A business plan is an essential tool for providing direction to start-ups and established companies to remain focused on major activities relating to their business. When finance is required, a business plan is mandatory because the lender needs to know what the money is required for and how you intend to pay it back. In real life, however, many companies don’t have a business plan. Some business owners do not know where to start, and others have produced plans that contain too little or too much information. This article will explain how to write a cohesive, straight-to-the-point business plan that will contribute significantly to the success of your business.
Why Does a Business Plan Matter?
A business plan helps inform future decisions. An established enterprise such as an IT business looking to expand requires formal documentation to provide the needed clarity. What equipment would be required to expand business operations, and how should they be acquired? If you are a manufacturing company planning to increase production, you will need to lease or purchase new machines. These details must be incorporated into the business plan in order to provide direction, align teams or raise capital for the expansion project.
In the case of start-ups, a business plan is the first step in transforming business ideas into solid strategies before a path forward begins to emerge. Generally, a business plan motivates staff, attracts prospective investors and improves productivity.
Parts of a Business Plan
The process of writing the plan does not have to be daunting if the right steps are followed. Although business plans do not have a set format, there are essential components every plan should have. They are:
- Executive summary
Start with an executive summary that gives a general overview of the business plan. You may wish to prepare this as a stand-alone document because some investors initially ask to see the executive summary. If they like what they see in the summary, they may then request for the complete business plan.
- Company introduction
Provide an introductory overview of your company in clear and concise language. A long, winding plan is likely to be glossed over by busy stakeholders. Describe the legal structure of your company. State who your target audience is and the product or service you are (or will be) providing to them.
- Market opportunity
Research is an important prelude to writing this section. Ideally, you should spend more time gathering and analysing your research data. Describe the problem your customers face and that your company could help solve. Explain how your business will solve this problem and provide value to the customer. Point out the size and future growth potential of the wider market and how you intend to capture some of this market.
- The competition
In the process of conducting your research, you would have identified who the most successful players in your field are and determined what makes them so successful. Do they make better products or provide better service than the others? Are they offering better prices? Answers to these questions can help you in formulating a realistic strategy that will help in exploiting the strengths and weaknesses of these competitors. All these should be highlighted in this section of the plan.
- Your people
Most businesses still rely on their workers to be successful. List the key staff members in your company and describe their experience, mentioning the value they add. If you don’t currently have a team in place, state the people you intend to hire, their skills and the roles they will play in the company. A prospective investor would like to see that your team has the relevant expertise to make your business successful.
- Financial status and projections
If your business is an ongoing concern, you need to include a balance sheet and your profit and loss statement, which discloses all the finances involved in running your business. If you are looking for funding, you should state the amount you need here, what the money will be used for and how you intend to pay it back. Start-up companies should include the start-up costs and the cash flow projections for the next three years.
Keep the Plan Concise
It is important to keep in mind that your business plan does not have to be complicated. Ideally, it should be kept short and simple. If you follow the steps described above, you will have a well-written, professional business plan that can help you make strategic decisions. You will be able to apply for funding, and you can outline how your business will operate and grow. If you are just starting the business, a well-written business plan will improve your chances of success. For an ongoing business concern like the example of the IT company given above, leasing new equipment from a company like Grenke Leasing would be a better option than purchasing new ones.
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