Writing a Business Plan

No matter how it’s looked at, writing accurately, briefly, and with clarity is an essential business skill. This is because writing, particularly in a business context, fulfills four important roles:

  1. It conveys information by communicating intentions, objectives, opinions, and ideas as well as on-going developments and plans for the future. Written material in any format – can also be conveniently filed away and stored as a form of definitive recording.
  • It clarifies information by helping to eliminate misunderstood ideas. Writing forces the person who is writing to think about and clarify the idea/subject that he or she is writing about. Topics tend to be confirmed and strengthened when someone takes the time to write them down.
  • It reflects seriousness on the part of the writer. Committing a project to writing shows intent, devotion, and dedication.
  • It holds people accountable. Poor communication is often blamed for problems as diverse as: a) credibility issues; b) incompetence; and, c) differences in beliefs. These situations can be avoided if the use of clear, concise information is understood beforehand. Writing also provides a guide that can be used to measure and compare thoughts with others as well as future results.

Why Write A Business Plan?

When one takes into consideration the fact that the number one reason why new businesses fail is a lack of planning, the importance of writing a business plan becomes more apparent. Don’t try to avoid the time and hassle of sitting down and putting together a comprehensive plan. A well-researched business plan makes it possible to:

  • Define and refine a business concept,
  • Keep a focus on objectives,
  • Spot and rectify weaknesses before they become major problems,
  • Recruit personnel by defining what is needed and what skills employees must have,
  • Create a map that helps guide a business through unfriendly environments,
  • Convince investors that the business idea is sound,
  • Convince money lenders of the entrepreneur’s ability to pay back a loan,
  • Convince potential customers that the business will serve them reliably, and,
  • Obtain necessary permits and licenses.

The Essentials of Good Planning

The main purpose of a business plan is to compare the (potential) sales of a product against its expenses. Put another way, a business plan is not a forum for an entrepreneur to brag about how wonderful or creative his or her idea is. What potential customers say about the product and what the market reveals are far more important. 

The point of business research is to:

  • Determine who is going to buy a product,
  • Find out how many are going to buy it, and,
  • Discover if the market is strong enough to sustain future sales. A business that plans on selling ice cream, for example, needs to know how much it costs to produce, sell, and store ice cream. This includes the cost of raw materials, equipment expenses, the cost of licenses, utility costs, and so on.

A Sample Business Plan Layout

The essentials of a good business plan include (1) an executive summary, (2) a clear description of the product and the people behind it, (3) research findings, (4) marketing strategies, and, (5) costs, wages, and financial projections.

In other words, good business plans do not rely on expensive bindings, novel-length discourses, or fancy graphics; the emphasis is on solid information and reliable explanations as to how the information was collected. The following outline is designed to help write a solid business plan. A brief description accompanies each section. Note that nine sections are not mandatory when it comes to writing a business plan, however, the criteria in each of the nine sections does need to be addressed. Ideally, every section of a business plan should be easy-to-read and be arranged to suit the eye of the intended reader.

Section 1: A Cover Page and Table of Contents. First impressions are important. Every business plan needs an eye-catching, professional-looking cover page followed by an easy-to-use table of contents.

Section 2: An Executive Summary. A good summary briefly uses one or two pages to describe the product (or service), its competitive advantages, who the product will serve, the size of the market, the goals and objectives of the entrepreneur, and a few profitability estimates. Keep everything short. The objective here is to whet the reader’s appetite not to explain details.

Section 3: A Full Description of the Product/Service. This includes how it was conceived, why it’s needed, its function and design, why it’s different, and comparisons with similar products/ services. Focus on competitive advantages and disadvantages and provide a brief overview of the intended customer base. Profitability estimates (along with how the estimates were obtained) should also be included.

Section 4: A Description of the Business. Goals and objectives should be mentioned as well as the intended location of the business (and why). An explanation of the business’s legal structure and organizational set-up is mandatory. Comparisons with similar businesses are also useful.

Section 5: Market Potential. Here’s where market research enters the picture. This section needs to have a full assessment of the market (itemized demographics, characteristics, and trends), a complete description of product demand (i.e.: where perspective customers are located – and their numbers), the future outlook of the market, and a thorough analysis of the competition (who the competitors are, where they are, their strengths and weaknesses, and a forecast of their future intentions). Be certain that the data used is accurate and reliable (in other words, don’t exaggerate). All numbers and forecasts will need explanations clearly showing how data was obtained if a loan from a bank or other source is needed.

Section 6: Marketing Strategy. This is a plan showing how the business will announce its arrival, how its product will be advertised and promoted, the costs involved, market entry barriers (and solutions), the intended price of the product, and distribution plans (and costs).

A brief description of selling procedures and how sales (or the sales team) will be organized is equally as important.

