Wikipedia defines a business plan as a ‘formal statement that contains a set of business goals, reasons an entrepreneur believes those goals are attainable, and how he or she thinks they can be achieved.
You could say that a business plan is a ‘written form of a business’. It is usually a 25-30 page writeup, with a description of an idea that an entrepreneur might want someone to fund, usually an investor.
It provides the short-term and long-term goals of a business, how it intends to reach those goals, how it intends on getting resources, how it plans on allocating those resources, the potential problems that the business may encounter and how these will be dealt with, and potential opportunities that may arise during the course of a business.
It also provides information about the market, its potential and how the business aims to be successful in that market.
At the end of the day, it tells anyone reading the business plan – be it the business owner, an investor, people directly associated, affiliated or influenced by the business, and other stake holder how the business will benefit them and how it will go from being an idea into a sustainable running business that makes them money.
All entrepreneurs well and truly understand the importance of a good business plan. When a good business opportunity has been identified, the first thing that every entrepreneur needs to do is create an effective business plan.
A business plan has many different components, which we will be looking at in this article. One of the most important of these, for instance, is the SWOT analysis – short for Strengths, Weaknesses, Opportunities and Threats.
Here is a step-by-step guide on how entrepreneurs can create rock-solid, effective business plan from the ground-up:
What makes a business plan effective and successful isn’t actually the plan itself, but the idea behind it.
Every business needs a rock-solid idea that is sustainable and profitable in a market where there is a demand for such a business.
If you think about it, every business starts from an idea, and the better the idea, the more successful the business will be, the more pitch-worthy it will be, more investors will be interested in funding it, and it will have a higher chance of turning into a sustainable and successful business in the long-run.
Keep it simple, but (in the famous words of Donald Trump) think big!
Contents of the Plan
A business plan usually consists of the following set of things, and is structured in the following way:
- Cover page: The cover page is usually a one-pager that has the name of your business in big, bold letters. The name of the business will be the biggest and the most distinctive feature of this page, something which immediately catches the eye of the reader. This will be accompanied by contact information (address, telephone, email, website – whatever’s applicable). A cover page is usually followed by a Table of Contents.
- Executive summary: Your ‘elevator pitch’! A management summary; another 1 or 2-pager, which summarizes your business plan comprehensively. It provides readers with a way to know everything in the plan without having to read the whole thing. This is your opportunity to really pitch your idea in a solid manner, as this is where an investor will develop initial judgment about your business.
- Description of the idea and the business: Self-explanatory. Explain in detail about your idea/business. Start with the basics – address all the what’s, who’s, where’s, and why’s.
- Industry background: Information about the industry your business will belong to.
- Market analysis: Marketing analysis looks at the potential of the market (within the chosen industry) that your business intends to enter. A marketing analysis is usually very interesting (well, at least for me). The biggest component of a marketing plan is the SWOT Analysis.
- Competitor analysis: Self-explanatory: a look at your competitors and who you will be in direct and indirect competition with, their strategic strength in the market and industry, as well as their strengths and weaknesses.
- Marketing plan: This is different from a market analysis; the marketing plan details your business’s marketing strategy and its marketing efforts. This is where good marketers, business men and entrepreneurs make their bread; how you will market your business, reach your potential customers and clientele, advertisement details, sales promotions, merchandising… the whole lot!
- Operations plan: Information about some of the physical aspects of your business and things related to the operations, including the office space, the facilities, equipment and assets, suppliers and the supply-chain, manufacturing process, and inventory, for instance.
- Financial Plan: Self-explanatory. Everything that the person reading the document needs to know about the money: including initial investment, projections, projected cash-flows, break-even analysis, financial ratios, expenses, expected profits, and the short-term and long-term financial health projections of the business. The financial plan needs to be realistic, for obvious reasons.
- Management and organization summary: This is your business’s HR department. This part of the plan includes information about the people who will be running the business, including the organizational hierarchy, senior management and key personnel, staffing requirements, as well as recruitment and selection policies, trainings, bonuses and rewards, internal and external promotion criteria, and all costs associated with this.
These are some of the main contents that make up a marketing plan. Most of those are quite self-explanatory, for instance a good business plan starts off with a short background, a little about the business, and then gets to the technical stuff like a marketing analysis and an industry analysis, before dwelling into a marketing-operations-financial plan.
At the end, add any attachments, indexes or appendices to your business plan.
We will look at each of those different components of a business plan in great detail on this blog.
Composition of the Plan
Business plans need to be simple, straightforward and to-the-point. They need to be short and precise, rather than becoming a doctoral thesis. They need to be able to (a) get the idea across to the person reading it in the simplest of terms, and (b) let them know how you intend on achieving your purpose.
Always keep the investor in consideration. A business plan also gives potential investors a solid reason to invest in the business.
Use the standard writing best-practices here: refrain from using complicated words or sentences, keep the language simple, break down your copy into short, easily-comprehensible sentences and paragraphs, and use bullets (but if you do, add an explanation with each bulleted point!
As far as pages go, an average business plan is usually somewhere between 20-30 pages, but it can vary greatly. A large business with a unique idea, for instance, might not fit within 30 pages. Don’t make it too long, usually 30 pages plus another 10 for the appendices works well. Anything more than this and chances are that you won’t find many people willing to read it, let alone invest in your business.
One good idea is to make use of as much graphs, infographics and other charts to get the idea across.
Other than that, make sure the plan is grammatically and factually correct. The last thing you want to do is leave the wrong impression on an investor by putting not getting your facts correct!
Keep the fonts consistent: one font for the headings, and another for the body. 11 or 12, font size, Ariel, Times New Roman or Calibri as your fonts are safe bets.
At the end, use the spell check!
I’ll be looking at some of the contents of a business plan in greater detail in some of my upcoming articles, so watch this space.
I’ll also speak about how to go about pitching a business plan to potential investors, interested parties, and present it in front of stakeholders.
Till then, don’t forget to think big, aim big!
(Side-note: a common misconception with business plans seems to be that only entrepreneurs and start-ups require one. This is totally wrong. A good business plan can keep a running business can keep a running business on-track, and can be just as useful to a well-established business as well. What is your opinion? Leave me a comment below!)