Well, coming up with a business idea is simple. All you need to do is look for them. But… But, turning that idea into reality isn’t easy. For doing that, you need a business plan.
Worry not my friend, in this post I will share everything you need to know about business plans including how to create one.
Let’s get started.
- What is a business plan?
- Why is a business plan important?
- How to create a business plan
- Business plan format (A step-by-step guide to creating a business plan)
- Business plan tips
What is a business plan?
Let’s understand by example; we perhaps create a plan if we need to travel somewhere, that’s called a traveling plan If I’m not wrong.
In that plan, we put all the things on a single paper or digital device related to our trip, like where we will visit, which places we will explore, what will be the traveling cost, etc.
So similar to that plan business plan work, where we put all the information, plan, idea, strategy, goal, vision, mission, etc on paper in a clear and straightforward way.
So it works like a roadmap of the business that guides the founder with a clear vision and data-driven decision. A great business plan helps entrepreneurs with their business goals, how to reach them and how to monetize.
Additionally, it also helps investors and partners with funding decisions, which I have explained in the next section.
Why is a business plan important?
If you want to achieve your business goals, you undoubtedly need a business plan. Why? Because it helps you create a roadmap and guide you toward your goals.
Here are some reasons why a business plan is important:
1. Helps you define your goals
As I said before, a business plan is just like a roadmap that guides you through your business journey. And the first thing it does is define your business. Here’s how:
So, at the beginning of writing your business plan, you are required to think of all the factors of your business. This includes everything from idea validation, market research, target audience, competitors research, business model, marketing strategy, etc that I have discussed in the creating a business plan steps below.
By doing this, you get clear about your business goals and understand its core purpose.
2. Helps you avoid big mistakes
When you create a business plan, you gain an understanding of all aspects of your business. This includes everything from plus points to challenges your business may face, which helps you avoid big mistakes.
Don’t know how? Let me explain:
So when you write a business plan, you analyze and jotted down your entire business. This makes you aware of all the potential threats your business may face.
You also test your assumptions about factors like market demand and clarify your doubts.
All of this helps you understand all the threats to your business and take proactive steps to avoid them.
3. Secure funding
For a moment, if I keep myself as an investor, I need complete business details along with all the things that are required before investing the money. Otherwise, I can’t!
Similarly, your investors need to understand your business before you approach them.
So how can you do it? It’s simple – creating a business plan.
As I mentioned earlier, your business plan tells the investors what your business is, its goals, as well as everything else they need to know. You also inform them about the strategies, and models (Whether business/financial/market) you are going to use.
Additionally, your business plan allows you to consider the necessary funding for your business and the time frame. All of this will help you get funding from your investors more efficiently and smoothly.
4. Helps to set and communicate objectives and benchmarks
You cannot run a business without knowing its goals. This means that your first job is to always clarify your business goals.
That is why you must always try to figure out what your business objectives are.
When you write a business plan, you clarify what you want to accomplish. The goals can be anything from launching new products to expanding the market. This helps you mold your business in the right direction.
Next, the written plan also helps you set benchmarks for when to achieve these goals. By this, it gets easy for you to track and measure your progress.
This overall helps you understand your business goals and track your results to improve them.
5. Helps you create effective strategies
See, a business plan is not just about gathering business information and documenting them, It’s about creating a blueprint of the plan of action and developing effective strategies based on gathered data.
As I said earlier (Which I can’t repeat 🙂again), the plan helps you define your goals, identify your audience, analyze offerings, make financial projections, etc. Plus, it also gives you information about your competitors and your market.
All of this helps you identify your challenges and develop strategies.
6. Helps you identify risks
Risks are the only thing that, if not avoided at the right time, can break your entire business. That is why, as an entrepreneur, you must be aware of all the risks of your business.
How can you do that? Well, your business plan helps you do that as well (multi-talented, or what:-)
The plan you create gives you a complete picture of your business and its positions. By this, you easily identify the roadblocks of your business and decide how to avoid them.
Furthermore, the plan also brings information about your market, giving you an idea of your future conditions. This overall helps you avoid all the risks and roadblocks.
7. Helps you better understand your business
Creating an effective business plan would require you to sit down and carefully think about all the aspects of your business. This would include your business’s target market, audience, and major competitors.
Furthermore, when you write your business plan, you get clear about your goals and start thinking about your sales strategy, marketing strategy, and pricing strategy.
You understand who your customers are, what they want, and how to serve them, to achieve better business results.
This overall will help you gain deeper and a better understanding of your business.
How to create a business plan
Having a business idea and starting a business is a dream! And now comes the part that will help you make your dream come true – Creating a business plan.
Yes, creating a business plan can be intimidating. But don’t worry, in this section, I’ll guide you through everything about creating a business plan right from the beginning to the end.
First, let’s get some ground rules straight about creating a business plan, for a kickstart.
Know what your product or service is
Before taking any step towards creating a business plan, you must first ensure that you know what product or service you sell.
