Every business needs to have a written business plan. Whether it’s to provide direction or attract investors, a business plan is vital for the success for your organisation. But, how do you write a business plan?
SBA.gov recommends that a business plan includes;
- Executive summary – a snapshot of your business.
- Company description – describes what you do.
- Market analysis – research on your industry, market, and competitors.
- Organisation and management – your business and management structure.
- Service or product – the products or services you’re offering.
- Marketing and sales – how you’ll market your business and your sales strategy.
- Funding request – how much money you’ll need for next 3 to 5 years.
- Financial projections – supply information like balance sheets.
- Appendix- an optional section that includes résumés and permits.
However, getting started can be difficult to do. So, here’s a seven steps in writing a perfect business plan.
1. Research, research, research
“Research and analyse your product, your market and your objective expertise,” writes Bill Pirraglia, a former senior financial and management executive. “Consider spending twice as much time researching, evaluating and thinking as you spend actually writing the business plan.”
“To write the perfect plan, you must know your company, your product, your competition and the market intimately.”
In other words, it’s your responsibility to know everything you can about your business and the industry that you’re entering. Read everything you can about your industry and talk to your audience.
2. Determine the purpose of your plan
A business plan, as defined by Entrepreneur, is a “written document describing the nature of the business, the sales and marketing strategy, and the financial background, and containing a projected profit and loss statement.” However, your business plan can serve several different purposes.
As Entrepreneur notes, it’s “also a road map that provides directions so a business can plan its future and helps it avoid bumps in the road.” That’s important to keep in mind if you’re self-funding or bootstrapping your business. But, if you want to attract investors, then your plan will have a different purpose and you’ll have to write your plan that targets them so it will have to be as clear and concise as possible. When you define your plan, make sure you have defined these goals personally as well.
3. Create a company profile
Your company profile includes the history of your organisation, what products or services you offer, your target market and audience, your resources, how you’re going to solve a problem, and what makes your business unique. When I crafted my company profile, I put this on our about page.
Company profiles are often found on the company’s official website and are used to attract possible customers and talent. However, your profile can be used to describe your company in your business plan. It’s not only an essential component of your business plan, it’s also one of the first written parts of the plan.
Having your profile in place makes this step a whole lot easier to compose.
Related: Top 10 Business Plan Resources
4. Document all aspects of your business
Investors want to make sure that your business is going to make them money. Because of this expectation, investors want to know everything about your business. To help with this process, document everything from your expenses, cash flow, and industry projections. Also don’t forget seemingly minor details like your location strategy and licensing agreements.
5. Have a strategic marketing plan in place
A great business plan will always include a strategic and aggressive marketing plan. This typically includes achieving marketing objectives like;
- Introduce new products
- Extend or regain market for existing product
- Enter new territories for the company
- Boost sales in a particular product, market or price range. Where will this business come from? Be specific.
- Cross-sell (or bundle) one product with another
- Enter into long-term contracts with desirable clients
- Raise prices without cutting into sales figures
- Refine a product
- Have a content marketing strategy
- Enhance manufacturing/product delivery
“Each marketing objective should have several goals (subsets of objectives) and tactics for achieving those goals,” states Entrepreneur.
“In the objectives section of your marketing plan, you focus on the ‘what’ and the ‘why’ of the marketing tasks for the year ahead. In the implementation section, you focus on the practical, sweat-and-calluses areas of who, where, when and how. This is life in the marketing trenches.”
Of course, achieving marketing objectives will have costs. “Your marketing plan needs to have a section in which you allocate budgets for each activity planned.” It would be beneficial for you to create separate budgets for for internal hours (staff time) and external costs (out-of-pocket expenses).
6. Make it adaptable based on your audience
“The potential readers of a business plan are a varied bunch, ranging from bankers and venture capitalists to employees,” states Entrepreneur.
“Although this is a diverse group, it is a finite one. And each type of reader does have certain typical interests. If you know these interests up front, you can be sure to take them into account when preparing a plan for that particular audience.”
