Creating a business plan isn’t as complicated as many make out. A well-documented prospect is kept short and simple, enough to only communicate your pitch, whilst stating your long-term objectives and strategy analysis.
Your goals should set out a specific target for the future (usually in 3 – 5 years), which includes your profits, assets, and resources.
To find out how to put together an effective business plan, then read on for more information.
Why you need to write a business plan:
If you are looking into a start-up business, then you should definitely consider writing a business plan. Many think that a plan is only beneficial for trying to get loans or funds, however, clarifying your business down on paper can actually have many other advantages:
- Your plan will help to define business goals, like product launches, website traffic, and sales; it will give clear direction.
- Interruptions and daily routine can knock you off course in strategy, so a plan will help you stay on the right path.
- Make calculated forecasts with sales, business processes, promotions and potential target markets.
- Use the document to track milestones and deadlines.
- Organize schedules for marketing or product releases.
- It grounds your idea and gives your business much stronger foundation.
As you can see, there are plenty of psychological benefits, as well as higher accuracy in hitting targets.
Planning your business plan!
Writing the plan itself needs planning, even more so, if you are planning on getting finance for your new business idea – an investor will turn you down if felt the business is too risky.
The documents are a simplistic form, however, writing one can be a very complicated process.
Take into consideration that it will contain strategy on decisions, along with growth forecasts and sales targets.
Why is it always important to start with a business plan?
As it can be a lengthy process, you don’t want to find yourself writing one after you begin operation – you need to maximize time to generate income, otherwise, you may fall behind and be very stressed.
However, with a solid business plan, you are far more likely to grow your investment at a steady pace – similar to a pirate reading a treasure map.
Let’s take a look at a step by step guide on how to create a business plan, included is a link to many different free downloadable plan templates (Step 3).
Step 1# Finding your goals
This section requires the most imagination. Reflect on what your business will look like in five years:
- Would your business increase in size?
- Will your company become a dominant monopoly?
- Or maybe it’s for short-term gains so you can sell and retire early?
Be specific with your goals – how much will you be turning over per month?
Have fun with this, and let your mind be free – nothing is impossible.
Try this exercise to get your ideas flowing:
Write a letter to yourself in 5 years’ time, telling yourself what goals you should have achieved.
When writing your financial goals, you need to take these factors into account:
Deciding on a source of finance:
If you are starting with nothing, then look into a business bank loan, equity sales or a partnership, in order to get the start-up funds.
Calculate how much money you need
How much stock do you need to buy? Will you need commercial premises? The cost of daily running operations?
Open MS Excel and list all your costs into a table. If you face very high costs, then consider a Venture Capital Investor or finding someone with money to come into partnership.
If you take on a partner or even an investor, then you may lose complete control of running your own business. Before agreeing to anything, you need to always know the terms and what you could be sacrificing.
Generally, this is what you can expect:
A partner may wish to control a portion of your company, leaving you restricted on how its run (unless they are a silent partner).
They can object to management decisions, especially if they feel their investment is under threat – but have no power for the day to day running.
They only care that you make payments and obeying their terms, but they do have the power to unplug your finances if unhappy.
Use a comparison service (as linked in sub-title) to find the best business loan deal.
These can vary, and are either full on or not seen for dust – ensure you are thorough with their conditions.
Once you have begun writing ideas down, you will have a fair idea of how much capital you need, the type of financing required, and where you see your business in 5 years.
2# Choosing a type of business plan:
Business proposals come in many forms, all depending on your intention e.g. Is it to secure a bank loan or for your own route to success? Let’s take a look at each type of plan.
Business Plan for loans, banks and investors (the standard)
What used to be a document consisting of pages and pages, has now evolved to being a short pitch with figures and evidence for its probability of succeeding.
It should contain the following information:
- The service or product pitch.
- Analysis of your intended target market.
- Marketing strategy.
- Financial projections include an expense budget, sales forecast, balance sheet, cash flow, profit, and loss analysis.
- Management and staff setup.
- Milestones and objectives (as covered in step 1).
- Information on your company and background.
The order of each section doesn’t matter, as long as they are all included.
This is crucial for when writing a business plan for money lenders; they need the confidence that you’ll pay your bills and have money in the bank – otherwise, the lender may see your venture as too risky!
Highlight the most significant points from your business proposal, which should forecast monthly projections in your first year, along with annual projections for year 2 & 3.
