Featured

Business plan: what it is and how to do it effectively

The business plan is not something that entrepreneurs only need to obtain the necessary funding to start or grow a startup or launch a business project.

A business plan can help you outline your business strategy and identify potential obstacles. It can allow you to validate a product idea. And it can help you define the resources you need and your development plan before you start.

Making a business plan can help you in several ways. In this article, we will explain what a business plan is and how to do it.

What is a business plan?

The business plan is a document that describes the company, its products or services, how it earns (or will earn), management, staff and company finances; it also defines the business model followed by the company and many other details essential to its success.

Whatever the reason you want to write a business plan, you will probably experience this task as a burden or you can hire business plan writers. After all, you certainly have a mileage to-do list with more immediately rewarding activities. For example, taking product photos, creating advertising campaigns and opening social media accounts.

Not all companies start with a formal business plan (some startups start with a pitch). But many entrepreneurs find it helpful to take the time to step back, assess market demand, and validate their idea by defining the scope and strategy of their project.

Why write a business plan?

Investors rely on the business plan to assess the feasibility of a business idea before financing it; therefore, the document is commonly associated with granting loans. But there are several valid reasons for making a business plan, regardless of the intention to seek funding.

  • Planning. Writing a business plan is an essential step in clarifying ideas. It can help you define the scope of your business or business project and the time, money, and other resources you need to get started. Consider it a kind of strategy guide for your business.
  • Evaluation of business ideas. If you have multiple business ideas in mind, writing a rough business plan for each can help you evaluate them. After that, you can focus your time and energy on those with the highest chance of success.

Other reasons to make a business plan:

  • Research. To write a business plan, you must research your ideal customer and competitors. And this information helps you make more strategic decisions.
  • Recruiting. A business plan is one of the simplest ways to communicate your vision clearly to new corporate employees. It can help give them more confidence in your business, especially if it’s a new business.
  • Partnership. Do you want to start partnerships with other companies? By having a clear idea of ​​your vision, your audience and your growth strategy, potential partners will be able to identify more easily if your business is suitable for their needs, especially if they are in a more advanced stage of growth than yours.
  • Contests. Many business plan contests offer rewards such as mentoring, financing, or investing capital.

Making a business plan is the ideal starting point if you are looking for the most appropriate way to expose your ideas to those who can help you succeed.

How to make a business plan?

There are key factors to keep in mind for an effective business plan.

  • Know your audience. Knowing who will read your business plan (it can also be intended only for you) allows you to adapt both the language and the level of detail to your needs. And among other things, it helps you determine which information to include and which to omit because it has no impact.
  • Define a clear goal. If the goal is to get funding for your business, you will need to commit to writing a comprehensive operational plan, which takes into account how your business will make a profit.
  • Invest time in research. The business plan sections will be based primarily on your ideas and vision. But some of the most important information is based on research from outside sources. Specifically, take the time to figure out who to sell to, if there is demand for your products within the market niche, and who else is selling similar products or services to yours. In other words, it will allow you to delve into your business model.
  • Respect clarity and synthesis skills. A business plan must always be short and smooth for whoever it is intended for; in principle, its length should not exceed 15-20 pages. If there are any documents you think are useful, consider adding them as an attachment.
  • Keep your tone, style and voice consistent. For consistency, one person should write the business plan. Or you should have it reviewed before handing it over to recipients.

How do you write a business plan?

Starting to write a business plan from a blank page can be difficult. To help you, here is the structure to follow to do business:

  1. Write the executive summary.
  2. Include company information
  3. Prepare the market analysis.
  4. Illustrate the products and services
  5. Explain the marketing strategy
  6. Define the logistics and management plan
  7. Develop your financial plan
  8. Write the executive summary.

The executive summary is a crucial component of the business plan. In addition, it is the final section you should compose when composing your business plan. Its purpose is to give readers (potential investors, for example) an overview of your business.

