Learn the simple steps to write a business plan that get results from the beginning.
Starting a business without a concrete plan is like trying to swim with your hands and feet tied together. It’s rough waters ahead.
So knowing how to write a business plan is essential to making your work easier and stress-free.
Lack of a business plan is one of the main reasons why a large number of new businesses close their doors within 3 years of launching.
Yet, these plans are a lot easier to write than most people think.
And there are so many benefits to having one.
Study after study has shown that learning how to write a business plan significantly improves your chances for success.
These plans eliminate a lot of the unknown that comes with a new business venture. That means less surprises down the road for you.
They give you a deeper insight into how your business should run.
This helps you avoid many of the traps that ensnare so many startups.
A good plan also helps you avoid getting overwhelmed by the entire business process. With a business plan in place, you have a blueprint to follow.
So there’s no guesswork and less frustration.
You’re more in control of the entire business process. Without a plan, you’re more likely to miss something important.
A good business plan may even help you uncover a new opportunity… or two.
These are just a few of the reasons why every business expert you talk to recommends having one.
But if you plan on borrowing money to finance your business, then a business plan becomes an absolute must. Lenders won’t even consider giving you the money without a real business plan.
This guide walks you through the entire process of writing a business plan, even if you’re a beginner.
Before learning how to write a business plan for the first time, you should understand its real meaning and purpose.
Let’s define it first for those who are going to open a business for the first time. Basically, a business plan contains your vision for the next 2 to 5 years.
It has all your goals and strategies to achieve them.
If you are planning to get investors in the future or take out loans for extra investments and expansion, your business plan ascertains that you are well prepared for what’s to come.
A normal business plan has 9 sections: an executive summary, a description of the company, objective statement, business and management structure, products and services, marketing and sales outline, business financial analysis, financial projections, and appendix.
Here’s the first element to writing a business plan…
1. The Executive Summary
Every business plan should have an executive summary because it serves as the outline to your plan.
It lets others know what’s included in your plan and the opportunities that will be presented to them.
Make sure it’s not longwinded and that it goes straight to the point.
The summary typically includes a mission statement, basic information about the type of ownership, a short description of the products and services, and a summary of the plans for the business.
As stated earlier, do not make it lengthy. Many experts say it should be one or two pages, no longer than that.
2. Describe Your Company
Next, you have to focus on your company description.
In this part, you have to give the reader a snapshot of your business.
Technically, this should contain the registered name of your company, your address or physical locations, the people involved in the business, the kind of business you are running, and the products and services it offers.
To make this page more interesting, you have to tell your brand story in this section. Write about your business’s history and how and why you came up with your concept.
3. Your Objectives
Writing an objective statement is like formulating your business objectives. You have to define the goals of your company and the strategies you will use to get them.
An objective statement tells exactly what you want to achieve both in the short and long term.
For instance, if you are looking forward to expanding your business through loans and investments, you should be able to include in this section the reasons why you need funds from outside resources.
You also need to explain how lenders and investors can help you grow your business, together with your techniques on how you can accomplish your targets.
Another great example is when your business plans on introducing a new product to the market. You should be able to write how certain financing can make the introduction more successful.
Your ultimate goal here is to give a coherent explanation of the things you look forward for your business and how the proposals can contribute to the success of your company.
4. Business Structure
In this section, you are going to write about the legal structure of your business.
If it is a sole proprietorship, you have to include it on this page. The same applies if your company is a partnership or corporation.
This gives the reader a clear idea of the type of business you are operating.
The management structure also forms part of this section. The owners, managers, and key employees should be written here.
If you can put an organizational hierarchy on this page, even better.
Don’t forget to add the percentage owned by each owner if the business has multiple owners. Be clear about all the partners involved.
The last thing you want to do is look like you’re hiding the true ownership and structure of your firm.
5. Your Products/Services
This page is meant for your products and services. This is where you can showcase what you are offering.
To make this section simpler and easier to understand, make sure to include the products and service you offer, how they work, and the pricing strategy used for your products or services.
You should also include the types of clients you cater to,
Tell the reader why customers will choose your products or services over other competitors. Here, you can also give a brief explanation of the strategies you use for sales and distributions.
