hurt, though. Here are some strategies and sources you might want to use:
- Online presence. This is the easiest research because you need only a laptop or your phone. Do a Google search to weed out the competition. Examine their market presence – websites, social media, online stores. Also, you’ll probably get some ideas about your efforts in these respects. Best case scenario is that you’ll notice mistakes you’ll want to avoid.
- Go to their locations. If we’re talking about brick-and-mortar stores, get in the car. Check out how they present their products. What sales strategies they use. Try to determine if they work.
- Watch closely the competition’s marketing and ad efforts. The advertising campaign will tell you all you need to know about the company’s financial plan and even more than if you see their income statement.
- Check out the internet about customer response to your competition’s approach. There will be reviews and even opinions on the marketing efforts. Social media makes that type of research easier than ever. Make use of the chance to get to know your competitors and their audiences.
It isn’t easy to predict the market response to your products and services. It is just as hard to guess how other companies and investors will react to your success. One way to do it is to monitor the industry news and the social media response to your market.
There are other ways to predict your competition’s behavior in the future. You should make sure to include them in your business plan. Rest assured, you’ll have to deal with rivals if your field covers any (or a combination of several) of the following:
- High profit margins
- Growing market
- Easy entry into the market
- Low supply, high demand
- Little current competition
Knowing you’re going to face competition doesn’t answer the question of how to deal with it. It does help you to prepare, though.
Use the Essence of Your Research of the Competition for Your Business Plan
You shouldn’t share all details of your research process in the business plan. For that matter, you don’t need to go into the specifics of your findings either. Remember, the key to a good business plan is to keep it short and simple. Your goal is to distill the results of your labors and tell the reader what they want to know. For example:
- Who are your current competitors?
- How is the competition going to look like in the future?
- Why is the competition growing or scaling back?
- In what ways does your startup differ from the competition?
- How would you react if the competition drops out of the race? Will you be able to make use of the chance you get?
- How would you react to new competition appearing on the scene? What is your strategy for dealing with such a challenge?
Everything that has to do with the money of your business goes into the financial analysis. Here is the place to explain how much money you’re going to need to get into the target market. Do you know what operational costs to expect because your potential investors would like to learn? The same goes for the money you’ll spend on growing the new business.
These things will be of great interest to lenders. Knowing the details in advance will help you as well. According to most experts, the hardest part of the business plan is the financial analysis. It can be a considerable challenge to nail it on your own.
Make or Break the Funding Deal
If you want to get the funding you require, you need to demonstrate you understand how money works. Don’t hesitate to consult with your accountant on the specifics of the financial analysis. Other finance pros can also help you flesh out the details of the structure and data you need to write in the business plan.
What Goes into the Financial Analysis?
There are two ways to go around gathering the data for this section. You can look at general estimates for new businesses entering your industry. The other way is to look at the data about existing businesses in the same field and area.
A combination of the two works best. In any case, the elements you should include in the financial analysis are:
- Balance sheets: They account for assumed and expected assets, liabilities, equity, and other business financial statements.
- Profit and loss analysis: It’s a subtraction of the costs of running the business and the financial projections. You do it for a set period, for example, a quarter or a full year.
- Cash flow statement and analysis: Here you need to give details about the money you expect to come into the company. On top of the cash flow from sales, you include the cash expenses you think you’ll require to run day-to-day operations.
- Personal expense forecast: All expenses of your team go here. Include coverage for business loans as well.
- Break-even analysis: It shows the reader the point when sales cover the costs of running the business.
A Few Considerations
Financial analysis is hard to get right. At the same time, it’s not the place where you want to make mistakes. Potential investors are financially savvy people who don’t forgive mistakes of that type. Check and double-check the map before you submit your business plan.
Don’t be shy about asking for help. Go to a financial advisor, your accountant, or a more knowledgeable entrepreneur friend if you don’t have confidence in your abilities. Even if you do, it’s always better to have a second pair of eyes take a look at the numbers. Visuals are the best way to present the data plainly so make use of graphs and SWOT analysis charts.
Manage the Expectations
One of the purposes of your business plan is to get your outside funding. The financial analysis isn’t the place you try to sell your business idea, though. Be very careful about any assumptions you make in the section. The financial analysis isn’t a place for guesswork. Any experienced investor will see-through attempts to oversell your small business. It’s best to just avoid such attempts.
Before you even start drafting that section, read the GAAP and SBA guidelines. The Generally Accepted Accounting Principles will help you write a concise, useful financial analysis. They’ll enable you to present both yourself and your idea in the best possible light. Knowing GAAP will help you with the future bookkeeping of your business as well.
You can expect lenders to spend a lot of time on the financial analysis section. What many people forget is investors care about to whom they give their money. That is why you shouldn’t misjudge the importance of the management team section. It is the place where you list your credentials, as well as the people on your team.
Give details about the experience, education, and track record. A well-written management section can demonstrate to backers what makes your new business unique. It’ll get lenders excited about the prospects of your company.
As Always – Start with Research
You should know all the key facts in advance. Get everything you want your lenders to know about the management team in one place.
Getting their resumes in one place is the first step. It would be a good idea to include them at the end of the business plan. The preparation stage is when you need to notice any discrepancies and blanks. Figure them out with your management team before you write the business plan. It’s best to discuss these questions now than to go unprepared to a meeting with a potential investor.
Management Team – Step One
Give the reader a roadmap of your business’s legal structure. The ideal organizational chart contains:
- Department managers
The more details you include in an easy-to-read manner, the better.Don’t forget to include your biography as well. You matter just as much because you’re the owner and face of the business in front of the investors. When talking about yourself, don’t miss mentioning the percentage of the company you own.
Try to give the info in short paragraphs at first. You’ll have an opportunity to go into detail about the viability of your small business in the second part of the management team section.
Management Team – Step Two
This is the part where you give details about the education and certification of every member of your team. You can expand on the most impressive moments in their work experience as well.
Don’t miss mentioning their (and your) notable accomplishments. These can include not only professional ones but those related to their lives and passions outside work as well.
Management Team – Step Three
Write a summary of what you expect each team member to accomplish. Moderation is the key here. You need to convince the reader you’ve got competent and driven people on board. The text should not sound like a sales copy, either. Steering into the realm of hyperbole is one of the biggest mistakes people make when writing a business plan.
Don’t forget the management section is the human side of your company description. All other sections deal with data, predictions, and analysis. Here you can pinpoint one last time what makes your company unique.
Final Thoughts on the Business Plan Template
Nailing the perfect business plan isn’t impossible if you stick to the business plan template. Avoid the common mistakes people make, for example, don’t oversell in any section. The balance between reasonable expectations and advertising your business for potential backers is crucial. Don’t make the mistake of tipping it one way or another. Many people forget to write concise, easy-to-read paragraphs. Keep things short, and you should be okay.
At the end of the day, a good business plan opens the door to getting funding for your business. Do you have any wisdom to share on the topic? Tell us in the comments.