For example, bankers will be more interested in balance sheets and cash-flow statements, while venture capitalists are looking at the basic business concept and your management team. The manager on your team, however, will be using the plan to “remind themselves of objectives.”
Because of this, make sure that your plan can be modified depending on the audience reading your plan. However, keep these alterations limited from one plan to another. This means when sharing financial projections, keep that data the same across the board.
7. Explain why you care
Whether you’re sharing your plan with an investor, customer, or team member, your plan needs to show that you’re passionate, dedicated, and actually care about your business and the plan.
You could discuss the mistakes that you’ve learned, the problems that you’re hoping to solve, listing your values, and what makes you stand out from the competition.
When I started my payments company, I set out to conquer the world. I wanted to change the way payments were made and make it easier for anyone, anywhere in the world to pay anyone with little to no fees. I explained why I wanted to build this. My passion shows through everything I do.
By explaining why you care about your business creates an emotional connection with others so that they’ll support your organisation going forward.
Business Plan Format Guide
A comprehensive business plan format guide. A full guide to the business plan contents including the standard business plan format for these 10 basic elements: The overview, executive summary; general company description; the opportunity; industry and market; your strategy; the team; a marketing plan; operational plan; financial plan and the appendix.
When it comes to a business plan format, there are ten basic elements that must be covered when writing a business plan.
The standard contents of a business plan includes:
- an overview
- executive summary
- general company description
- the opportunity
- industry and market
- your strategy
- the team
- a marketing plan
- operational plan
- financial plan
- an appendix.
Save yourself time
While there are no hard and fast rules for the the format of a business plan, this breakdown is generally accepted as standard.
While some people think you don’t need a business plan to start your own business, research has shown that having a business plan greatly contributes to the success of your venture.
A business plan won’t automatically make you a success, but it will help you avoid some common causes of business failure including under-capitalisation or the lack of an adequate market.
The cheat guide for you: View 50+ sample business plans here
Business Plan Format Introduction
What to Include in Your Business Plan
Before you physically start writing your business plan, you need to spend some time doing in-depth research into your industry and market. This is important regardless of whether you have previous experience in that particular industry.
You can use the Internet, industry experts and associations, suppliers and existing competitors for the information. Your research will help you in putting the business plan together as it will give you an understanding of the dynamics and forces affecting the industry.
All sections in the business plan format are interrelated, and cannot be written in isolation. Each should be written by people who are fully aware of the contents and intricacies of the other areas of the plan so that the different sections are all integrated.
The best option is to write the plan yourself as you know your business best. Also, if you are responsible for writing the business plan, you could identify certain challenges and find solutions to them, it will also ensure that you know every single aspect of the business, which is critical when meeting with potential investors.
You may need assistance putting together the financial information if you don’t have a financial background, but make sure you get an accountant to explain what all the figures mean. Although there is a fairly well accepted structure for a business plan format, there are many ways of putting it down on paper.
There are three primary parts of a business plan:
- The Business concept,
- The Marketplace section
- The Financial section.
Some of the contents will have different names and be presented in a different order but almost any business plan will cover these broad areas:
Business Plan Format Contents
Table of Contents (1 page)
Your contents page should be the very last thing you write to ensure that all the page numbers are correct. Make sure that you number your pages correctly so that a person can quickly and easily find the sections they are interested in._
Related: Free Sample Business Plans
1. Business Plan Format, Section 1:
Executive Summary (2 pages)
The executive summary is probably the most critical part of the business plan format. Many business plan readers will read the executive summary and then decide whether to proceed further or discard the plan.
The executive summary should be written last, once all the other sections are complete. It should not exceed two pages and should eloquently summarise the most important aspects of the plan.
Key elements that should be included in the executive summary are:
- Business concept: A description of the business, its products and the market it will serve. You need to describe what will be sold, to whom and how it has a competitive advantage.
- Financial features: The summary should highlight the important financial points like sales, profits, cash flows and return on investment.
- Financial requirements: You need to be clear about the capital needed to start and expand the business, as well as how the capital will be used.