The executive summary should not exceed one page in length. Although it is difficult, it is not impossible to fit all the pertinent information into such a small space. Include the following in your business plan’s executive summary:

  • Business concept. What does your company do? What’s your business model?
  • Goals and company vision. What does your company want to achieve? What are the objectives of the company?
  • Product Description and differentiation. What do you sell, and what is your Unique Selling Proposition? What are your distinguishing features?
  • Target market. Who do you sell to?
  • Marketing strategy. How do you plan to reach customers? What marketing channels will you leverage? Do you mind launching an advertising campaign?
  • Current financial situation. What is your income?
  • Expected financial situation. What income do you expect to make?
  • The request. How much money do you need to make the product or service offered?
  • The team. Who participates in the entrepreneurial activity?

Include company information

This section of the business plan should answer two key questions:

  • Who are you?
  • What are you planning to accomplish?

You can explain why you are in the market and what differentiates you from competitors by answering these questions. And you will be able to clarify your projects and why your company is a good reality to invest in.

Here are some components to include in this section:

  • Company structure
  • Business sector
  • Vision, mission and corporate values
  • Information on how the company was born or its history
  • Business objectives, both short and long term
  • The team, with key contributors and their salaries

Some of these points constitute mere facts. Others require elaboration, especially when it comes to the vision, mission and values ​​of the company. This is where you can explain why your company exists, what you hope to accomplish and what you care about.

Prepare the market analysis

It is no exaggeration to say that the success or failure of your business depends on the market you target. Choose the right market for your products – with many customers who know and demand your product – and you’ll have an advantage. On the other hand, you may have difficulty making sales if you choose the wrong market (or the right market at the wrong time).

Market analysis is a key section of your business plan, regardless of whether or not you intend to have it read to a third party.

For this reason, market analysis is a key section of the business plan, regardless of whether or not you intend to have it read by a third party. The plan should include an overview indicating:

  • Market size for your products
  • Market position analysis of your organization
  • Description of the competitive landscape

Thorough research to support the conclusions is important. It serves to persuade investors and validate the assumptions made in the project.

For more information you should visit https://www.mbplans.com/

How big is your potential market?

The potential market estimates the number of people who could buy your product. It is certainly exciting to imagine very high sales figures. But it uses as much relevant data from independent sources as possible to validate the predictions. Research can be challenging, so here are some general tips to get you started:

  • Outline the profile of your ideal customer, especially about demographics. If you’re targeting an audience of millennials in the USA, you can first look for official data on the size of that group. You may also want to look at the expected changes in the number of people in that age group over the next few years.
  • Research the main trends and perspectives of the sector. If your product is aimed at retirees, try to find data on how many people will retire in the next five years and information on that group’s consumption patterns. If you sell fitness equipment, you might look at trends in gym memberships and overall health and fitness among your target audience or the general population. Finally, look for information on your industry’s growth or decline forecasts in the coming years.
  • Make predictions based on the information. You will never have perfect and complete information on the size of your overall target market. Your goal is to base estimates on verifiable data to make reliable assumptions.

Among the sources to consult to obtain market data are national statistical offices, sector associations, academic research and sources of information authoritative in your field.

SWOT analysis

A SWOT analysis examines strengths and weaknesses, risks and opportunities.

  • What are your company’s success factors?
  • What market or sector changes can you take advantage of as an opportunity?
  • Are there any critical factors that can compromise your chances of success?

These analyses are often presented in a grid, with bulleted lists in each section highlighting the most relevant information, so you don’t need to write the points in sentences. Strengths and weaknesses – both internal to the company – are listed first. Opportunities and threats follow in the next line.

With this visual presentation, the reader can quickly see the positive and negative internal and external factors that can affect the business.

Here is an example.

