When starting a new business, entrepreneurs often wonder if they really do need to invest time and resources in writing a business plan. Well, the answer is always going to be “Yes!”. A business plan is one of the most important things to consider when opening a new business and it is a process that can take up quite some time, especially if you don’t have any experience in using marketing tools to your advantage. A business plan will give you an overall idea of what you are about to get yourself into and help you build up a strategy to start your business on the right foot.
While some entrepreneurs argue about the importance of writing a formal business plan, there are some situations where a business plan is not only recommended, but also mandatory. If you plan on applying for a loan or catch the eye of some investors, there is no other way to do it.
What Is a Business Plan and Why Is It Important?
Broadly speaking, a business plan is a document that compiles all the financial and operational goals of a business and it should contain all the detailed plans showing how those goals are to be met. A well put-together business plan will help determine how viable your business idea is and answer a few important questions before the grand opening. Even if the idea does not turn into a successful business, it is better to lose a few weeks to develop a plan, than to invest in an idea which is destined to fail.
In some circumstances, such as applying for a business loan, searching for business partners or pitching your idea to investors, a business plan is paramount. Financial institutions are going to need proof that you will be able to repay them, while investors will want to see if your idea truly has potential and is worth their money and a business plan is the only way you can provide the information needed.
Besides helping you prove yourself, a business plan will often work as a reality check and offer some answers to questions that might appear along the way. Gathering the correct information to write the business plan will also help you make some tough and important decisions, such as product type and pricing. If used correctly, a business plan can easily turn into a real action plan and point you into the correct direction, especially in the beginning.
What Should a Business Plan Consist Of?
A traditional business plan model should include the following sections:
- Executive Summary
This is going to be the first section of your business plan and should summarize its most important elements. Anybody who looks at your business plan is going to read this section first so it should be perfectly written. Because it is an overview of your entire plan, this section should be written after the rest of the plan is complete.
- Industry Overview
The overview should include an examination of the industry that your business aims to be a part of. It should include information such as industry trends, estimated industry sales and show you possess information about other big names in the industry. It should also describe how tour business will fit into the industry.
- Market Analysis
Any successful entrepreneur will tell you that good market research is always the first step in writing the market analysis section of the business plan. This should include a thorough examination of your product’s target market, the market’s needs and how they are currently being met. This section should be able to show the reader that your predictions about the targeted customers and market are based on knowledge and research.
- Competitive Analysis
The name is pretty self-explanatory, as this section should reveal a thorough investigation about your competitors, listing their advantages and your plan to overcome the marketing barriers. This is where you will show the reader how your business will differentiate from your competitors and what your advantages are.
- Sales and Marketing Plan
This section should include your Unique Selling Proposition, which should, in a single sentence, summarize the core of your business. You should include detailed information about your pricing plan and sales strategy, as well as product benefits and advertising plans.
- Management Plan
The management plan should describe the legal structure of your business, as well as management resources. You will need to outline the structure of your internal management team, human resource needs and external management resources, which should include an advisory board, especially if you plan to get funding through your business plan.
- Operating Plan
This is where the physical necessities of your business should be outlined. You will need to include information about the physical location of the company, necessary equipment and other facilities. In this section, the reader should be able to understand what your progress to get your business off the ground has been so far and that you have knowledge about the production process of your product, including manufacturing and inventory requirements.
- Financial Plan
In this section, you will need to focus on presenting the main financial documents required for any business to open: the cash flow statement (or projection), the balance sheet and the income statement. You will need to include a description of the type of funding you require and show the potential investors that your business idea is viable, as this is probably the section that they will be most focused on.
- Appendices and Exhibits
This should serve as the end of your business plan and can include any additional information that can help you support your business idea and establish credibility. Here you can include marketing studies, product prototypes or mock-ups, photographs and all sorts of documents that can add value to your business plan.
Other Useful Tips
After your business plan is complete, it may be a good idea to insert a table of contents and title page at the beginning, to guide the readers and make it easier for them to look for the necessary information.
As this is a formal document, you will want to make it look like one, as you are looking to impress the reader and ultimately receive funding for your idea. Pay attention to formatting and make sure it is spell checked before printing it.