- Current business position: Provide an overview of the company, its legal form of operation, when it was formed, the principal owners and key personnel.
- Major achievements: Highlight any developments within the company that are essential to its success. This includes things like patents, prototypes, locations, contract that need to be in place and results from test marketing already conducted.
2. Business Plan Format, Section 2:
General Company Description (1 – 2 pages)
The general company description section usually follows the executive summary in the started business plan format. It is used to give a high level overview of the company and the business that it engages in.
This introductory section of the plan section should include:
- Name of the company, type of legal entity, ownership, significant assets
- Mission statement of the business
- Company goals and objectives
- The main features of the industry in which you will operate
- The most important company strengths and core competencies
Avoid getting into too much detail about the business in the general company description. It is often tempting to try and cram everything about the business into this section but there are opportunities to get into the details of strategy, marketing, operations, people and finances further on in the plan.
Rather focus on the description of the industry. Is the business retail, wholesale, food service, manufacturing or service-oriented? Provide an indication of how big the industry is and why it has become so popular. You can also highlight some of the trends currently influencing the growth of the industry. Try as much as possible to prove how much opportunity there is in the industry – do so with statistics and anecdotal information.
You should also explain the target market and how your product will be distributed to the market, as well as the support systems including advertising, promotions and customer service strategies. In the description you can include the unique features setting your product or company apart from others in the industry.
The business description should also answer the questions about how your business is going to make a profit. If you are using the plan to apply for funding, explain why the money is going to make your business more profitable.
The length of the description will depend on the complexity of your plan, if your plan isn’t complicated, keep the description short by describing the industry in one paragraph, the product in another and the business in three of four paragraphs_
3. Business Plan Format, Section 3:
The Opportunity, Industry & Market Description (2 – 3 pages)
This section of in the standard business plan format requires that you communicate some of the insight that you got into the industry, the market and the opportunity from the systematic research you conducted before writing the business plan.
Your research will determine your market strategies. The market analysis you do should force you to become familiar with all aspects of the market, so that the target market can be defined and your business can be positioned to garner its share of sales.
It also helps you establish pricing, distribution and promotional strategies and gives you an indication of the growth potential within the industry. Begin your market analysis by defining the market in terms of size structure, growth prospects, trends and sales potential.
a) The Opportunity
Describe the gap that exists in the market and explain what has given rise to this gap, how it was identified and how it can be filled. Answer the following questions:
- Where is the gap in the market?
- What has given rise to this gap?
- How was this gap identified?
- How will the gap be filled?
b) The Industry
Describe the forces affecting the industry in which you will operate. These forces are covered by discussing barriers to entry, suppliers, customers, substitute products and competition. Answering the following questions will enable you to cover the critical issues in discussing the industry:
Question 1: What are the barriers to entry in this industry?
- Consider whether any of the following exist for your company and others wanting to enter the industry: high capital costs, high production costs, high marketing costs, consumer acceptance and brand recognition, extensive training and skills, unique technology and patents, tariff barriers and quotas, legislation or regulation.
- How will you overcome the barriers to entry?
Question 2: How much power do the customers have?
- Who are the customers?
- Do they have significant power or influence over the prices they pay?
- Do they have significant choice when buying the product or service?
Question 3: How much power do the suppliers have?
- Who are the suppliers?
- Do they have significant power or influence over the prices they charge?
- Is there a limited number of suppliers?
Question 4: Are there substitute offerings for the product or service?
- What is the likelihood that customers will switch to a substitute product or service? Will you have important indirect competitors? (For example, video rental stores compete with theatres, although they are different types of businesses)
Question 5: Who are the competitors and how strong is the competitive rivalry?
- What products and companies will compete with you?
- How will your products or services compare with the competition?
Question 6: What are the major changes affecting the industry?
- Consider changes in technology, in government regulations, in the economy
c) The Market
Present your insights into the market in which you will operate. Focus on the customers for your product or service by addressing the following questions:
- What is the total size of the market?
