Written by: Christopher Chitty
Knowing what a business plan is about and how to create one are two different things. It is very important to understand how to prepare a business plan and in this article, we will provide an overview of the things it should consist of.
The first thing you need is a business concept. This is the crux of your business as it defines its place in your chosen industry. If you have products or services to sell, you need to expound on them to excruciating detail. The concept is your idea given life and you have to show how you plan to make it a success, within feasible and reasonable means.
After this has been sufficiently handled, you will now need to establish your customer base. This involves analysing and describing them. Graphs and surveys on consumer behaviour pertaining to your service or product will go here. You will also need to state who your competitors are and how you intend to position yourself to compete and beat them.
The third and last section will be everything to do with your finances. This contains your income, cash flow statement, balance sheet and any other financial documents you should have depending on your business. If you have an accountant or someone who is trained in finance, it is advisable to get assistance from them. The finance section must be ironclad and your numbers, absolutely accurate.
In order to expand on these three sections, your business plan should consist of these essential sub-categories;
• Executive Summary: Ranging anywhere between 1 to 10 pages (depending on the type of business), the executive summary is your entire business plan miniaturized as it is written for the time-starved executive who most likely will not be reading the original in its entirety. It is imperative for the executive summary to be attractive and feasible. Treat it as a sales pitch and an opportunity to reel in genuine interest.
• Business Description: This is a summary of your business; describe what it is, what it sells, your company's brief history, where you intend to work out from, who the owners are and the legal state of your company.
• Market strategies: This details how you intend to reach your key market, your strategies in reaching this market and what medium you will use for your advertisements (TV, internet). You will also have to plan some (anything between two to four should be fine) marketing campaigns to show just how you are going to raise your company's profile and use your product or service to bring value to your key demographics' lives.
• Competitive analysis: Identify your main competitor and provide a detailed summary of their product/services strengths and weaknesses. Also list company strengths and weaknesses and determine if they operate within your niche. List out validated reasons as to why you believe consumers would want to buy from you. Also list out all other competitors and any alternative products customers may choose over what you provide and your course of action to counter this in detail.
• Design and development plan: Investors require a description of the product's design. This can be provided through the design and development plan. This also maps out the development of the product, marketing plans/activities and the company for investors. This plan must possess a development budget meant to provide the company with enough means to reach its goals as determined in the business concept. To sum up, the mains areas you will cover in here are product, market and organizational development.
• Operations and management plan: This is very important as it is designed to show how the business functions on a day to day basis. This plan deals with all logistics involved with the organization such as capital and expenses required for specific operations of the business. Operating costs, capital requirements and cost of goods or cost of sales will be included in this plan.
• Financial elements: While this is always situated at the back of the business plan, it is far from being the least important. The financial section takes on data already established in the other categories but expands on them to cover a projection of an entire year, month to month income/revenue as well as all assets, liabilities and equity relevant to the company. The three things highlighted here are the income statement, the cash flow statement and the balance sheet.
A business plan for a start-up company is different from that of a mature company so it is important for you to plan this around your situation. However, the seven sub-categories are a definite must. They ensure that your plan hits all important points and forces you to carefully consider your strategies.
Some business plans can run over a hundred pages but a start-up typically has 15 to 20 pages with room to increase as the business grows.
Although they have to be accurate, room must be left to allow changes to be made as the company matures. A good business plan respects this and will provide ample breathing space for a change of direction or the addition of new products/services within a projected period of time.
While investors are not interested in reading about grand ideas on how you think the business will develop, if it is grounded in carefully planned out strategy and statistics, they will want to see a healthy dose of optimism but layered with professional conservatism.