7 Steps To Writing A Business Plan
Learn how to create a solid professional business plan with the help of this step-by-step article, which will assist you in starting your company, obtaining money, and expanding it. A business strategy need not be difficult to write. To create a successful company strategy, you do not need a business or accounting degree. Planning a business can be easy and even enjoyable.
Small business entrepreneurs frequently utilize business plans to assist and guide them rather than putting themselves in a situation where they might need to pause and ask for directions or even go back and start over. That is because they increase their chances of success by assisting them in planning ahead, seeing the wider picture, and making crucial decisions.
This article will explain how to carry out your plan without difficulty or annoyance. When you are through, you will be better equipped to launch, manage, and expand your company
Why is a business plan important?
A well-written business plan is a crucial tool since it enables entrepreneurs, small business owners, and their staff to outline their goals and monitor their success as their company expands. When launching a new firm, business strategy should come first. Business plans are crucial for attracting investors because they enable them to assess whether your company is headed in the right direction and is worthwhile of their capital. Detailed information that can increase your company’s chances of success is generally included in business plans. Examples include:
- A market analysis: collecting data on the elements and circumstances that influence your industry
- Competitive analysis: assessing the strengths and weaknesses of your competition
- Customer segmentation: To better your marketing, categorize your customers into separate categories depending on certain traits.
- Marketing: using your research to advertise your business
- Logistics and operations plans: deciding on and conducting the most effective production strategy
- Cash flow projection: being ready for the money coming into and leaving your firm
Reasons why you need a business plan
An essential and strategic tool for entrepreneurs is a business plan. A solid business plan assists entrepreneurs in focusing on the procedures required to realize their business ideas as well as in achieving both short- and long-term goals.
- To help you with critical decisions
The main benefit of a business strategy is that it aids in decision-making. Making decisions and handling crises is a constant practice in entrepreneurship. Small businesses may lack the resources to take the time to sit down and carefully evaluate all the effects of a particular action. Consequently, a business plan is necessary.
Making a business plan enables you to decide in advance on some of the most important company decisions.
- Business planning is proven to help you grow 30 percent faster
The goal of writing a business plan is not to provide a forecast of your company’s future. What is crucial is how you write your plan. You will have a better understanding of what you must do to succeed and reach your goals if you write down your strategy and consistently review it.
Business planning entails creating goals regularly, monitoring your progress toward those goals, and adapting your company as you gain more insight into your clients. According to studies, businesses that frequently plan and evaluate their performance have a 30 percent higher rate of growth. Research demonstrates that businesses with plans experience faster growth. They are less likely to end up as one of those dreadful failure statistics or to face a cash flow crisis that could force them to close.
- Having a business plan minimizes your risk
When you first start, you do not know a lot about your customers, your competitors, or even operations.
As a business owner, you accepted part of that risk when you launched your enterprise, but there are several things you can do to lower your risk. A fantastic way to identify your weak points, weaknesses, gaps, and assumptions you have made and prepare contingency plans is to regularly create and review your company plan.
- It’s a solid foundation for strategic planning, prioritization
A fantastic location to map how your sales and revenue targets align with your spending budget is in your business plan. You can ensure that you are putting yourself in the best possible position for success by making a clear connection between the investments you are making and the outcomes you want to see.
Having a team that is on the same page is easier when you have a business plan. You will be able to clearly explain how you plan to move from one place to another.
Rallying your team to align toward the same priorities will increase your efficiency. You want everyone on your team to see the big picture and understand your larger goals. You need their buy-in from the beginning, and as you progress, you want to make it easy to track and communicate on your progress.
If everyone on your team knows how their piece of the work impacts the larger company, the more invested they will be in meeting your goals because they will know their part of the work matters.
- You can use it to define realistic objectives and benchmarks.
A business strategy is far less valuable if no goals or milestones are included in it. You will struggle to get your team focused on the same priorities if your company’s and team’s goals and milestones are not in line with the strategy you described in your business plan.
Use your business plan to establish important benchmarks. After that, make goals that matter and use them to direct your sales and marketing tactics.
