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What Is a Business Plan?
The simplest way to define a business plan is that it’s a blueprint for your company’s future. It provides an overview of your operational and financial objectives to get your business to where you want it to be. But business plans aren’t only for startups and small-scale enterprises, as companies that wish to expand or pursue a new venture may use the plan to determine if their ideas are viable. Not only does it breed confidence in business owners, but it cultivates trust among lenders as well. Detailed business plans prove that you’re knowledgeable and serious about what you’re about to embark on to earn a lender’s approval.
“Companies that plan grow 30% faster than those that don’t plan.” (Source: Bplans)
“71 percent of fast-growing companies have business plans.” (Source: Bplans)
“The most successful entrepreneurs were those that wrote their business plan between 6 and 12 months after deciding to start a business, increasing the probability of venture viability success by 8%.” (Source: Harvard Business Review)
Although these plans are created at the initial stages of the undertaking, they still need to be reviewed from time to time. It’s important to update your business plan periodically to make the necessary changes as the company continues to evolve. Keep in mind that the objectives that were set two years ago may not be as relevant to the current state of your business.
Types of Business Plans
Business plans guide owners, managers, and investors in their path toward success. They help clarify the different aspects of a business to help the management make data-driven decisions for any opportunities or shortcomings that arise. But the common misconception about a business plan is that you’ll only ever need one to suit all your business needs. The truth is, companies and organizations often need new and different types of business plans as they continue to grow in the industry.
How to Write a Business Plan
Every business needs to have a written plan in place if it wants to flourish in the industry it is in. Whether it’s to draw new customers or provide your team with direction, a business plan plays a vital role in the success of your organization. However, getting started is probably the most difficult part. It’s important to know how to write an effective business plan to make sure it speaks volumes with your target audience.
Step 1: Conduct extensive research on the subject.
To write the perfect business plan, you need to have a good understanding of your company, your product, your market, and your competitors. Experts even suggest spending more time researching, evaluating, and studying as opposed to actually writing your ideas on paper. It’s your responsibility to gather as much information as you can about the business and industry you are entering to steer clear of loopholes that could have been avoided.
Step 2: Determine your purpose.
A business plan can serve several different purposes, depending on what you aim to accomplish. One way to meet the objectives of your business plan is to keep it targeted. If you want to attract investors to support your business ideas, you need to write a plan that expresses these intentions. Defining your exact purpose will make it easy for you to tailor your content according to how you expect readers to respond.
Step 3: Create a company profile.
Your company profile pertains to the history of the organization, the products or services that are offered, the targeted audience, the problem to be solved, and the unique selling proposition that differentiates the business from its competitors. You can find most of this information on the About page of a website, as it intends to attract prospective customers and talents to the company. In a business plan, your profile introduces your organization to investors and clients in a way that puts you under a good light. People want to associate themselves with entities that they could trust, your profile does just that by building integrity through words.
Step 4: Have a marketing plan in place.
A simple business plan always comes with a strategic and aggressive marketing plan. After all, it would be impossible for your company to generate a return on investment without proper marketing to create conversions. It should focus on the ‘what’ and the ‘why’ of your marketing tactics to discover what’s practical and what’s not. Meeting your marketing objectives will eventually garner promising outcomes for your overall business goals.
Step 5: Adapt to your audience.
Business plans usually cater to a diverse audience. But even then, note that each type of reader does have a specific interest that they look for in a plan. If you’re familiar with these interests, you can take them into account when writing a business plan for that particular audience. The best business plans are made flexible enough to adapt to their readers. It is often kept simple with the limited use of technical jargon to ensure that ideas are communicated effectively for one to grasp.
Step 6: Explain your intent.
Even though business plans carry a professional tone for formality reasons, it doesn’t mean you can’t evoke an emotional response from your readers. The only way to connect with your audience is if you learn to put their best interests in mind. Your plans need to show that you care about meeting certain goals and that you’re dedicated to pursuing them. That way, investors, customers, and employees get a better view of the problems you’re trying to solve, the values you uphold, and the distinctive features that make you stand out from the competition.
The Dos and Don’ts of a Business Plan
You can find a ton of articles, journals, and websites that are dedicated to guiding new and thriving entrepreneurs on how to make a solid business plan. But it’s not enough to know the steps involved to prepare the business plan, as it’s also important to be aware of what you need to do and avoid when creating it.
