A properly written business plan must include information about your company’s objectives, the products or services you offer, and financials.
A business plan defines the financial goals of your company and details how you’ll accomplish them in three and five years. This is a step-by-step guide for creating a business plan that will provide a strong and detailed roadmap for your company.
What makes a business plan effective?
Business plans are a piece of paper that outlines what your business does, how it earns money, and who its clients are. Writing an outline of your business will assist you in clarifying your goal and help you organize your activities. Externally, you can present the plan to potential investors and lenders to show them that you’re on the correct course.
The business plans of a company are always evolving, and it’s okay for them to change as they go along. Startups might change their business plans frequently in order to determine what their target market is and what kind of products and services will best suit their needs. The more mature companies will only revise their business plans every couple of years. No matter how old your company is, review this document prior to applying for business loans.
1. Compose an executive summary
Your elevator pitch is what you should include. It should contain an objective statement, a short description of the services or products the company offers, as well as an overview of your financial plans for growth.
While the executive summary may be the first thing that your investors read, it is often easier to finish it off. This way, you’ll be able to emphasize the information you’ve gathered while creating other sections that provide more depth.
2. Specify your company
The next step is to write the description of your company. It should contain the essential information such as:
- Your company’s registered name.
- Address of your office.
- Names of the most important people who are essential to the business. Be sure to highlight the distinctive capabilities or technical expertise of the members on your staff.
The description of your company should define the structure of your business, for example, the sole proprietorship of a partnership, or corporate, and should include the percentage of ownership each owner owns as well as the extent of each owner’s participation in the business.
Then, write down a few words about the background of your company as well as the business’s nature currently. This helps the reader discover your business’s goals in the following section.
3. Compose your company’s objectives.
The third section of a business plan is an objective description. The section outlines what you want to accomplish in the short long term as well as in the coming years.
If you’re seeking an investment loan for your business or an external investment, you may utilize this section to describe how the funding will assist your business in its growth and the way you intend to reach your growth goals. It is essential to give an accurate explanation of the potential your business offers an opportunity to the banker.
For instance, if your business is about to launch another product line, you could discuss how the loan can aid your business in launching this new product, and the amount you believe sales will rise in the next three years due to the.
4. Describe your goods and services.
In this section, you will go in-depth about the products or services you provide or are planning to offer.
Include the following information:
- A brief explanation of the way your service or product operates.
- The pricing model you use for the product you offer or for your service.
- The customers you typically serve.
- The supply chain of your company and your order fulfillment strategy.
You may also talk about the status of your trademarks or patents that relate to your service or product.
5. Perform a market analysis
Investors and lenders are interested in knowing what makes your product apart from competitors. When you write your analysis of the market, describe your competition. Examine what they are doing well and highlight what you could do to improve. If you’re catering to a different or less well-served audience, discuss why that is the case.
6. Put your marketing and sales plan in writing.
In this section, you will be able to discuss the ways you intend to convince customers to purchase your products or services, or create loyal customers who bring repeat customers to your business.
Include information about your distribution and sales strategies, as well as the costs associated with selling each product.
7. Conduct a business financial analysis
If you’re just starting out, there may not be any information about your company’s financials as of yet. If you’re already running a business, it’s important to include profit and loss or income statements as well as a balance sheet that includes your assets and liabilities, as well as an accounting of cash flows that will show how cash flows into and leaves the business.
Accounting software might produce such reports on your behalf. It could also help you determine metrics like:
- Margin of Net Profit: The percentage the revenue you retain for net earnings.
- The current ratio: an assessment of the liquidity you have and your capacity to pay back the debts.
- Turnover ratio of accounts receivable: a measurement of the frequency you collect receivables in a year.
This is an excellent location to incorporate graphs and charts, which make it easier for the people reading your plan to comprehend how your finances are performing for you and the company.
8. Make financial forecasts
This is an essential element in your plan for business, especially if you’re seeking funding or investors. It will outline how your business can generate enough revenue to pay back the loan or earn an adequate profit for investors.
In this section, you’ll list your company’s quarterly or monthly revenue, expenses, and profit estimates for at least three years and the expected numbers in the event that you’ve gotten the loan.
The accuracy of your data is essential, and you must carefully examine your financial statements from the past before making projections. The goals you set may be ambitious, but they should be achievable.
9. How your business is operated
At the conclusion of the business plan, outline the structure of your business and define the roles of each team. This will allow your readers to know who is responsible for the various tasks that you’ve mentioned above, including creating and selling your goods or services, and what these tasks cost.
If you have employees who possess exceptional talents, you may want to include their resumes in order to explain the competitive advantages they provide you.
10. Provide any further information in an appendix.
Also, add any additional documents or other information that cannot be included elsewhere. This could include:
- Permits and licenses.
- Patents.
- Leases on equipment.
- Contracts.
- Bank statements.
- The details of your credit score for both business and personal records, if you’re in the market for credit.
If the appendix seems long, it may be beneficial to think about the addition of a table of contents at the start of the section.
Resources and advice for creating a business strategy
Here are some suggestions to create a convincing, detailed business plan:
Beware of over-optimism: When you’re applying for a business bank loan or investment from a professional, the person who is reading your business plan attentively. Giving unrealistic sales estimates could affect your chances of approval.
Check for proofreading: Spelling, punctuation, and grammatical mistakes could jump off the page and sway potential investors and lenders. If editing and writing aren’t your forte, then you might want to engage an experienced business plan writer as well as a copy editor or proofreader.
Utilize free sources: SCORE is a non-profit association that provides a vast network of volunteer business advisors and experts who can assist you in writing or editing your plan for business. It is also possible to use the U.S. Small Business Administration’s Small Business Development Centers, which offer business advice for free as well as assistance in the development of a business plan is also an excellent resource.