What is a Business Plan, How to Create a Business Plan?
A business plan is one of the most critical documents for a new business. It describes the future of your business by explaining what you plan to do and how is your plan to succeed. A well-created plan guides your business and key stakeholders during the execution or growing phase regarding the dimensions and targets. It demonstrates your management, investors, lenders, or potential partners. From this aspect, a successful start-up or expansion of business doesn’t come without a well-created business plan. In this article, we will discuss the essential steps to write a business plan.
What is a Business Plan?
Before starting a new business, most probably you have planned all the critical items in your head to make convert your small-scaled enterprise into a big corporation. However, there will be many problems issues along the road that has the potential to obstruct your success. The best practice is to create a plan to face such problems before making an investment.
Simply put, a business plan is a strategic document that describes the current status of your business, your resources, targets, abilities, and plans where you will be in the future and how you plan to get there.
To put it all in simple terms, a business plan demonstrates how you will proceed from point A to point B in five to ten years.
Although key aspects of this plan are easy to understand, you need to follow some basic steps to create it.
How to Create a Business Plan?
If you have never tried it before, creating a business plan may look a bit complicated at the beginning. However, there are some basic steps that make it easier to write. Here below the steps to writing a business plan.
1. Executive Summary
As the name suggests, the executive summary is a short summary section that explains what your business does, where your business currently stands, what is the plan for the near future, and how you will proceed.
The executive summary section can be organized as follows;
- Mission Statement
- General Information for the Company
- Highlights and Key Milestones
- Products and/or Services
- Financial Information
- Plans for the Future
The main purpose of this section is to provide brief information regarding the company, products, and plans. It will be better for you to write this section once you have completed the whole plan by using the inputs of the following pages.
2. Company Description
Company Description is the second section of the plan which provides a quick description of your ownership structure and the explanation of your marketplace. In this section, explain your business and the industry of your company, provide a general overview.
3. Market Analysis
In the third section of the business plan, you provide an in-depth analysis of your industry, market, and competitors. Unlike the first two steps, the marketing plan is a comprehensive step that provides detailed information regarding the market you are serving.
The market analysis section should involve below information;
- Description of Industry
- Description of the Target Market
- Characteristics of the Target Market
- Size and Growth of the Target Market
- Market Sharing Potential
- Market Pricing Potential
- Potential Barriers
- Potential Competitors
Note that the market analysis section should include detailed information and a market overview. You need to make enough market research to understand the market characteristics and potential competitors. You can check the SBA‘s guide for market research and competitive analysis at this stage.
4. Management and Organization
In this section, you describe your company’s management and organizational structure.
This section should involve below information;
- Organizational Structure
- Ownership Structure
- Background of Management Organization
You explain the current organization structure and personnel to be hired if needed. Also, explain the background of your key personnel to demonstrate if you are capable of achieving the targets.
5. Products and/or Services
Products and services are one of the most important sections of your business plan where you describe the current status of your products and future plans in detail.
The products and services section should involve below information;
- Description of your Products and Services
- Current Status of your Products and Services
- Research for Product Development
Give the details of your products and explain how they will fulfill the requirements of the customers. If the product is still in the ideation phase or needs improvement, explain the steps for development, improvement, and research.
Finally describe the project procurement management system, vendors you need to create the product, and give information about the inventory if you need it.
6. Marketing and Sales Plan
In this section, you will explain how you’ll pull the customer’s attention and sell your products in the market. Explain the methods to reach customers such as by advertising or promotion. Also, detail who will be selling the product.
7. Financial Plan
The financial plan section demonstrates your current financial status and involves projections for the future. If you don’t have any financial data of your business, provide just projections.
This section should include;
- Projected Income
- Cashflow Forecasts
The financial plan section should provide the needed funding amount for the investors. Thus, they will understand how much they will support the business.
This section provides supporting information such as charts, notes, reports, and further researches. You may attach resumes and additional information corresponding to each section.
Tips for Writing
Below tips may be helpful to write an effective business plan.
- Research and Analyze
In order to write a good plan, you should be aware of everything regarding the product, market, and customers.
- Do not keep it too long
In general, potential lenders and investors don’t like to read long and complicated documents. It will be better for you to keep the document length at an optimum level.
- Optimize it for your audience
While creating the plan, keep in mind your potential audience and give provide them what they need. For example, a lender may be more interested in financial projections rather than the technical features of the product.
You need a business plan whether you start a new business or expanding your current business. Simply put it creates a roadmap explaining what you plan to do and how you plan to win through. In this article, we discuss the key aspects of a business plan and show how to write a business plan step by step. If you have ever created a business plan, you can share your experiences through the comments section below.
Irwin Michael Reston is an expert who has more than 30 years of experience in optimizing businesses, inspiring individuals and improving human resources departments. He established the BlueLight Consulting Limited to provide learning and training service worldwide.