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:
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:
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:
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,
(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
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)
2. Convey the message of the plan in a way that its recipient(s) will understand
3. Structure the plan carefully (organize and clarify)
4. Take the time to develop, revise, and edit the ‘completed’ document before submitting it.
Business Plan Advice from the Pros