- How fast is the market growing?
- What percentage share of the market will you have? (This is important only if you think you will be a major factor in the market.)
- What are the major trends in target market – trends in consumer preferences, demographic shifts and product development?
Related: The 4 Types of Business Plans
4. Business Plan Format, Section 4:
Strategy (1-2 pages)
Section 5 of in this standard business plan format covers Strategy. You need to describe to readers how the business will compete in the chosen markets. Your positioning strategy will be affected by a number of variables related to the motivations and requirements of your target market as well as what your primary competitors are doing.
Before you position your product or service, you will need to know how your competitors are positioning themselves, the specific attributes your product has that your competitor’s don’t and the needs your product fills for your customers.
Once you have these questions answered in the research stages you can develop a positioning strategy and illustrate it in your business plan. The positioning statement doesn’t have to be long or elaborate, as long as it points out exactly how you want customers and your competition to perceive your product.
This requires a description and explanation of the strategic choices that you have made as a business, including:
- The focus of the business: broad mass market or a specific niche?
- How the business will succeed in the market? How will you create a unique and valuable position, involving a different set of activities?
- What is unique about the business? How is the offering different from that of competitors?
- What is the value for the customers? Describe the value proposition for the customer?
5. Business Plan Format, Section 5:
Business Model Explanation (1 page)
A business model is the profit-making engine of the business. It is central to a business’s success. The business model you choose will be a strong determining point of the future the success of your business.
Your business model must include information on what your company offers in terms of products or services; what makes your offering unique; who you sell them to; and how you make your money.
The important aspects of a business model that should be presented in a consolidated framework include: The sources of revenue
- The major costs involved in generating the revenue
- The profitability of the business (revenue less costs)
- The investment required to get the business up and running (to get to scale)
- The critical success factors and assumptions for making the profit model work
Good business model depend on three qualities, finding high-value customers, offering significant value to customers, and delivering significant margins.
They also avoid three things that can derail a business, namely difficulties in satisfying customers, trouble maintaining market position, and problems generating funding for growth.
6. Business Plan Format, Section 6:
Team: Management & Organisation (2 pages)
In this section of the business plan format you should provide a description of the people behind the business. It should include:
- A list the founders including their qualifications and experience
- A description of who will manage the business on a day-to-day basis. What experience do these individuals bring to the business? What special or distinctive competencies do they offer?
- An organisational chart if you have more than 10 employees, showing the management hierarchy and responsibility for key functions (including position descriptions for key employees)
In this section you will also explain the logistics, including the responsibilities of each member of the management team, the tasks assigned to each division of the company (if applicable), and the capital and expense requirements for operating the business.
Apart from the managers, you should also specify what type of support staff will be needed for the business to run efficiently.
7. Business Plan Format, Section 7:
Marketing Plan (2 – 3 pages)
The marketing plan defines all of the components of the marketing strategy. The marketing plan should draw on market research. It should disclose the important marketing decisions about:
- The product (or service) and why it is valuable to customers
- The focused and detailed description of the target market
- The positioning of the product or service – how it should be perceived by customers
- The pricing strategy with specific price points at which the product or service will be sold
- The sales and distribution channels that will be used to get the product or service to the customer
- The promotion strategy including public relations activities, specific promotions, advertising and intended viral marketing activities
Your product’s pricing will play a role in the success of your business. You need to ensure that your prices cover costs and find ways of lowering your costs. Your prices should also reflect the dynamics of cost, demand, changes in the market and response to your competition.
When deciding on the distribution process of your product or service, analyse your competitors to determine the channels they are using and decide if you want to use the same or an alternative that could provide you with an advantage.
The channel you use will depend on the industry and size of the market, but some of the options available to you include direct sales, OEM (original equipment manufacturer) sales, manufacturer’s representatives, wholesale distributors, brokers, retail distributors and direct mail.
Your promotion strategy should be specific including the advertising budget, creative messages for your advertisements and at least the first quarter’s media schedule.