I know it may seem too obvious, but most entrepreneurs skip this part thinking they already know it. However, knowing about your product or service does not only mean knowing what it is. You must also know all its features and benefits, target audience, market, and so on.
Know who your target is
You might hear this quote “The most important element in developing a successful marketing campaign is having a very clear image of your target audience.”
So, knowing who your target audience is is crucial for your business.
It is just like aiming the bull’s eye, you can’t hit it if you have no idea where it is.
That is why you must know who your target audience is, demographics, behavior, interests, and so on. This will help you create a business plan that aims directly toward your target audience.
To know and research the target audience, you can take the help of Semrush. Which I’ve explained here, how!
Have a clear goal
Your business needs a clear direction to run smoothly. Not sure how to provide it? Well, it’s simple – have clear goals.
So when you have clear goals, you know what, when, and how your business wants to do something and get clear about the main focus of your business. You understand what your business currently needs and how it can be achieved.
We all know that we cannot create a business plan if we don’t know what our business is. That is why you must research all the aspects of your business before creating a plan.
The research will tell you what your business is, what it sells, in what industry it sells, who the target audiences and competitors are, etc, about your business. You’ll also learn about the new trends in the market, opportunities and challenges, and the strategies to use.
Furthermore, you will also be able to make proper financial projections to ensure smooth cash flow.
Once you’re done with understanding all these rules, it’s time to create your business plan.
Business plan format (A step-by-step guide to creating a business plan)
Now that you’ve learned what to do before creating a business plan, it’s time we actually learn to create one. Nice.
You see, a business plan is not just about simply writing and creating a document. For doing it, you need to create a proper outline in the first place, to include all the necessary parts.
So, when talking about writing a business plan, we can mostly categorize them into two types or formats:
Lean startup plan – Lean startup plans are generally short and quicker to write. They include key elements only and lack complete information. Because of this, companies using this type of plan must be ready to provide additional information to the investors, when asked.
Traditional plan – Now these are the types of plans that are quite opposite to lean startup plans. Traditional plans are lengthier plans that contain all kinds of information about the business. Most companies prefer this plan format as they are more detail-oriented.
Well, because traditional plans are the most common type of business plan, I’ll use this format and outline as the standard business plan type.
1. Executive summary
Now this is the first and most important section of your entire business plan. In this section, you share a snapshot of what your business is, with the investors, and summarize your key points of the plan.
When your reader starts reading your document, he must instantly get an idea of your plan and get interested in it. That is why the executive summary is the first section as it provides short and compelling content to the readers.
Just remember, that your executive summary must not exceed more than two pages.
Not sure what to include in an executive summary? Here’s a list:
- Business concept – Explain exactly what your business is and how it works.
- Mission and vision – Explain your business goals and the problem you are trying to solve.
- Target market – Explain the exact customer base you are trying to target.
- Product Description – Explain exactly what your product is and how it differentiates from the competitors.
- Marketing plan – Explain your strategy to reach your target audience.
- Financial overview – Communicate your current and your projected earnings to the readers.
- The ask – Let them know how much money you are asking for.
- The team – Information about the people included in the team.
2. Company description
Well, you might have guessed by the name what this section is about – An overview of your company.
This section is your chance to tell investors what your company is and catch their interest.
You can start by writing about all the basic information about your company. This includes company name, location, legal structure, etc. Next, try to talk about your team members and their skills and qualifications, to help investors understand your management team.
You should also write about your company’s mission statement. This will let the investors understand your company’s purpose.
Finally, highlight all the factors that differentiate your company from its competitors.
3. Market analysis
Running a business is not easy! It requires you to execute each step properly, and along with executing, you must also have knowledge of every single thing about it. How can you do that? By doing market analysis.
Performing a market analysis is not any hard. You can start this analysis by researching your competitors. Just try to check what they are doing and who they target. You can also learn about their offerings and strategies to spy on them.
Next comes your customers. Now you need to learn about your potential customers and understand their needs and preferences.
Your final job is to research your market. Try to learn about your market including the trends, technology, size, and so on.
All of this helps you understand your market.
4. Product or service
In this section, you tell your readers what your product or service is.
Just start by explaining what you’re selling, its benefits, and its features. Also, try to talk about what makes your product or service unique. Next, find the best price for your product or service and how to sell it.
Moreover, your audience will have their own needs and wants. So you can increase your sales by learning their needs and giving them what they want. Nice.
Finally, also talk about improvements you might make to your product or service in the future.
In short, this post is all about disclosing everything about your product or service.
5. Marketing and sales strategy
Well, well, well, now that we have checked all the basic steps of a business plan, it’s time we get to the actual game – Figuring out how to market and sell.
In this section, you must mention the ways and strategies you will use to market your business and get your sales up. Also, try to talk about how you are going to increase customer loyalty and retain them.
