What is a business plan and why does it matter?
A business plan is a formal document outlining the goals, direction, finances, team, and future planning of your business. It can be geared toward investors, in a bid to raise capital, or used as an internal document to align teams and provide direction. It typically includes extensive market research, competitor analysis, financial documentation, and an overview of your business and marketing strategy. When written effectively, a business plan can help prescribe action and keep business owners on track to meeting business goals.
Who needs a business plan?
A business plan can be particularly helpful during a company’s initial growth and serve as a guiding force amid the uncertainty, distractions, and at times rapid developments involved in starting a business. For enterprise companies, a business plan should be a living, breathing document that guides decision-making and facilitates intentional growth.
“You should have a game plan for every major commitment you’ll have, from early-stage founder agreements to onboarding legal professionals,” says Colin Keogh, CEO of the Rapid Foundation—a company that brings technology and training to communities in need—and a WeWork Labs mentor in the UK. “You can’t go out on funding rounds or take part in accelerators without any planning.”
Five components that every business plan needs
While there is no set format for writing a business plan, there are several elements that are typically included. Here’s what’s important to consider when writing your business plan.
1. Executive summary
No longer than half a page, the executive summary should briefly introduce your business and describe the purpose of the business plan. Are you writing the plan to attract capital? If so, specify how much money you hope to raise, and how you’re going to repay the loan. If you’re writing the plan to align your team and provide direction, explain at a high level what you hope to achieve with this alignment, as well as the size and state of your existing team.
The executive summary should explain what your business does, and provide an introductory overview of your financial health and major achievements to date.
2. Company description
To properly introduce your company, it’s important to also describe the wider industry. What is the financial worth of your market? Are there market trends that will affect the success of your company? What is the state of the industry and its future potential? Use data to support your claims and be sure to include the full gamut of information—both positive and negative—to provide investors and your employees a complete and accurate portrayal of your company’s milieu. Go on to describe your company and what it provides your customers. Are you a sole proprietor, LLC, partnership, or corporation? Are you an established company or a budding startup? What does your leadership team look like and how many employees do you have? This section should provide both historical and future context around your business, including its founding story, mission statement, and vision for the future.
It’s essential to showcase your point of difference in your company description, as well as any advantages you may have in terms of expert talent or leading technology. This is typically one of the first pieces of the plan to be written.
3. Market analysis and opportunity
Research is key in completing a business plan and, ideally, more time should be spent on research and analysis than writing the plan itself. Understanding the size, growth, history, future potential, and current risks inherent to the wider market is essential for the success of your business, and these considerations should be described here. In addition to this, it’s important to include research into the target demographic of your product or service. This might be in the form of fictional customer personas, or a broader overview of the income, location, age, gender, and buying habits of your existing and potential customers. Though the research should be objective, the analysis in this section is a good place to reiterate your point of difference and the ways you plan to capture the market and surpass your competition.
4. Competitive analysis
Beyond explaining the elements that differentiate you from your competition, it’s important to provide an in-depth analysis of your competitors themselves. This research should delve into the operations, financials, history, leadership, and distribution channels of your direct and indirect competitors. It should explore the value propositions of these competitors, and explain the ways you can compete with, or exploit, their strengths and weaknesses.
5. Execution plan: operations, development, management
This segment provides details around how you’re going to do the work necessary to fulfill this plan. It should include information about your organizational structure and the everyday operations of your team, contractors, and physical and digital assets. Consider including your company’s organizational chart, as well as more in-depth information on the leadership team: Who are they? What are their backgrounds? What do they bring to the table? Potentially include the résumés of key people on your team.
For startups, your execution plan should include how long it will take to begin operations, and then how much longer to reach profitability. For established companies, it’s a good idea to outline how long it will take to execute your plan, and the ways in which you will change existing operations.
The five key areas to think about when writing your business plan
What is the need you're addressing?
Your business is designed to fill a gap somewhere and you'll need to figure out what that is. Define the problem that your business is solving and make it so simple and clear that anyone can take a glance and immediately know what you're all about. Once you know the problem, you can then create a solution. How will your business be that solution and how well will it do it?
Who are your potential customers?
Once you work out the problem and the solution, you'll need to determine who is going to care. That means customers. Where will demand for your business come from and what exactly will motivate them?
Market research is your friend here. If you consider your business to be large and commercial or if you're aiming to celebrate how niche it is, it will always pay to do the groundwork to see what people want and why they're going to want to get it from you.
Understand your competitors
Know your enemy! Even if you believe your business is unique, there's a good chance somebody is doing something similar to you. You'll need to understand what they're doing, why they're doing it and most importantly, how you can do it better.
This is all about having an advantage. You're not keeping an eye on the competition to copy what they're doing, you're just figuring out the easiest ways to stay ahead of the game. Which will result in a better position for you now, and in the future.
Plan your finances
Money is the only way you'll keep your business afloat. If you spend more than you make, you'll be closing down before you know it. The best way to avoid this is to get a clear idea of three financial areas: Starting Out, Costs To Operate and Future Projections.
Always take the time to write down everything you'll need to pay for. Tools, licences, permits, equipment, rent, insurance and more. As your business evolves and grows, any unexpected cost & revenue surprises will be taken into account instead of emptying your bank account.
Market your business
Get the word out! Whether you're a storefront, online marketplace or something in between, the only person who's going to sell your business is you. Work out the best ways to do this that fits your business and your industry.
Stay informed of the latest marketing trends, online media and commercial opportunities so you can always be active and have your finger on the pulse. Otherwise, all your hard work will just sit there waiting to gather dust.
Top writing tips
Now that you know what areas to think about when writing your business plan. Here's a few tips to make the actually writing easier.
Brainstorm before you write
It's tough to write a whole business plan from scratch, so take some time to brainstorm first. Make rough notes and general ideas about the key areas we mentioned earlier and then when you've explored all the areas you can start to write up a clearer, more structured business plan.
Revisit your budget as your write
As you start to write your business plan you might discover new areas of your business that you hadn't budgeted for. So make sure you revisit your budgets regularly and refresh your calculations if you need to.
Question your business plan
As you write your business plan ask yourself these questions. If your plan doesn't answer them clearly you might to do a bit of rewriting.
- Why does your business exist?
- What are the core beliefs of your business?
- Who are your customers?
- Who are your competitors?
- How is your business going to be different/better than your competitors?
- How much money do you need to get started?
- How much money do you need to run your business?
- What are your short- and long-term business goals?
- How are you planning to achieve your business goals?
- How are you going to measure your success?
- What are the deadlines for your business goals?
Courtesy: best products in Abu Dhabi
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