1. Do understand what you are selling.
When you offer a product or service to the market, you aren’t just selling the item itself, but its value, quality, and brand experience as well. For example, L’Oréal and Lancome are both makeup brands that sell a wide range of cosmetics to their buyers. What makes them different is how L’Oréal aims to sell money-saving products to consumers, while Lancome uses luxury and status to accompany their offers.
2. Do determine your main objective.
Your mind must be buzzing with a ton of great ideas by now. While this might seem like a good thing, one too many ideas can start complicating your vision. This will only make it difficult for investors and customers to understand what it is that you’re really trying to sell. To make things a lot less complicated, you need to determine the central objective of your company. This makes it easier to eliminate certain aspects of your business plan that don’t support that ambition.
3. Do prove your knowledge in market demand.
With a business plan, you have to convince potential investors that your ideas are worth the money. A good understanding of your micro-economic environment will indicate the growing demand for your product or service offer. If you’re pitching an idea that doesn’t seem promising enough to drive a profit, you could be wasting all your efforts on a lost cause. Also, be sure to consider the factors that influence the rise and fall of market demand to prove that you are capable of running a sustainable business despite the circumstance.
4. Do tackle the risks that come with it.
There will always be risks, and even your backer knows that. But what concerns most investors is your ability to tackle these risks head-on. Risks are an inevitable part of any business venture, and although it’s too early to eliminate them, you can elevate your plans to mitigate these dangers wherever possible. Remember to point out counter-balancing opportunities that are likely to happen if you identify these risks and address them early on.
5. Do focus on future success and profits.
It’s easy to see why your plans would work in the present, but what happens down the road? Your company won’t be able to continue its operations once your capital runs out and you no longer have the funds to support it. When creating a business plan, it’s essential to think ahead. The plans you make now can potentially affect what happens to your business in the long run. Taking the bandaid approach to settle long-term problems with short-term solutions is bound to lead to even more consequences in the future.
1. Don’t forget to strategize.
You don’t want to be too ambitious with your plans. Attempting to sell your products or services to a mass audience is only a good idea if you’ve already established a name for yourself in the industry. Otherwise, you might want to start small. Focus on a specific group of people to target and start building your customer base from there. This method offers a better chance for you to sustain your business as it grows into broader markets.
2. Don’t forget who you are writing for.
A good tip for writing a business plan is to make sure it is geared toward your target audience. This means you need to write clearly and precisely enough for readers to grasp what you are trying to convey. Turn your focus on what readers will look for in your plan, which is anything relevant to the investment decision. An in-depth look into financial calculations and economic evidence may also be necessary in some cases. The business plan outline should also contain information that will explicitly answer the concerns of your audience.
3. Don’t dismiss the competition.
You might have a sharp edge against your competitors, but you’ll need more than that to impress clients and investors. Alternative offerings are a huge factor that could impact your sales numbers, so be sure to examine the facts before making a final call. See what your competitors are up to; where they excel and where they appear to fall short. Knowing the market performance of your peers will offer you a better view of where you currently stand and where you need to be at this level of the competition.
4. Don’t ignore feedback.
It won’t hurt to get a second opinion on your business plan. Comments, complaints, and ideas that others have to offer must be taken into consideration to help improve the plan’s content. It can be extremely valuable, especially when you begin to lose sight of your main objective. Discussing ideas with your peers will also open your mind to opportunities that may have been overlooked in the initial stages of the writing process.
5. Don’t expect too much from your first try.
When you set your expectations too high, you almost always end up disappointed. Starting a business is a difficult process for everyone. But if done right, it can also be a gratifying experience. While writing a business plan might as well be the most daunting part of the journey, it’s still a crucial step to building a roadmap for your ideas. You need to be realistic about the things you envision and make sure your claims are credible. The bottom line should connect you with your target demographics and give them a reason to gamble.
Planning is essential to start and grow your business. And now that we’ve reviewed what a business plan is and why you need one, you can begin with the writing stage of the process. It can be helpful to take a look at a few sample business plans for reference. If you’re looking for something more efficient, feel free to use a downloadable business plan template as an alternative. This allows you to think and strategize effectively to prompt others to invest or join you as you establish a thriving business.