How to Write a Business Plan
Writing a business plan can seem like a pretty daunting task. Especially if you’re not a expert in business. However, don’t be intimidated, it doesn’t need to be scary. If you’re passionate about your idea then writing a plan is a natural way to get your thoughts down on paper. You can even start with something called a ‘Lean Plan’ this is a really short business plan about a page long. You can then expand this later.
But... If you’re ready to dive in now then read on for some tips on how to make writing your business plan as pain free as possible.
Executive summary and elevator pitch
I know I said section one, but many people write this last. It is often the most important part of the plan as it should explain the essence of your business. Use this section to highlight the key points and keep it brief - no more than two paragraphs.
The executive summary should also include a ‘problem and solution’ section.
Before you can define your target market it’s crucial for you to pinpoint the problem you will solve for your customers. What is their primary issue? how can you solve this problem?
Often the best way to do this is to head out and talk to people. Ask a potential customer about a problem you assume they have and then offer your solution. This helps you to find out if your product or service is solving a real problem for someone. It will either give your potential business more substance, or send you back to the drawing board.
Describe your product or service
This section should be an in depth look at what product you are selling or what service you provide. It is important to ensure that the language used in the section can be understood by everyone including those who don't work in the industry you do. It's a good idea to get someone who is not involved in your field of work to read over the plan.
Who are your customers?
This section needs to provide a detailed account about who your target market is. It should not be a generalization of any customer who would potentially use your business. It’s about defining a specific range of customers who will buy your product or service.
This section is easier if you have sold products or services already, but don’t worry if you haven’t you can use some of the points below to help you define your target audience.
Are your customers businesses or individuals?
Describe your typical customer?
Where are your typical customers based?
What prompts your customer to buy your product or service?
How does your typical customer decide which company to buy this product or service from?
How will you acquire customers?
This is where your marketing strategy comes in to play. Social media is a great place to start when it comes to promoting your product and acquiring customers. However, don’t solely rely on this as a way to gain customers. Think about your target market and how they could find out about your business. Is there certain trade shows or exhibitions you could attend to showcase your business? Should you be advertising in certain magazines or on websites?
You could also think about direct to customer marketing, this could involve contacting potential customers via email to showcase your product and possibly offer discounts or promotional deals.
Costs and pricing
Before you can set a price for your product or service you need to work out how much it will cost to make. Take into account everything including electricity, labour, packing, materials, etc. Then calculate your ‘markup,’ this will vary depending on what you are selling. Take a look at your competitors to find out what sort of price you should be charging. If you wish to charge more than the average for your product or service, establish why your customers would be willing to spend more with you then your competitors.
You will also need to work out a personal survival budget. Be realistic you’re not going to be earning millions of dollars straight away so you need to give yourself a basic wage which allows you to live comfortably, but not excessively. Think about the absolute minimum you can live off for a certain time. The more money you are putting back into the business the quicker it will grow. However, don’t let yourself starve! If you need to do that then you should seriously rethink your business plan.
You should also include a cash flow forecast so you and potential investors can see how much money will be coming in and out of your business. You should also allow for seasonal changes such an increase in heating bills. As well as allowing for delays between someone making a payment and you receiving the money. It is important to complete your cash flow as accurately as possible, so you don't overestimate how much money you may need, or allow yourself too much of a survival budget.
Long and short term goals
Setting goals is extremely important in so many areas of life. I know I talk about setting S.M.A.R.T goals in a previous blog post but I really do think they are a great way to help you achieve your goals.
Not only does this provide motivation but it also allows investors to see where you want to take the business.
In your goals section also include a concise five-year forecast showcasing your goals for expansion. This will allow investors to see that you have thought about the future and show how they can recoup their investment. It will also provide you with guidelines to follow - in what will probably be the trickiest years for your company.
Of course there are other things you can include in your plan depending on your business. This article is just designed as a way to help you get started. I would suggest that you keep your plan fairly concise, especially if you are going to show it to potential investors, but also don’t miss anything important out!
There’s a whole range of online templates available to make the process easier. Just remember not to get deterred. It is very likely it will reveal holes in your business idea, however, that is why you are writing a plan in the first place. It’s best to iron out the kinks at the start instead of months down the line!