Starting a business and becoming an entrepreneur might sound big at first. But once you dip your hands into entrepreneurship, you find yourself on a rollercoaster ride. From coming up with an idea to pitching it to investors, the process includes many stages. Among all of them, preparing a good business plan is crucial. However, before we explain how to write a business plan, let us understand why having one is important.
To raise money
Your business might need investors and they’ll need to see a business plan before they agree to invest. With a mere description of your plans, an investor would never indulge himself or herself into it.
Related: Where to find SME business loans
Attracting team members
A business plan can also be used to attract the right team members. You can share your plan with an executive candidate or desired partners to convince them about the potential your business has. This is especially important in the case of a startup that has no track record to share.
Identifying the pitfalls of your business
A business plan helps you to identify the weaknesses of your business. When you share your plan with other experienced people from the same industry, they might suggest some worthy advice. This will help you to determine and remedy the weak points of your plan — before spending a single rupee.
7 sections to include in your business plan
Here are the seven sections that lenders and partners will expect to see in a standard business plan.
- Executive summary.
- Company description.
- Products and services.
- Competitive analysis.
- Marketing strategies.
- Operations and management plan.
Now let us explore each section in-depth.
1. Executive summary
An executive summary is a concise overview of your business plan. The overview should quickly convey to readers as much as possible about your business.
This section should include:
- Business name and its location.
- Offered products or services.
- The principal purpose of the plan (raising funds, defining goals, etc.)
- Mission statement and vision for the business.
Although the executive summary should be the first section of your business plan, you will write it last.
2. Company description
This section covers everything from who you are to what your goals are. Begin with a short description of your industry. While describing it, consider mentioning the present scenario and future possibilities.
The company description should feature:
- The legal structure of your business — for example, whether it is a sole proprietorship or public limited or whatsoever.
- A brief history of your business and what needs it will meet that are not currently being met by another company.
- Your short- and long-term business goals.
3. Products and services
No business plan is complete without a section regarding what you are selling. Whether it’s a product or a service, describe it clearly, with a focus on the benefits it will provide to customers.
- A detailed description of the products or services you are selling. Learn about product research here.
- The market position of your product or service. In other words, how is it better than similar products in the market?
- Any information about copyright, patent or trade secret data.
- Planned activities for research and development that could lead to new products or services.
Be sure to include details regarding suppliers, service or product costs, and the expected net revenue from each sale.
4. Competitive analysis
Before proceeding with a business idea, it is important to understand your industry. The competitive analysis usually includes:
- Detailed description of your target customers, including gender, age and other characteristics.
- Industry overview, including stats and figures.
- Historical, present and projected marketing data regarding your products or services.
- A detailed analysis of what your competitors are doing, along with their strengths and weaknesses.
This is your chance to show your knowledge of the industry, as well as conclusions based on your market research.
5. Marketing strategies
Basically, these are the specific tactics you plan to use to get your product or service in front of likely customers. In this section, summarize the sales and marketing strategy along with how it can be implemented.
A market analysis allows the entrepreneur to become familiar with all the aspects of the market.
Here is what should be covered in this section:
- Details of how you plan to promote the products and/or services to your customers.
- The logistics and cost for each marketing effort.
- An explanation of the entire process, from acquiring the supplies to delivering the promotion.
- Information regarding the team, including the employees involved, the tasks required and how their success will be measured.
- Data for operating hours and facilities required.
6. Operations and management plan
This section explains how the business functions on a daily basis. It also includes details of the founders, team members and the board of advisors.
Put simply, the operations plan outlines the physical necessities of your business’s operations:
- Physical location of your business.
- Facilities, rented or owned.
- Equipment required.
This section can be divided into two parts — stages of development and production process.
Stages of development
Here you explain what the business has done “to date” to get the business operational. After that, explain what else still needs to be done.
In this section try to demonstrate your understanding of the entire process, from manufacturing to delivery of your product or service.
Remember to add information regarding equipment used, special requirements, materials, inventory and estimated pricing of your products or services.
Financials always occupy the last section of a business plan. The purpose of this section is to convince readers to invest in your business.
Consider getting this section developed with the help of a professional accountant.
Historical financial data
This section should contain income statements, balance sheets, and profit and loss statements for around three to five years (for an existing business).
Be it small or big, every business’s growth depends upon its sales. Include a spreadsheet with a sales projection over the next few years.
In a nutshell, cash-flow statements exemplify the revenue and expense of the business.
In case of established business, include statements from previous years. A startup should break down cash flow into 12 month projections.
A break-even analysis estimates the number of sales it will take for your business to start making a profit.
It can be calculated using fixed and variable costs and is an essential inclusion in your financial projections.
Wrap-up: how to write a business plan
In order to start a business that thrives in the long run, you must have a business plan. You will certainly need it to apply for a loan or grant.
All the aforementioned sections are essential for creating an effective business plan. Together, they can guide your decisions, bringing your business ever closer to success. And that’s how a business blossoms.