When I was starting out with my first venture few years back, my MBA professor forced me to write a business plan for it. Even though we were taught on ‘how to write a business plan?’ I was still confused to write about something that I was not well aware of. Yes, my first venture was a total disaster just because I was not fully aware of my business model. Same logic applies for creating a business model. If you don’t know everything about your business you cannot make a successful business plan.
For a business plan to work you need to you need to go for BHAG approach by Jim Collins. BHAG simply means Big Hairy Audacious Goals.
If you know what you’re doing, writing a business plan is usually simpler than it may seem. Although it may seem a complex and daunting task, mostly it’s just common sense.
Essentially, your plan will be based on a spreadsheet of numbers, and will provide an explanation to show how the numbers are to be achieved.
It is generally more difficult to write a business plan for a start-up than an existing business, which usually has comprehensive records of the results of past activities and trading. These figures then provide a template from which new plans can easily be made.
However, new business owners should not be put off by a blank canvass – banks and/or prospective investors are more likely to take your idea seriously if you put in the time to write a properly thought-through financial proposal.
Sections to include in your business plan
Once you have gathered all of your research it’s time to get everything down on paper…
It can be a good idea to write down the sections you’ll need to include within your business plan so that you can decide what information and research needs to go where. You can then create piles – either real or virtual – so that you have a structure to your work.
In our business plans we include 10 sections and in all but the first section – the Executive Summary – it’s a good idea to give as much detail as you can and to include graphics to show visually what you need to achieve:
– In brief, about your business. Where you are now, what you want to achieve and how you will go about it. This section should also include an overview of your current finances and your financial requirements as well as any achievements to date.
About your business
– Your business description in detail. This section will focus on the industry you’re proposing to enter, what service or product you will sell, who you will work with and an overview of customer and competitor analysis.
– What market are you proposing to enter? Here look at size, structure, how the market may grow and the potential for you to sell in it, as well as current and predicted trends.
– Which other businesses are in the market? Take a look at their strengths and weaknesses, their market share and how their products or services differ from yours. Remember to analyse the unsuccessful businesses as well as those who have strong market position.
– Which segment of your market are you looking to target? Not only do you need to look at numbers of potential customers but also who they are, where they live, where they go and what their habits are.
– Where do you want to be in relation to your competitors? This will include your unique selling points (USPs), the quality of your product or service, as well as your price point and how you will distribute. It should also include how you will promote your product or service.
Product / service development
– What is your product or service and why is it so good? Your description of your product or service should be as detailed as possible. Include where you are now and how you have achieved this, what your plans are for developing that product or service and how that will be achieved, including financial considerations.
– Who will you be working with and why? This section is all about your personnel and what skills and experience they bring to your business. As well as an organisation structure it’s a good idea to think about the skills needed to make your business work. Decide whether your existing personnel have these skills already, whether you need to help them to develop those skills or if you need to recruit. Include job descriptions for each position.
– How much do you need to make your business work? Here you will need to include the cost of your people, your overheads, expenses, capital outlay and the cost of the goods needed to create your product or service.
– What financial statements are already in place to validate your business idea? Here you need to include cash flow (how much cash is required, when and from where), income (including income, cost of goods, expenses , overheads and your net and gross profit), and a balance sheet (detailing your assets, liabilities and equity).
Each of these sections is complex and needs a great deal of thought and time. Now you know how to write a business plan it’s easy to see that the result of your hard labour and long hours is worth it, knowing that you have a full understanding of your business and how you will make it work.