Step By Step Business Plan Writing
A strong,
well-thought-out business plan is crucial for a business's success. Without
one, it's tough to maintain a vision of the future and what the next steps for
your business should be. Think of it as a litmus test to prove that every step
taken is part of a larger calculated effort.
Business
plans are also crucial for external affairs. If you want to want to take out a
loan, bring on a business partner, or more you'll need a solid plan in order.
Your plan should be your pitch.
Things to Know Before You Begin Writing
Know your audience. For example, if your business operates in a very niche space, you don't want to use niche and complex language that no one will understand if your plan will be reviewed by lenders or investors who don't have much knowledge of your space.
Also, keep the length of your plan in mind when it comes to your reader. We would always recommend keeping your plan as short as possible, but certain readers might want to see more details while others might want only the high level information. For example, a potential business partner will likely want to see a bit more details than an underwriter evaluating your business. However, don't go overboard with this and write a 50-page plan, as no one will read that.
STEPS
- Write an executive summary
- Describe your company
- State your business goals
- Describe your products and services
- Do your market research
- Outline your marketing and sales plan
- Perform a business financial analysis
- Make financial projections
- Add additional information to an appendix
1. Write an executive summary
This is the first page of your business plan. Think of it as your elevator pitch. It should include a mission statement, a brief description of the products or services offered, and a broad summary of your financial growth plans.
Though the executive summary is the first thing your investors will read, it can be easier to write it last. That way, you can highlight information you’ve identified while writing other sections that go into more detail.
2. Describe your company
Next up is your company description, which should contain information like:
Your business’s registered name.
Address of your business location.
Names of key people in the business. Make sure to highlight unique skills or technical expertise among members of your team.
Your company description should also define your business structure — such as a sole proprietorship, partnership or corporation — and include the percent ownership that each owner has and the extent of each owner’s involvement in the company.
Lastly, it should cover the history of your company and the nature of your business now. This prepares the reader to learn about your goals in the next section.
Here, you can address how you plan to persuade customers to buy your products or services, or how you will develop customer loyalty that will lead to repeat business.
If you’re a startup, you may not have much information on your business financials yet. However, if you’re an existing business, you’ll want to include income or profit-and-loss statements, a balance sheet that lists your assets and debts, and a cash flow statement that shows how cash comes into and goes out of the company.
You may also include metrics such as:
Net profit margin: the percentage of revenue you keep as net income.
Current ratio: the measurement of your liquidity and ability to repay debts.
Accounts receivable turnover ratio: a measurement of how frequently you collect on receivables per year.
8. Make financial projections
This is a critical part of your business plan if you’re seeking financing or investors. It outlines how your business will generate enough profit to repay the loan or how you will earn a decent return for investors.
Here, you’ll provide your business’s monthly or quarterly sales, expenses and profit estimates over at least a three-year period — with the future numbers assuming you’ve obtained a new loan.
Accuracy is key, so carefully analyze your past financial statements before giving projections. Your goals may be aggressive, but they should also be realistic.
List any supporting information or additional materials that you couldn’t fit in elsewhere, such as resumes of key employees, licenses, equipment leases, permits, patents, receipts, bank statements, contracts and personal and business credit history. If the appendix is long, you may want to consider adding a table of contents at the beginning of this section.
Additional Tips
Be efficient
with your plan: Be sure every single word and image in your plan serves a
purpose. You don't want window dressing for the sake of window dressing here.
Being concise and getting straight to the point will help make your plan more
digestible and easier to understand.
If your plan
starts to exceed 20 pages, really proofread to see if anything should be cut
out. Also, follow the advice we mentioned above and be aware of your audience.
Don't write a plan that will confuse or bore the reader.
Keep
yourself honest: Don't assume a fantasy world when writing your plan. Be
honest and realistic. Use industry or sector benchmarks to determine what those
realistic measures are, and be wary of inflating projections. This is a very
common problem and it doesn't help anyone out.
Accept help: There
are so many free resources both online and in person to help with all
small-business affairs. Nonprofit organizations like SCORE offer
things like free mentoring and can help you write your business plan. If you're
a woman or a minority, there are many governments sponsored resources like
the National Women's Business Council that also provide free
consulting.
Avoid
over-optimism: If you’re applying for a business loan at a
local bank, the loan officer likely knows your market pretty well. Providing
unreasonable sales estimates can hurt your chances of loan approval.
Proofread:
Spelling, punctuation and grammatical errors can jump off the page and turn off
lenders and prospective investors, taking their mind off your business and
putting it on the mistakes you made. If writing and editing aren't your strong
suit, you may want to hire a professional business plan writer, copy editor or
proofreader.
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