Do this section last once you have written the rest of your document, however, it’s customary for it to be placed at the beginning.
The company business plan
This type of plan is used for management on business strategy, activities, cash flow, deadlines, and dates. Overall, this means the document is much less formal and doesn’t have to include descriptions, summaries, and other background knowledge of the company.
As it’s kept internally for reference, employees will already be informed of these details.
A company business plan focuses on these 4 elements:
- Setting up a strategy
You can write these as bullet points, which needs to have a clear target market, business brand, objectives, and business offering.
- Key figures
Displayed in graphs or charts, this presents data for cash flow, sales forecasts and spending budget.
Your business plan is never finished, it will always need revision and updating regularly.
- Specific data
A bullet point list of target measurement, analysis of performance, tasking duties and milestones.
- How to execute strategy
Again, with bullet points, you need to state your marketing strategy:
- Social media
- Business website
- Packaging or delivery
- Promotional launch days
Additionally, if applicable, you may add training and recruitment needs.
Start-up Business Plan
This is written before any business is put together, and you are in the beginning idea stage. It will have the characteristics of either a formal or informal plan, depending on how you finance your new start-up.
However, a startup plan is making predictions and going on assumptive numbers – you will also need to add in the costs of starting your business:
- Any resources or assets you need to purchase.
- An inventory of everything you require.
- Equipment and vehicles.
- Office equipment.
- The current balance of your business account, along with credit rating.
These are the 3 most common types of business plans, however, there are a variety of other types of plans available e.g. a 1-page Business plan, internal plan, feasibility plan, annual plan, operations plan etc.
Once you have an idea of what plan to write, you will then…
3# Action your business plan
In other words, you are ready to write your proposal. You will need a computer/laptop and a word processor (MS Word) – if you are no good with layouts, then you can download an online business plan template and simply fill in the sections.
4# How to create a marketing plan
Before you get started on writing about your marketing strategy, you will need a bit of preparation, and to obtain the following:
- Information on your target
- A listing of all your services and products.
- If applicable; data of all your employees.
- All of your most recent financial reports; operating costs, profit, and loss etc.
- Thorough understanding of your market; for example, types of customers, distribution channels, geographical boundaries, demographic information and market trends.
- If applicable; seek your customer relations/sales employees for their opinion on the annual marketing plan.
Current marketing situation
You will need an up to date analysis of your target market.
You need to research the following:
- Have your products sold well in the past?
- Describe your target audience; income levels, demographics, population level etc.
- What size is your industry?
- Analysis of your competitors.
- The setup of your distribution and sales.
- Are you focused on one geographical location?
Don’t just look for opportunities, include market risks too – are there any ominous competitive market trends? Is the demographics beneficial or against you? Any trends that can put you out of business?
The quickest way to keep up with your market is by following both industrial and consumer blogs, as well as visiting the most popular forums and websites.
Believe it or not, there are still ways to effectively research without the internet (even if it does save a lot of time). You can seek out local business reporters, business publications, associations of manufacturers, and local chambers of commerce publish projections.
6# Goals should be figures and not generalized
This is where you have to think forward and set your goals – don’t be vague, use precise figures e.g. you want to capture 8% of your market in 2 years. If unsure of your market size, then use dollar figures.
How to set a business goal
If you have past sales figures, then you have the benefit of using this as a template for future forecasts e.g. if over 5 years you have accumulated 80% in gross revenues, then 20% – 25% would be a realistic goal.
If you have no previous sales records, then always start with a low and modest target, until you warm more to your playing field. Also, keep the number of marketing objectives minimum too, as not only can it defeat morale by missing them, it can ruin productivity for you and your staff.
Slow and steady wins the race!
Goals can come in the following categories:
- Higher sales for a particular product.
- The introduction of a new product or service to your market.
- Increase marketing for an existing product.
- Cross-selling a number of products or services.
- Higher profitable clients who provide long-term contracts.
- The business entering new territory.
As you can see, there is a huge amount of data you need, in order to complete a desirable business plan.
The main thing is to be precise with details, knowing the exact realistic figures of what you want to achieve, and making your goals challenging but not unrealistic.
Be prepared to alter your business idea, as the thorough research conducted may show you faults or things you didn’t take into account.
Never let this put you off though, it just means you need a different perspective to your business, which will fill the gap that your competitors left.
<Link to sample Business Plan PDF will be here shortly>