You can also include a description of the packaging strategy and possibly even mockups of labels, trademarks or service marks. You need to come up with a publicity strategy that includes a list of media you want to approach and a schedule of planned events.
8. Business Plan Format, Section 8:
Operational Plan (2 pages)
Explain the daily operation of the business, its location, equipment, people, processes, and surrounding environment. The operational plan in a standard business plan format describes how the business functions on a continuing basis, as well as the capital and expense requirements related to the operations of the business.
This section will vary depending on the nature of the business but some the more generic items that can be presented include:
- A description of the operating cycle that describes what the organisation will do to deliver its service or create and sell its product
- A description of where all the necessary skills and materials will be sourced
- What will be outsourced, what relationships are in place and how those relationships will be managed
- The cash receipts and cash payment cycle of the business
You can include a number of financial tables in the plan, including the operating expense table, the capital requirements table and the cost of goods table.
You should also highlight any potential benefits or pitfalls to the community such as new job creation, economic growth and possible effects on the environment from manufacturing and how they will be handled to conform with regulations._
9. Business Plan Format, Section 9:
Financial Plan (3 – 5 pages)
The financial plan is a reasonable estimate of your company’s financial future. Include a few paragraphs on the main features in the financial plan and back this up with financial projections.
Don’t include too much financial detail in the body of the business plan. If you have detailed projections and supporting calculations, place them in the appendix.
The following are the most important financial documents to include in the financial plan:
- Start-up expenses and capitalisation: a description and explanation of what it will cost to launch the business and where you expect to get this money
- 12-month profit and loss projection (month-by-month) and a three-year profit and loss projection (quarter-by-quarter)
- A 12-month cash-flow projection and a three-year cash-flow projection (quarter-by-quarter)
- A projected balance sheet at start-up and at the end of years one to three
- A break-even calculation
Astute investors will look at the charts, table, formulae and spreadsheets in your financial section very carefully, so it is important to put sufficient effort into them. Investors will determine the odds for continued survival based on the information provided in this section.
The three most important financial statements to include in your business are the income statement, cash flow statement and balance sheet. Of these three, the income statement is the best place to start. It is a simple and straightforward report on the proposed business’s cash-generating ability. It’s a score card on the financial performance of your business reflecting when sales are made and when expenses are incurred.
In the business plan, the income statement should be generated on a monthly basis during the first year, quarterly for the second and annually for each year thereafter. The information included is your financial projections of income, cost of goods, gross profit margin, operating expenses, total expenses, net profit, depreciation, net profit before interest, interest, net profit before taxes, taxes and profit after taxes. After the income state, include a short note analysing the statement, emphasising key points.
The cash flow statement shows how much cash is needed to meet obligations, when it is going to be required, and where it will come from. It should show a schedule of the money coming into the business and expenses that need to be paid. The result is the profit or loss at the end of the month or year.
Profits and losses are carried over to the next column to show the cumulative amount. If you run a loss on your cash flow statement, it is a strong indicator that you will need additional cash in order to meet expenses. You will also need to analyse the cash flow statement in a short summary.
The balance sheet is generated only on an annual basis for the business plan and is basically a summary of all the preceding financial information broken down into three areas: Assets, liabilities and equity. Investors might require a personal financial statement or balance sheet instead of one that describes the business. Again, you will need to create an analysis statement for the balance sheet covering the key points.
10. Business Plan Format, Section 10:
The appendix includes additional documents that the reader of the business plan may want to refer to.
Documents that could be included in the appendix:
- Brochures and advertising materials
- Industry studies
- Blueprints and plans
- Maps and photos of location
- Magazine or other articles
- Detailed lists of equipment owned or to be purchased
- Copies of leases and contracts
- Letters of support from future customers
- Any other materials needed to support the assumptions in this plan
- Market research studies
- List of assets available as collateral for a loan
- Detailed financial calculations and projections.
Instead of making one of the previous sections too long by including too much information, it is better to highlight an aspect you are describing, mention that there are figures, examples or other proof and then include that proof in your appendix.
