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Many of us have dreamt of starting our own businesses. Whether it’s a new handicrafts store or an animal-themed cafe, there’s no shortage of business ideas.
But what helps these ideas become successful businesses that can generate revenue? The answer is simple. Creating and sticking to a clearly defined business plan helps entrepreneurs achieve success.
Let’s look at the key aspects of a business plan to understand why it’s one of the most critical documents for any business—new and old.
What Is A Business Plan?
A business plan is a document that defines the formal aspects of a business—the objectives, market strategies, financing, competitor analysis and exit strategies.
It is commonly used by start-ups to attract investments from banks or venture capitalists. But existing organizations should also use business plans to measure their progress against predefined metrics like budget, time and resources.
Some organizations tend to overlook the importance of a business plan. They may have created or developed a sound strategy by gathering information, but they may not always follow it.
A sound business plan with reliable financial projections can help your business get funding, survive the market competition and turn your business into a valued brand.
Before diving into how to make a business plan, let’s understand what a business plan is and why it is important.
Business Plan: The Basics
A business plan is a dynamic document that grows, changes and evolves with your idea. It elaborates the what, why and how of any business. From the projected costs to drawbacks or contingencies, a business plan is the A to Z of an idea, its implementation and evaluation.
There are two types of business plans—
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Traditional Business Plan
Traditional plans are detailed—15-20 pages—and commonly used as the more reliable source of information. A traditional business plan lends credibility to the business idea and gives you the chance to shine in front of potential investors.
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Start-up Business Plan
Start-up business plans are usually short and crisp with key ideas, brief explanations and limited competitive analysis. You may need to expand on these while presenting to an investor to assure them of your idea’s viability.
How To Write A Business Plan
When you look at examples of a business plan, most elements are common across the board. This is because each aspect or section of a plan is critical for an effective business strategy. Elements like finances and budget, market competition and provision for contingencies give assurance to the people who will be putting their money into your idea.
Understanding how to prepare a business plan will help you get your ideas across in a clear, crisp and direct manner. Note that each of the sections of a business plan aligns with business verticals like marketing, finance, operations, intellectual property and technology.
Here are the key elements to keep in mind when writing a business plan:
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Executive Summary
Think of your executive summary as the abstract for the entire plan. It’s the first thing the reader will notice when they open the document. The summary comprises your mission statement, organizational structure, leadership, goals and methods to achieve your goals. The mission statement is important as it condenses your idea into a few inspired words that drive the plan.
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Business Description
How you describe your business plays a crucial role in setting yourself apart in the market. Why should the investor invest in your company as opposed to another company? Your business description includes what you do, what you offer, your values and beliefs, what inspired you and what you hope to achieve. Adding an element of storytelling to this section goes a long way in making it relatable.
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Products Or Services Offered
The products or services offered by your business must be described in a separate section. Apart from the business description, this is where you can elaborate on what you’re going to offer your customers. The section can include costs, pricing and customer use as part of the plan. This will give stakeholders a glimpse into how you decided to offer a particular product or service. Back your idea with research to strengthen it. You can even add a section on patents, copyrights and intellectual property rights.
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Market Strategies
A business plan is geared towards how your idea can satisfy customer needs and wants. You need to know exactly what you’re trying to do and how you’re going to do it. For this, you need to come up with sound strategies based on market studies. You can conduct surveys, run campaigns and draw on secondary data to understand what your target customers want. This is also where you elaborate on your marketing campaigns and advertising strategies for roll-out once the idea gets the green light.
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Competitor Analysis
Market analysis helps you establish credibility and prove the significance of your idea. You must conduct a sound competitor analysis to find out who your competitors are, what kind of strategies they’ve implemented and how yours are different. This is where you can do a SWOT (Strengths-Weaknesses-Opportunities-Threats) Analysis to understand your competition. Write about the market share you hope to capture and how your idea is better than what’s out there.
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Financial Projections
This is where you really have to show that your idea is worth investing in. Financial projections help others assess whether your idea can generate enough revenue for returns on investment. For new businesses, you should include targets, budget estimates and cash flow projections for a few years following incorporation. For existing businesses, profit and loss statements, balance sheets and cash flow are important.
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Exit Strategy
Accounting for setbacks, listing drawbacks and making provisions for contingencies shows reliability. If you have an exit strategy in place, your investors or other stakeholders will find your idea more believable. It shows that you know the pitfalls of your idea and you’re willing to put in the work to iron out the details. An exit strategy will help you reduce the impact of potential failures, which may otherwise lead to serious repercussions for your business.
Questions That Your Business Plan Should Answer
Based on the elements of a business plan, here are some questions that a business plan should seek to answer:
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Who are your customers?
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What do your customers want and how do you know this?
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Do you know your business and how it should operate?
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Are your financial projections sensible and feasible?
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What sets your business apart from your competitors and why?
These questions are in no way exhaustive. You should explore various examples of business plans, do your research and understand what makes a business plan work.
Know Your Business Plan Inside Out
Just putting together a long written document isn’t enough. You have to write your business plan well. It should be easy to understand, with accessible language and supporting research. You also need to be well-versed in each aspect of the plan, know the history and background and be able to answer ‘why’ questions.
Many business owners ignore their own mission statement, strategies and goals. So, instead of writing a business plan that only looks good on paper, try to write one that’s effective, sound and sensible.
A well-written business plan can leave a lasting impression on the audience. You need to know how to summarize its contents, write clearly and add visual elements like graphs or charts. Harappa’s Writing Proficiently course will teach you about error-free writing. The tools and concepts in the course will help you improve your brevity, clarity, proofreading, accuracy and formatting.
Explore Harappa Diaries to learn more about topics related to the COMMUNICATE Habit such as Business Communication, Creative Writing Skills & Report Writing to generate effective business plans and strategies.
