Business plan is a written document or road map which describe what you plan to do by outlining your goals, industry, business structure, product or services and how you plan to make the business a success. It analyze the business prospects and gives a detail projection about its future in comparison to present situation.
Before getting into how to write an effective business plan, you must know when and why you need a business plan.
Before you start writing, we suggest you to gather all relevant information, research and analyze your product to know your market and funding requirements.
To convey your vision to potential investors, bankers and to help them understand you better, we recommend you to remember following primary parts while writing an effective business plan. In this article, we will also discuss what should be included and excluded from the business plan.
Cover Sheet and table of content
Cover sheet or title page identifies your documents and gives it a professional look. Keep your cover sheet as simple as possible with company emblems and logos.
For identification purpose your business name, address, contact person details, web address, capital required, the party to whom you are asking for funds and the date of submission can be placed in this page.
Table of content page should be placed next to cover sheet. It must have listing of all the major sections of the business plan.
Executive Summary – A snapshot of your business plan
Executive Summary should be a brief introduction to a business plan. Generally it’s written at the end to summarize the whole project.
Prospective investors and bankers are always busy. To get their attention quickly, a one to two page summary of the whole business plan can be prepared and placed to the beginning after the table of contents.
In this section, you should describe;
- your business,
- what problem you solve for your customers,
- which market you are targeting,
- snapshot of your capital needs, and
- your financial highlights (projected sales, cost and profit).
You can prepare finance highlights based on your requirement towards equipment, building, working capital, land, inventory and other things. If you are sending your plan to investors or bankers, then don’t forget to include the amount of money you need from them and how you plan to use it.
This one or two-page document will provide basic information about your company, team, product or service, and market.
Organization chart and management
Organizational chart should convey internal structure of the management, expertise, educational qualification, the role and responsibility they are assigned to.
This section should cover following important areas:
- What is the business structure
- Organizational chart showing position held by the key management team and information about board of directors.
- Composition of your management team and their years of experience with past employment details.
- Educational background of key management team, awards and recognitions.
- Percentage of ownership by promoters
Market analysis is the most important section, your investor and bankers will be interested to read. This section also helps you to understand your potential customers and the market condition. The more you know and understand the market, you will have a better chance of success.
In market analysis section;
- you describe your potential customers,
- what makes customers to buy your products or services,
- what will be company’s market share within the time frame of your business plan?
- how your business will geographically expand?
- how big is the market?
- what are its critical problems and shortcomings?
- how is the landscape changing?
- who is the competition?
- is it a consolidated or fragmented industry?
Products or Services you offer
Products or Services section list down what type of product or services you are providing to your customers. It should list down all the qualities, value and benefits of your product.
This section should include;
- Which products or methods you will develop? Explain how these product and services will give you a competitive edge. Highlight your products best features.
- How are you going to price it?
- How long will it take?
- What are its applications?
- What are the company’s unique advantages and are those advantages sustainable?
- Comparison of your products with competitor.
- How will the current market change due to the company’s products, methods, etc.?
- How are you going to deliver it to the customers?
Don’t forget to discuss the uniqueness and specific characteristics of your product and services and how they differ from existing similar products and services.
Marketing and Sales Strategy
Your future enterprises will depend on what the market dictates. You need to explain the existing marketplace in which you are planning to sell your product and services and what is your strategy to convince prospective customers to buy your products or services.
Here are certain questions to help you write your marketing and sales strategy for a business plan:
- How many competitors already exist in market and what is their market share?
- How market will grow in future?
- What are the major trends toward the development in the market?
- What strengths and weaknesses your product and services has in terms of quality, distribution capability, price and promotion. Outline your pricing strategy.
- What are the specific segment of the market your product or services will work.
- What type of strategy would you put together if your very existence depends on it?
- How are you going to change customer’s mind?
- What strategy will you adopt to promote your product and services?
- How are you going to advertise your product or services?
- Will you be selling your product nationally or internationally?
Funding request – If Business plan is for investors
Funding request is a written request to obtain funds from investors or lenders. If you are seeking funds from outsiders, then this section should be drafted with the exact fund required by your startup. If you don’t want financial help, you can leave it out of your business plan.
You are also required to specify what equipment you need, what is your total project cost, how much money you need to start or expand, how much sales revenue you can expect and how funds will be used.
Financial projections – Backbone of Business Plan
Financial projections is the nuts and bolts of what investors are looking for. You need to include a detailed description of all revenue streams and the company’s cost structure. In this section you need to include income statement, balance sheet and cash-flow statements.
Don’t be afraid to seek out professional advice when compiling your financial projections.
Here are certain important questions to answer while writing your financial projection section of the business plan.
- what will be its annual revenue in a year, five years and 10 years?
- what is your current and projected financial statements?
- how much cash will be generated from business in a year, 5 years and 10 years time?
- how much cash you need in short-term and long-term?
- what is your projected expenses, sales and profit?
- what is your estimated and projected balance sheet and profit and loss account?
Your bankers and investors will be interested in a business plan which explain the financial aspects, money needed for business and how fund will be paid back.
Successful businesses do something useful by solving a common problem. In your business plan, you need to describe how you will solve your customer’s problem. Developing a business plan can be a very hard work, but if you develop it right, then it will help you to accomplish many essential objectives.