Having a superbly written business plan is the recipe for a potentially successful business. Knowing how to write a great business plan is essential to the success of the business that you plan to start. This is what you use to guide you during the startup of your business.
This also helps you gauge and see if you have a viable plan before you spend your time, energy and money on it. It will help you get investors and show them the potential returns on their investment. It is a projection of what your business could be if you follow through with all the steps. So how do you write a good business plan? Let’s get to it.
There is no standard way to write up a business plan as long as it contains the essential elements. Today we discuss two of the more common formats of writing up a business plan:-
- The Traditional Business Plan
- The Lean Startup
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The Traditional Business Plan
This is the most common type of business plan writing format. It contains the following essential components;
The Executive Summary
This is a summary of the company, it’s purpose and objectives. It should include a brief description of basically everything from beginning to end. This is where you make or break your plan. It shows the overview of the business, the marketing and sales projections, the competition, the problem the business plans to solve.
It shows the company and management and the financial projections of the business. You use this to make an outline for the rest of the business plan. This part should be precise and to the point. It should be able to pinpoint the potential success of the business. It should not be too long and should keep your readers and potential investors engaged.
Company Description
This part goes into a lot more detail on the governance of the company. The years of experience each party has under his/her belt, which will play a key role in the success of the business that is to be ventured into. This part also describes who is needed to be hired for the success of the business and also the legal structure of the business and its location.
Market Analysis
This shows an overview of the size of the market, how will the business be able to capture this market. It also describes the potential competition and how you plan to have an edge on your competition. Is it lowered rates or quick responses? All these need to be described in detail in the plan. It also needs to detail how you will make the numbers of the market streaming to your business grow with each financial year.
Product and Services Description
You need to describe in detail the products or services that your business plans to offer. How they will be beneficial to your potential customers. How they will solve the problem that the market is in need of right now. Describe plans to patent any intellectual properties. You need to show that your product or services are viable.
Marketing & Sales
A very key component because what is the use of having a great product or service if no one knows about it and no one is buying it? Describe how you plan to make the market aware of your products/services, what it will cost to keep this budget and the projections of sales that will come with a particular amount of marketing budget. The budget needs to make sense otherwise your profit margins may not be enough to keep the costs of marketing.
Also, this area involves a lot of trial and error so the plan needs to be very adaptable to change with every situation. One mode of marketing may work for a while until it doesn’t anymore, meaning you have to find new ways. All these need to be captured.
Financial Projections
In any business, money is what matters as it is the very backbone of the business itself. It runs everything. The financial projections have to make sense for it to be a viable business. If the money is not flowing in then you basically have no business. Your plan needs to detail the finances, how the company is set to perform in the first financial years since it could take a while for the business to pick up.
What are the funding sources in place to make sure that the business is afloat? It also needs to detail the financial projections of the latter years. When is the business supposed to break even based on the market analysis and trends?
Funding Request
This is not necessary for all business plans, but if you plan to take out a loan from an institution or friends, it is best to have it, as it will detail the amount you need for each and every part of the business. It will also detail the security that will be used as collateral so that the financial institution does not go at a loss.
You need to have a conclusion that will tie it all up together and summarize all that has been detailed in the business plan and make a convincing case in the part of the funding request. But basically, it should prove that the business at the end of it all is viable and will make a profit.
Related: Business risk: Can Your Business Handle The Heat?
The Lean Startup
As the name suggests, this is a much smaller, more modern type of business plan that aims to fasten the process of business viability, through adopting experimentation over elaborate planning. It puts more importance on customer feedback and the flexibility of the business after a mistake.
This type of planning enables a business to be able to capture failures fast and adapt and change to a product that the market is reacting to. It entails producing smaller versions of the products or services to see how the market reacts to them before mass-producing the products or services. This usually saves the company a lot of money in failed concepts.
Related: The Lean Startup
Minimum Viable Product
This is a product or service that has just enough features for it to be usable by customers. This is a concept used to determine the behaviour of customers and how they will react to the product or service that you want to bring out. If the response is good, then it means you have a product that customers could want and you can produce more of it. If not then you have to go back to the drawing board.
Split Testing
This is a process to help you figure out which products or services resonate the most with the customers. It will help you narrow down more on which products the customers will go for. For example, if you have a poll on clothes or shoes, based on the response of the poll you can narrow it down to high heels or flats in the case of shoes and jeans or dresses in the case of clothes.
Customer Development
This is the process of figuring out the ideal customer for the business that you would want to start. You have to build your business around what the customer wants and you also need to figure out if this is the kind of customer you are trying to attract and build products or services for. It involves a lot of hypotheses as you try to come up with a validated model. The company is then able to move forward fully focused on this validated model.
Cost Structure
This has to be put in place so as to help you and potential investors see how much the whole process is going to cost. You have to break it down to the most critical avenues so as to avoid a scenario where you overlooked a critical part of the process which could make you get stuck and lose valuable time and money.
Revenue Streams
Your potential investors have to see how much money they are going to make if they decide to invest in your venture. You have to analyze all the revenue streams at your disposal, especially the digital streams. You have to prove to yourself and your potential investors that if they decide to invest it will be a good idea.
Business is a risky endeavour but one which is always worth the risk, if it fails you start over with experience on what not to repeat, if it succeeds then you have something to call your own. Please let us know what you think in the comments
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