Strengths

  • Previous experience of commercial expansion in the eCommerce sector
  • Strong experience and know-how in advertising management
  • Patented product
  • Exclusive agreement with the manufacturer

Points of weakness

  • No experience in managing a team
  • Fragile products with higher shipping costs

Chance

  • Strong sales growth for the product category
  • No “market leader” in the category; many small businesses

Threats

  • Expected regulation for the category of products on international markets

Competitive analysis

There are three general factors you can use to differentiate your business from the competition:

  • Cost management. You can maximize profits by offering lower prices than most competitors.
  • Differentiation. To earn, focus on the uniqueness of your product or service offered. Offer something different than the current market leaders.
  • Segmentation. You focus on a very specific target. Aim to attract a small audience before moving to a larger market.

To understand which differentiator is best for you, start with understanding your business and the competitive landscape

Competition is always present on the market, even with an innovative product. So, it’s important to include an overview of the competition in your business plan. For example, if you enter an established market, include a list of companies that you consider direct competitors. And specify how you plan to differentiate your products and business.

Outline the products and services

Your products or services will play a prominent role in the business plan. But it is important to have a section outlining key details for readers interested in your operational plan. If you sell many items, you can include more general information about each product line; if you sell a few, you can focus on each in more detail.

Customer segmentation

Your ideal customer – also known as your target market – is the foundation of your marketing strategy and operational plan. So, you need to know this “buyer persona” AND include a description of him in the plan.

To provide a complete overview, describe your ideal customer with a series of general and specific demographic characteristics.

Customer segmentation often includes:

  • Place of residence
  • Age range
  • Educational level
  • Common patterns of behavior
  • Pastimes
  • Workplace
  • Used technologies
  • Income
  • Sector of use
  • Values, beliefs or opinions

The list needs to be adapted based on what you sell. But try to be specific enough to make it clear which target you want to target. More importantly, the data must be sufficient to validate business choices based on the target type and preferences.

Explain the marketing strategy

The choice of marketing activities depends a lot on the ideal customer. Therefore, the business plan should outline current decisions and future strategies. Especially dwell on why your ideas are suitable for the target.

For example, if you plan on marketing on TikTok, specify the importance of TikTok to your audience. It is not enough to follow a fashion!

Most marketing strategies include information on four key topics. Then, based on the activity type and the business plan recipients, you can choose whether to deepen these points.

  • Price. How much do your products cost, and how do you decide the selling price?
  • Product. What product do you sell, and how do you differentiate it on the market?
  • Promotion. How do you encourage the ideal customer to purchase the products?
  • Place. Where will you sell your products? Will you decide to create an eCommerce site, open a physical store or both?

Promotion may be the most widely covered point, as you can easily get into the strategy details. But the other three areas need to be dealt with at least briefly. Each of them is an important strategic lever of your marketing plan.

Define the logistics and management plan

Logistics and operations are the workflows you will implement to turn your ideas into reality. If you want to make a business plan for planning purposes, this is always an important section to consider, but you don’t need to go into the details. Instead, try to be specific if the plan is aimed at looking for investments.

It deals with all management aspects, including:

  • Providers. Where do you get the raw materials needed for production? Or where are your products manufactured?
  • Production. How long does it take to manufacture the products? How long are they delivered? How will you handle a busy season or an unexpected surge in demand?
  • Structures. Where will you work? Where will the team members work? Are you planning to use physical space for retail? If so, where?
  • Equipment. What tools and technologies do you need to be operational? This includes everything from computers to lights to everything in between.
  • Shipping and fulfillment of orders. Will you deal directly with the activities related to order fulfillment? Or will you use an external partner?
  • Inventory. How many stocks will you have available? Where will the goods be stored? How will you ship to partners if needed? And how will you manage the inventory?

From this section of the business plan, it should emerge that you have a solid understanding of the supply chain and sound contingency plans to deal with possible contingencies. In addition, it should provide you with a basis for making other important decisions, such as the price of products to cover estimated costs and at what point you plan to hit the break-even point on the initial spend.

How to make a business plan: conclusions

Writing a business plan can help you identify the steps to starting a business, regardless of the need to seek out investors. It can also help you spot any project gaps before they become problems.

Are you thinking of writing a business plan to create a new business? Or to grow your existing business? Then, follow the instructions in this guide to write an effective business plan.

Click here to read more articles.

Related Articles

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button