How to write a business plan step-by-step
Every business plan needs to have six key elements, regardless of whether you are writing one to attract investors, expand your company, or simply determine the viability of your idea. An outline of each section is given below:
- Executive summary:
The executive summary provides a summary of your company and your goals. It should only be one to two pages long and appears first in your plan. Though most people write it last.
The executive summary should ideally serve as a standalone document that summarizes your comprehensive plan. When analyzing your firm, investors frequently request merely the executive summary. If they are pleased with what they read in the executive summary, they will frequently ask for the whole plan, a pitch presentation, and more thorough financials.
- Products & services:
The core of your company strategy is found in the chapter on products and services. It contains details on the issue you are attempting to address, your proposed solution, and how your good or service fits into the current competitive landscape.
Start the products and services chapter by outlining the issue you are resolving for your clients and the nature of your approach. this is a summary of what your business offers.
The next step is to describe your competitors. Who else is attempting to address the issues that your consumers have? What distinguishes your company from rivals in terms of competitiveness?
This chapter is an excellent area to discuss any competitive advantages you may have, such as unique intellectual property or patents that protect your goods.
Review your metrics and milestones to finish. This is a list of the following actions you must take, along with deadlines, to prepare your product or service for sale. Discuss any significant accomplishments you have previously made here, such as acquiring an important client or accepting pre-orders.
- Market analysis
You will present all the details about your potential consumers in this part. You will talk about your target market and the development of your market and industry.
Describe your target market first. The population you intend to sell to is your target market. Be as particular as you can. Having a clear target market will make it simpler to develop a sales and marketing strategy that will appeal to your target audience.
Next, present whatever market research and analysis you may have. You should describe how your market is expanding over time and how your company is set up to benefit from anticipated developments in your sector.
- Marketing & Sales
Your business plan’s marketing and sales section explains how you intend to reach your target market segments, how you intend to sell to them, what your pricing strategy is, and what kinds of initiatives and alliances you will require to succeed.
Some companies that distribute their goods and connect with their clients via retail channels like jumia.com, Konga, Jiji, and others should assess this aspect of their operations. The strategy should cover the costs and logistics of getting products onto shop shelves as well as any obstacles that the company might face.
- Company organization and management team
Along with brilliant ideas, investors also look for strong teams. Describe your present team and the people you need to hire in this chapter. If you currently have a business and are already established, you will also give a summary of your location, history, and legal structure.
Include succinct biographies for each important team member that highlight their pertinent experiences. Making the case for why the team is the best team to put an idea into reality is crucial in this situation. Do they have the necessary background and industry experience? Do team members have a history of entrepreneurship success?
- Financial projections
Entrepreneurs frequently find this to be their biggest challenge, but it does not have to be. Most businesses’ financials are simpler than you might assume, and you do not need a business degree to create a reliable financial forecast. there are many tools and resources available to support you in creating a strong financial plan if you require more assistance.
A typical financial plan will include:
- Sales and revenue projections
A 12-month sales and revenue forecast, followed by annual estimates for the following three to five years. Most investors prefer five-year forecasts, while others will accept three-year expectations.
- Profit and loss statement
Your financial information is compiled in an income statement, sometimes referred to as the profit and loss (or P&L), which reveals whether you are in the black or red.
- Cash flow statement
The cash flow statement tracks how much cash (money in the bank) you have at any given time, whereas the income statement determines your profits and losses.
- Balance sheet
Your company’s assets, liabilities, and equity are listed on a balance sheet. It offers a quick snapshot of your company’s financial situation.
Finally, discuss any suppositions and significant business risks before concluding. Understanding your presumptions as you launch a firm can mean the difference between success and failure. Once you are aware of your assumptions, you can go on the offensive to support them. Your chances of running a successful business increase as you reduce your assumptions.
By no means is the appendix to your company plan a compulsory chapter. It is a good idea to put any charts, tables, definitions, legal notes, or other pertinent material here if it would feel out of place or unwieldy to do so elsewhere in your business plan. This is the place to mention any patents, patent applications, or product illustrations you may have.