My one best tip for this section would be to properly understand your customers’ needs. When you do that, you mold your offerings in the right direction and give them what they need.
6. Operations plan
Your next step is to create your operations plan. This step basically means you need to outline your day-to-day business activities and how they will work.
This includes everything right from the beginning to the end such as the production process and inventory.
Your first step for creating an operations plan will be to define your business model. From this, you get an idea of how your business will work and its day-to-day activities. You can break those activities down to understand each step and the tools and resources required for them.
The operation plan you create must be an effective plan that supports efficiency and can be easily adapted to growing business changes during the time of expansion.
You’ll have to include:
- Equipment – Mention the tools and technology your daily operations would require.
- Inventory – Decide the amount of inventory you’ll keep as in hand and where to store it.
- Facilities – Decide where you and your team will work.
- Suppliers – Decide from where you’ll be getting your raw materials.
- Production – Determine your way of production and how you are going to handle the shipping and delivery.
7. Financial projections
In the next step, you need to make proper financial projections for your business.
Not sure what it is? Well, financial projections are the projections you make about your future revenue and expenses, to understand the positions of your business.
The financial projection includes the income statement, balance sheet, cash flow statement, etc, which help you in analyzing revenue, expenses, and cash flows.
Remember you’ll need to think realistically as unrealistic and overestimated projections can put you into a tough financial position.
Plus, consider all the unplanned challenges your business can face in the future. Such challenges can be unexpected changes in the market, a rise in competition, and business losses.
Finally, these projections are not the reality of your business’s financial health, and just try to update your projections as your business grows.
8. Funding requirements
Now comes the part where you’ll be clearly mentioning the funding requirements of your business.
In this section, you tell your investors the amount of funding you need to get your business up and running and how you’ll be using it.
Start by considering all the expenses associated with starting your business. This includes anything from your office rent to salary expenses for the employees you plan to hire
Once you make your proper estimate, your next job will be to determine from where you need those funds
The source of your funding can be anything from small business loans to raising funds from venture capitalists or angel investors.
Finally, clearly specify whether you need debt or equity, and bring out every other terms and conditions you need to apply. You’ll also have to give a detailed description of how you are going to use these funds and all your strategies.
An appendix is the final section of your business plan that is used to provide additional information and support the content presented in the above sections.
In this section, you can include all your supporting documents which include your financial statements, product pictures, resumes, legal documents, letters of reference, patents, and other relevant documents.
You can use headings and subheadings to organize your appendix and make it easier for your readers to navigate through each section of documents.
Just remember to include only the important and most relevant documents that support the content mentioned in your business plan.
Business plan tips
Now that you’ve got a full understanding of how to write a business plan including the steps to involve, it’s time for you to complete your knowledge with some final tips.
1. Be clear and concise
Well, the most important business plan writing tip I can give you is to be clear and concise.
The people or let’s assume investors who read your business plan may not always have the deep knowledge of your industry as you have.
Also, initially, investors won’t give you much time while pitching as they prefer straightforward information.
That is why, you should always try to avoid complex language or jargon.
2. Perform in-depth research
Well, there’s one simple reason why research is important in a business plan: It informs.
When you put your glasses on and start performing research, you come to know about things you wouldn’t have known otherwise. This helps you understand your business and develop strategies.
3. Be objective
Being objective in your research is another key tip you need to consider for creating an effective business plan.
When performing your research, instead of relying on personal biases and assumptions, try to gather data from various sources to build a proper opinion on certain factors.
Furthermore, also try to show both the good and the bad sides of your business and its condition.
This will help you win the trust of your readers.
4. Clearly demonstrate the differentiation
If your business is based on a product or service that has a lot of competition, you’ll need to focus highly on clearly demonstrating your differentiation.
Try to make your points clear and explain how your product or service differentiates from the competitors, their features, benefits, unique selling points, and so on.
5. Learn from entrepreneurs
You don’t always have to do everything yourself.
Learning what other entrepreneurs do and then creating a business plan is always smart:-)
6. Have proof to back up your claim
It’s extremely important to include evidence in your business plans to back up every claim you make.
Regardless of the points you are trying to make, providing documents to support those points can help you prove what you are trying to claim.
7. Don’t be afraid to change it
It’s not like that once you create your business plan, it will be the same for your entire business life.
Businesses are created to grow, and as your business grows, you’ll have to make changes to your business plan as well.
Just be sure to always revisit and rework your business plan every time your business grows.
What are the four C’s in a business plan?
The four C’s in a business plan stands for – capabilities, capacity, constraints, and culture.
What are the elements of a business plan?
The key elements of a business plan include:
Marketing and sales
Product or service
What is the purpose of a business plan?
The main purpose of a business plan is to identify, analyze, and define a business, including its opportunities and challenges, and financial conditions.
So there you have it, mate! The guide to creating a business plan.
Now that you know everything about creating a business plan, from start to end, it’s your turn to do the job. Perform your research and start writing your effective plan.