Section 7: Financial Overview. If outside funding is being sought this will be the section most studied by investors and money-lenders. Indeed, many experts consider the financial section of a business plan to be the most important. Financial forecasts for the first year, second year, third year, and fifth year (with balance sheets) are mandatory, along with a brief description explaining how the numbers were obtained. Income statements (based on research estimates).as well as outgoing cash-flow projections (itemized costs) need to be clear and concise. A breakeven analysis is important as is the intended sources of required funds and how that funding will be applied. Do not place financial information in paragraph form.

Section 8: The People behind the Plan. This section involves a description of the main people who will be implementing the plan including a run-down of each person’s skills, experiences, education, and background. Also worth describing are the number of employees needed, a run-through of wage requirements (including those of the entrepreneur), job descriptions, a brief synopsis of job responsibilities, and the business’s employee training procedures.

Section 9: An Exit Strategy. Because too many entrepreneurs don’t know when to call it quits, an exit strategy is an important consideration. For example, if the business proves to be successful it may be necessary to hire an experienced manager to handle growth. At what point will this be done? On the other hand, if the business is losing money, a course of action should be established in advance as to when and how to end operations. How much money will be lost before failure is recognized? Will the business be sold in its entirety – or will it be broken into pieces and sold? An exit strategy can provide possible answers to these questions long before the entrepreneur descends deeper into debt.

The Most Common Mistakes Made When Writing a Business Plan

  • Verbosity. If asked to describe themselves, few people begin by talking about their birth, their adolescence, their teen years, their first love, their pets, and all their experiences and encounters up to the present day. Curiously, however, many people take this route when writing a business plan. The message? Don’t overdo it. Keep each section of the business plan as short and concise as possible.
  • Lack of Scope includes not having sufficient data to complete nine sections of a business plan as well as ‘the 13 Main Reasons Why Businesses Fail’.
  • Overconfidence or Lack of Insight. ‘Eager beaver’ entrepreneurs who rely on hope, charm, or enthusiasm rather than legitimate research impress no one. Every section of a business plan should stick to solid research and facts. All it takes is one embellished ‘fact’ or uninformed opinion to reveal itself and the entire business plan will be seen as a complete fabrication.

Additional Suggestions for Writing a Solid Business Plan

Keep the following suggestions in mind before, during, and after writing a business plan:

1. Stay on track (consider the specific reason why your plan is being written)

− What is the plan’s intention? What is it supposed to accomplish? Is its purpose to acquire funding, to gain licensing permission, or is there another focus?

− Can the aim be summarized in one sentence and be used as the main point? It should.

2. Convey the message of the plan in a way that its recipient(s) will understand

− Exactly who will be reading the document?

− What are their likes and dislikes? (if this is not known, ask the recipients)

− Is the correct tone or attitude being used?

− How much does the recipient already know about the topic?

− Will he or she understand the terms and language used?

3. Structure the plan carefully (organize and clarify)

− Does the document proceed in a logical and organized way?

− Does every sentence and paragraph justify itself? (i.e.: is it organized around a central theme?)

− Have enough graphs, details and/or explanations been included to support the main point?

− Is everything that has been written down necessary? (if not, remove it)

− Is it clears to the reader what he or she needs to know or do afterwards?

4. Take the time to develop, revise, and edit the ‘completed’ document before submitting it.

− Is the document’s layout effective? (are its titles, spacing and text well-balanced?)

− Is the documents information and style easily accessible?

− Has someone proof-read the document? (it should be proof-read by several people)

− Do the beginning and ending statements have a resounding impact?

Business Plan Advice from the Pros

  1. Don’t try to impress the intended recipient of a business plan (usually a financier) with fancy jargon or overly-technical wording.
  2. When crunching your research numbers, don’t forget to add personal wage requirements into the overall expenses – even if you plan on living off your savings (or your parents) for a while. Wage requirements include rent (or mortgage payments), car payments, insurance needs, bills, energy costs, pocket money, and food and living expenses.
  3. Keep your business plan short and to the point. Avoid long sentences and long paragraphs.
  4. Don’t be ambiguous. Ambiguity does not reduce opposition, hide insecurity, cut down on questions or allow you to be all things to all people. It just makes you look bad.
  5. Have all facts and figures reviewed by a professional before showing them to others.
  6. For the financial section of the business plan, develop a worst case scenario, an expected scenario, and a better-than-expected scenario for the first, third, and fifth year of operations. For example, if you think the business will capture 10% of a particular market, also make forecasts for 5% and 15%.
  7. Check with a local bank to see if it offers a business plan booklet. Business plans that are tailored around the preferences of a lender improve the chances of obtaining a loan from that lender.
  8. Use graphs rather than an avalanche of words to explain complicated numerical information.
  9. If help is needed in putting together the financial section of a plan, consider hire an accountant. It may be money well spent.

One thought on “Writing a Business Plan

  1. Yohana Pius

    This document is solid and very useful to business start-ups. It uses very simple and understandable language


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