How to write a business plan step by step:
Every serious entrepreneur needs to have a well thought out business plan. Lenders and investors want to see that you have what it takes for your business to be successful not just today, but one year from now, three years from now, and beyond. A business plan is where you tell your business's story and communicate how you plan to make money.
You might feel intimidated by stories you've heard of business owners having to put together 100-page+ business plans, but you don't have to worry. Putting together a business plan is actually easier than you think. I'm going to cover the eight essential parts of a good business plan, including examples for each part, and at the end, I'll include some bonus formatting tips for your business plan, so please read this blog post carefully if you want to be successful in the future,.
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| Sample of business plan |
Executive summary:
The executive summary is the opening section of your business plan. You might be tempted to overlook this section because it contains mostly identifying information about your business, but think of this section as the introduction, the “hook” if you will, to your business plan. If this part isn't compelling and well written, lenders and investors won't be able to get past it to the juicier parts. Your executive summary should contain the following information: your business's name and locations, your mission statement, an overview of your products and services, and the goal of this business plan.
Here's a great example of an executive summary from a coffee shop business plan taken from B plans. Right away, this executive summary tells you the key success factors for this business. Make sure you highlight your business's main success points right away, but be concise in your executive summary. There'll be plenty of opportunity in future sections to provide more detail.
Company overview:
The company overview is like the biography section for your business plan. You can include here a brief history of your business, your company's business entity structure, the primary assets and liabilities that your business has at the startup phase, and mention leadership team members and their positions.
Market analysis:
You'll go into greater depth about your industry and market knowledge. Include relevant data about your industry, and be clear about who your target customer base is. How does your product or service solve a problem or issue that your customers face? And what are you doing differently than your competitors. The more detailed this section is, the more likely lenders and investors are to pay positive attention to your business plan.
Here's an excerpt of a market analysis for a health club that provides personalized fitness services. In just a couple of paragraphs, this business plan tells you what's typical in the fitness industry, and how this business will do things differently by providing personalized services for their customers. Make sure you use this section of your business plan as an opportunity to let your company's competitive advantages shine.
Organization and management team:
In this section, you'll provide detailed information about your business’s organizational structure, leadership team members, and staff members. Investors and lenders pay close attention to the people who make up your business because their prior experiences and knowledge can play a vital role in your company's success.
In this section, you'll want to include the following, an organizational chart highlighting departments and key staff members, biographic information about you, the owner, and any of your business partners, such as educational degrees and work experience and any other companies you've owned, biographical information for your leadership team. And you'll want to make mention of any business advisors your company utilizes, such as lawyers, accountants, and consultants. For the organizational chart make things easy on yourself by using charting software.
Products and services:
Whether you have a goods-producing business or a service business. This section is key. Here you'll describe the fundamental characteristics of your product or service, and why your product or service is the best on the market. Here are some questions to think through when writing this section of your business plan what problem does your good or service solve? What benefits does your good or service provide? How does your good or service differ from what competitors are offering?
What's the product lifecycle from manufacturer all the way through to distribution? You should also mention any patent, trade mark, or copyright potential for your products and services. Here's a sample products and services section for a bridal shop that rents bridesmaids gowns and bridal accessories. Notice how they've highlighted the competitive advantage of being able to rent rather than buy bridesmaids dresses and bridal accessories.
They also mention value-added partnerships that they have with other bridal suppliers. When putting together the products and services section of your business plan, don't just think about what products or services you have today, right now. Also think about whether and when research and development efforts will result in new products and services.
Strategy and implementation:
In this portion of your business plan, you’ll lay out exactly how you plan to execute on the goals that you mentioned in your company overview. In this section, you should provide a clear summary of your sales and marketing plan. Some of the things you should include area description of your promotional strategies, details about pricing, promotions and distribution channels, a timeline for getting your product or service market ready, sources of labor and employee responsibilities, and your business’s operating hours at each facility or location.
Here's the strategy and implementation excerpt from an advertising agency’s business plan. This is the granular level of detail that you'll want to include in your own business plan. You'll also want to explain how you came up with any sales or customer acquisition estimates.
Financial projections:
If I had to pick out the most important part of a business plan, financial projections would be it. In this section, you make an educated estimate of your company's expenses, revenues, and profit for the next three to five years. Lenders and investors often base the size of their financial commitments from these numbers, so it's really important to spend extra time on this section of your business plan.
If you already have a business, making these projections is easier because you have a historical record of financial statements to rely on. However, if you have a new business, you'll need to rely on industry estimates and competitor information to put this part of your plan together. It also helps to bring in an accountant to assist you with this section of your business plan. Take a look at this financial projections chart from a children's website business plan.
They have estimates for three years out. When creating this section, you'll want to think about every possible expense that you might have to cover in the next three to five years of your business's life, along with every potential revenue stream, and larger assets like equipment, and larger liabilities like business loans. Create projections of your three most important business financial statements, the profit and loss sheet, cash flow statement, and balance sheet; you’ll round out your business plan with an appendix section.
Here you can include any additional information that you were not able to cover before, and you can include relevant attachments such as a resume, market research data, or industry statistics. The appendix is where you put in factual information that supports the rest of your business plan. All right, those are the eight key sections of a business plan.
Tips for formatting your business plan:
· Your business plan should ideally be between about 30 and 50 pages long. Any shorter, and it probably does not contain enough detail. Any longer, and the person reading it might lose interest.
· Have a shorter, summary version of your business plan. This is called the one-page business plan, and it's really valuable for making those quick pitches to investors.
· And our last tip is to have your business plan reviewed by a trusted friend, mentor, or fellow business owner. Ideally, the person should not be in your industry, and they can provide essential feedback as you revise your business plan.
With these examples and tips in mind, you should now be able to confidently put together a solid business plan.
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