All of these sections combine to create what is hopefully an exciting and viable story of a business that is to be launched or a growth path that will take an existing business to new levels of impact and success.
There are some important things to remember when writing your business plan. You need to be as realistic as possible with all projections. The small details are important, so have the plan proof read by someone with a good command of the English language to check for any spelling or grammatical errors.
The 4 Types of Business Plans
Business plans can be divided roughly into four distinct types.
There are very short plans, or mini-plans, presentation plans or decks, working plans, and what-if plans. They each require very different amounts of labor and not always with proportionately different results.
That is to say, a more elaborate plan isn’t guaranteed to be superior to an abbreviated one. Success depends on various factors and whether the right plan is used in the right setting. For example, a new hire may not want to read the same, elaborate version of your plan that might be important to a potential investor.
The mini-plan is preferred by many recipients because they can read it or download it quickly to read later on their iPhone or tablet. You include most of the same ingredients that you would in a longer plan, but you cut to the highlights while telling the same story. For a small-business venture, it’s typically all that you need. For a more complex business, you may need the longer version.
The Presentation Plan
The advent of PowerPoint presentations changed the way many, if not most, plans are presented. And while the plan is shorter than its predecessors, it’s not necessarily easier to present.
Many people lose sleep over an upcoming presentation, especially one that can play a vital role in the future of their business. But presenting your plan as a deck can be very powerful.
Readers of a plan can’t always capture your passion for the business nor can they ask questions when you finish. But in 20 minutes, you can cover all the key points and tell your story from concept and mission statement through financial forecasts.
Remember to keep your graphics uncluttered and to make comments to accentuate your ideas rather than simply reading what’s in front of your audience.
While a presentation plan is concise, don’t be fooled: It takes plenty of planning. The pertinent questions who, what, where, why, when and how all need to be answered.
The Working Plan
A working plan is a tool to be used to operate your business. It has to be long on detail but may be short on presentation. As with a mini-plan, you can probably can afford a somewhat higher degree of candour and informality when preparing a working plan.
In a plan you intend to present to a bank loan committee, you might describe a rival as “competing primarily on a price basis.” In a working plan, your comment about the same competitor might be “When is Jones ever going to stop this insane price-cutting?”
A plan intended strictly for internal use may also omit some elements that you need not explain to yourself. Likewise, you probably don’t need to include an appendix with resumes of key executives. Nor would a working plan especially benefit from product photos.
Internal policy considerations may guide the decision about whether to include or exclude certain information in a working plan. Many entrepreneurs are sensitive about employees knowing the precise salary the owner takes home from the business. To the extent such information can be left out of a working plan without compromising its utility, you can feel free to protect your privacy.
This document is like an old pair of khakis you wear to the office on Saturdays or that one ancient delivery truck that never seems to break down. It’s there to be used, not admired.
The What-If Plan
When you face unusual circumstances, you need a variant on the working plan. For example, you might want to prepare a contingency plan when you’re seeking bank financing. A contingency plan is a plan based on the worst-case scenario that you can imagine your business surviving—loss of market share, heavy price competition, defection of a key member of your management team.
A contingency plan can soothe the fears of a banker or investor by demonstrating that you have indeed considered more than a rosy scenario.
Your business may be considering an acquisition, in which case a pro forma business plan (some call this a what-if plan) can help you understand what the acquisition is worth and how it might affect your core business.
What if you raise prices, invest in staff training and reduce duplicative efforts? Such what-if planning doesn’t have to be as formal as a presentation plan. Perhaps you want to mull over the chances of a major expansion. A what-if plan can help you spot the increased needs for space, equipment, personnel and other variables so you can make good decisions.
What sets these kinds of plans apart from the working and presentation plans is that they aren’t necessarily describing how you’ll run the business. They’re essentially more like an addendum to your actual business plan. If you decide to acquire that competitor or grow dramatically, you’ll want to incorporate some of the thinking already invested in these special purpose plans into your primary business plan.
This article was originally posted here.
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