How to Start a Business – #4 Why you need a business plan and how to design one

A business plan is a necessity if financing is from external investors and/or financial institutions. However, it is still an essential need if you are self-financing, as it helps you figure out how much money you will need to get started, what you need to do and where you are headed.

A business plan is a formal statement highlighting your goals, justifications/proof that your goals are attainable, and plans for reaching them. It sometimes also contains background information about your organization and your team. A business plan should not just be a document that you create to get a loan but it should serve as your journey plan to attaining your desired goals for your business.

In fact, your business plan does not have to be a formal document at all if you don’t need to present your plan to outsiders. Instead, your plan can follow a lean planning process that involves creating a pitch, forecasting your key business numbers, outlining key milestones you hope to achieve, and regular progress checks where you review and revise your plan.

Why You Need a Business Plan

Any business hoping to raise funds, either with the help of loans or through venture capital, needs a plan. If you show up at the bank to ask for a loan, all the decision-makers will want to see your business plan. Investors will like to know that you are organized and informed and that you have a strategy to help them realize a return on their investment.

However, you can benefit from a business plan beyond raising money. Even if you aren’t currently looking for funding, you’ll be glad to have a direction when you are trying to figure out what your next step should be. The market analysis section can help you clarify your efforts so you focus on just the right thing to find your niche and exploit it.

In a business plan, a good business description can help you stay on track, while sales strategies can remind you of how you plan to increase your revenue. Your business plan is about organizing and planning ahead so you have the lay of the land and are ready to build your business in a way that makes sense. When you face uncertainty and you aren’t sure where to go next, your business plan can provide you with the guidance you need.

Elements of a Business Plan

1.The Executive Summary:

The executive summary is basically the elevator pitch for your business. It distils all the important information about your business plan into a relatively short space. It’s a high-level look at everything and should include information that summarizes the other sections of your plan.

One of the best ways to approach writing the executive summary is to finish it last so you can include the important ideas from other sections.

2. Company Overview:

This is your chance to describe your company and what it does. Include a look at when the business was formed, and your mission statement. These are the things that tell your story and allow others to connect to you. It can also serve as your own reminder of why you got started in the first place. Turn to this section for motivation if you find yourself losing steam.

Some of the other questions you can answer in the business description section of your plan include:

  • What is the business model? (What are your customer base, revenue sources and products?)
  • Do you have special business relationships that offer you an advantage?
  • Where are you located?
  • Who are the principals?
  • What is the legal structure?
  • What are some of the market opportunities?
  • What is your projected growth?

Answering these questions narrows your focus and shows potential lenders and backers how you’re viewing your venture.

3. Market Analysis

This is your chance to look at your competition and the state of the market as a whole. Your market analysis is an exercise in seeing where you fit in the market and how you are superior to the competition. Review our edition of industry analysis for more information on market analysis and industry research.

4. Organization and Management

Use this section of your business plan to show off your team superstars. In fact, there are plenty of indications that your management team matters more than your product idea or pitch. Investors want to know you have a competent team that has the grit to stick it out. You are more likely to be successful and pivot if needed when you have the right management and organization for your company. Make sure you highlight the expertise and qualifications of each member of the team in your business plan. You want to impress.

5. Sales Strategies

How will you raise money with your business and make profits a reality? You answer this question with your sales strategy. This section is all about explaining your price strategy and describing the relationship between your price point and everything else at the company.

You should also detail the promotional strategies you’re using now, along with strategies you hope to implement later. This includes your social media efforts and digital and traditional marketing ideas. It should show how you use your sales force, leverage on peer groups and associations, networks and mentors to help raise your brand awareness and encourage people to buy or sign up for your products or services.

Your sales strategy section should include all information on how you aim to leverage technology. You want to show that you’ve thought about this, and you’re ready to implement a plan to ramp up sales.

6. Funding Requirements

Here’s where you ask for the amount of money you need if sourcing for finance. Make sure you are being as realistic as possible. You can create a range of numbers if you don’t want to try to pinpoint an exact number. Include information for a best-case scenario and a worst-case scenario. You should also put together a timeline so your potential funders have an idea of what to expect.

This will also contain detailed financial position of your company and the capital investments that you are seeking for.

7. Financial Projections:

Finally, the last section of your business plan should include financial projections. Make sure you summarize any successes up to this point. This is especially important if you hope to secure funds for expansion of your existing business.

Your forward-looking projections should be based on information about your revenue growth and market trends. You want to be able to use information about what’s happening, combined with your sales strategies, to create realistic projections that let others know when they can expect to see returns.

Even though it can be time-consuming to create a business plan, your efforts will be rewarded. The process is valuable for helping you identify potential problems, as well as help you plan ahead. You’ll be more organized and better prepared for success.

If you would like detailed information on how to write a business plan to present to others, there are plenty of online resources, and Business Development Service Provider (BDSP) that can assist.

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