“Nah, I don’t need to write a business plan, my business does not need one.” This is a how some potential entrepreneurs think about writing a formal business plan.
Many get excited over their business niche and they think that it will attract customers. Ideas are often appealing to the principals, which prompts their predictions of success. Unfortunately for them, ideas are far from reality. This is where writing a formal business plan comes in.
Some who research business-plan writing online often run across business plan templates. But it’s more effective to use software or a good online portal as an aid.
Here are the requirements for writing a formal business plan. I have added concise details to each topic along with some tips.
▶ Executive summary: I recommend you do this topic and the topic of “financial projections” last because this section of a business planner contains a compressed version of most of the other topics listed below. This section is designed to provide a quick glance and the overall business plan summary to help the reader understand the business’s purpose and mission, financial needs and more. In this section, you explain business opportunity, products/services, current business status, financial needs, cash plan and more. It’s important to keep this section concise, clear and to the point yet with adequate content.
▶ Company background (Start from here): This section gives an investor or lender a better idea of who you are and how this business idea came about. Write a description of your company or business, how it came to be, where it is today and where you see it heading. Share how you plan to grow it and success you foresee based on your vision, education history, knowledge and experience. Also include your areas of weakness or inexperience and how you propose to compensate for them.
▶ Products: Describe your products so that the party of interest can clearly understand what you will deliver. This includes an understanding of what the product is, what it does and how it performs its functions. Include details such as research and development, competitive analysis, suppliers and inventory.
▶ Services: Describe your service offerings in the same kind of detail, including details such as service research and implementation, competitive comparison and service offerings.
▶ Industry, competition and market: Specify the industry, competition and your business niche, and why you feel that your products or services can attract customers. Include a definition of the industry, primary competitors, market size, market growth, customer profile and target market.
▶ Marketing plan: Why would a customer buy from you and not from your competitor and how will you reach your target market? This is one of the most challenging parts of operating a business. Selling is hard to do so this section helps you develop your marketing strategy. It helps you understand, assess and plan to connect with your target market. Describe management, organization and ownership, including principals, board and organizational structure.
▶ Goals and strategies: By now, you should have a more defined reality. Specify long-term goals, highlights and strategies you will apply to achieve those goals. Include future plans and keys to success.
▶ Financial assumptions and projections: This section contains a long list of items and this is the first section that most investors, banks and financial institutions review after reading the executive summary. Include items such as income, operating expenses, taxes, assets, liabilities, equity, payment terms, debts, line of credit, balance sheet, profit and loss, cash plan and more.
All this may appear overwhelming but, after you complete your first topic, you will become more equipped to prepare the next topic.
Many people think you need a business plan only when applying for a business loan, but it’s more valuable than that. It’s a blueprint of your business and it’s more beneficial when you write it yourself.
Yes, writing a business plan can be daunting, but those who have written one often feel nourished with the knowledge and gain better understanding about what’s feasible and what needs improving. It’s like building a bridge with the right tools from passion to successful execution. It can also help you understand if you are truly ready to start or grow the business.
Raj Tumber specializes in strategic business development. He has worked with Fortune 500 companies and attained strategic business and management skills. He is also a certified business mentor with SCORE, an organization that helps small business formation and growth. Reach him at firstname.lastname@example.org.