You’ll expand on those in the next section on sales and marketing.
If you want to talk about your patents and trademarks, this is the best place to write them. Everything that’s related to your products and services should be put here. Especially if it’s something that gives you a competitive advantage.
6. Your Marketing Plans
Sales and marketing are two of the most essential aspects of your business. If you don’t focus on them, your new firm has no realistic chance at success.
Unless you have a whole bunch of clients already lined up.
The marketing and sales outline should contain a simple explanation of your marketing plans and how you will perform them.
Don’t get discouraged by this step because it doesn’t matter what type of marketing plans you have. Just get it down on paper.
Simply explain how you will attract customers that want to buy your products and services. You should also explain how you plan on retaining them.
Try to emphasize the strengths of your company and what assets you are going to use to outsell your competitors.
List any competitive advantage that relates to sales and marketing.
And list all your estimated costs pertaining to marketing including how you plan on delivering orders.
7. Analysis of Your Financials
Because you’re a startup, there might not be much for you to fill in here. After all, you’re just getting started and you don’t have any financial statements.
So you can skip this step.
But, if you are a well-established business, you should include all your financial sheets here. This part should consist of your profit and loss statement, balance sheet, cash flow statement, and a statement of owner’s equity. Also mention any debts you may have.
Each of these statements has a different purpose.
Your profit and loss statement displays the income or losses you incurred for the month.
Your balance sheet shows the assets and debts of your business.
The cash flow statement tells the cash that goes in and out of the company. The report on the owner’s equity presents your investments and withdrawals.
In this analysis, you might want to include your net profit margin, accounts receivable turnover ratio, and the current ratio to help the readers determine the financial health of the business.
Anything that’s related to the financial performance of the company should be written on this page.
8. Financial Projections
Financial projections are the meat of your business plan.
They are the most crucial parts of the business plan. So it’s vital you do the best you can here and be as honest and realistic as possible.
If you are a business owner who is looking for future investors, you need to take this portion serious thought and consideration.
Financial projections typically show how your company will earn sufficient income to repay your obligation.
They also highlight how you can generate enough profit to provide a good amount of returns to the investors.
One of the things you should always remember is making your goals realistic rather than aggressive. If you write figures that are impossible to earn, you are giving false hope to your investors.
This will impact your business negatively and could possibly repel potential creditors and investors.
As part of your financial projections, you need to provide your sales, expenses, and estimated profits, whether monthly or quarterly, for the next three years to come.
The figures you should write here should assume that you have got enough financing from loans and investments. Accurate and complete financial projects attract more investors.
The appendix is simply a collection of supporting documents that make the information in your business plan more reliable. Here, you can put the resume of the owners, managers, and key employees.
You can also include licenses, permits, lease contracts, patents, bank statements, receipts, and business credit history.
What constitutes a good business plan?
Now that you have an idea of how to write a business plan, let’s tackle some of the things that constitute a good business plan.
The first thing you should understand is that you need to be as accurate as possible in all the statement you make in your business plan.
This is especially true if you plan on borrowing money for your business and you need to submit a business plan to the lender.
Having discrepancies drastically reduces your chances of getting the financing you need. So don’t embellish.
Your business plan should reflect the good and bad sides of your business. It doesn’t need to show all the positive aspects. Again, honesty wins the day here.
You have to be real and bring out the most accurate information so that more creditors, lenders, and investors will support what you’re trying to do. So they will want to work with you.
Don’t make wild projections.
Try to make everything as simple and easy to understand as possible.
Writing a business plan isn’t nearly as difficult as many people make it out to be. Most experts say that it shouldn’t be more than 20 pages long. This might seem like a lot at first but, once you get going most of it starts writing itself. So don’t feel overwhelmed in the beginning.
Like with most things, getting started is the hardest part.
And finally, have someone else look over your business plan. Have them check for any errors grammatical or otherwise.
It’s always good to have an extra set of eyes looking over your work.
All the greatest writers in the world have proofreaders and copy editors that look over their work, so there’s no reason why you shouldn’t do the same.
Don’t be afraid to change anything you don’t like. Add, delete and expand on anything you feel is important.
The editing process is one of the most important parts of understanding how to write a business plan to succeed.
So you should put it to good use.
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