A business plan can be broken down into a handful of different components that are each necessary to create a fully functional plan for any business. Every company is unique and every industry has its own special needs, but there are some facets of business that are relevant to every firm regardless of market or product.
Defining the problem you solve
When you’re writing a business plan, the first thing you need to know is if this is a problem that people are willing to pay to fix? Without paying customers, no business can survive! You need to know who is going to be needing the solution your business offers – is this a solution for end consumers, or for other businesses? A business plan needs to outline the scope of the problem and where exactly it appears; without this information you could have the perfect solution to a problem but a failed business due to promoting it in all the wrong places! A customer needs to be able to recognize their problem and understand that your business offers the solution to it – this creates market demand which drives your entire business.
Sizing the market
Your business plan needs to outline how attractive the market you’re entering is; the more attractive it is, the more potential future competitors you could have. How many potential customers are in this market? Large or small amounts of customers are not inherently a good or bad thing, but this information is crucial for proper planning. How does the market organize itself? The market could be organized in numerous different ways, from geographic to psychographic and everything in between. Once you have an understanding of these factors of the market, your business plan needs to articulate how much of this market your business can be expected to capture. Sometimes a niche market can be just as profitable as a much larger market, if not more profitable! It’s all dependent on market share.
Defining your product solution
Describe your product in a simple way that anyone can understand. Many of your customers could be completely unfamiliar with the industry and lack the expertise required to understand industry jargon. Use simple, straightforward language. Describe how the product solves the customer’s problem. Remember to focus on the benefits that a customer gets from the product, rather than features they may not understand the impact of! You’re the expert in your field and your customers are not, so it’s important to speak to them in the ordinary language they understand.
Determining your revenue model
In order for any business to be sustainable, it needs to bring in revenue. This can come in a number of ways: a single charge such as when a product is bought, recurring charges such as anticipated maintenance, or subscriptions like many digital offerings. Are there opportunities for cross-selling or upselling? Add-ons? How are similar products priced and what kind of revenue models do competitors have? Many competitors have spent significant money on researching this very topic and you can benefit from the conclusions they’ve reached by observing the decisions they’ve made. What is the value you’re delivering? Price accordingly. Perhaps your solution is truly revolutionary and current competitors cannot compete – in such a scenario you can charge significantly more!
Describing why you’ll dominate the market
You need to have an understanding of your competitors and why your product can compete against them and win. What is your competitive advantage in the marketplace? A business plan should include a SWOT analysis outlining the Strengths, Weaknesses, Opportunities, and Threats facing the organization. This information will be used to describe why your business will out-compete its competitors and avoid being left behind.
Understanding your market
What are the major trends in the market? You can learn a lot from the way competitors are behaving – for example, are they making new acquisitions or divesting existing assets? Is the market fragmented with many different competitors, or has it consolidated around a handful of giants who pose a significant threat to new entrants? Who makes the buying decisions in the market? It’s important not just to answer these questions for the present, but also to anticipate how current answers can predict which turns the market will take in the future.
Building a go-to market strategy
How are you going to reach customers? What channels are you going to market through? Direct? Distributor? How will you build awareness of the product? Partnerships? Licensing? Understand the economics of each channel, they’ll be different!
Determining how many people you need
What job families will you need? Perhaps your business will require them, but not all businesses need finance or marketing experts on staff as these tasks can be done by specialist contractors. How are you going to staff the jobs you do need to maintain in-house, and as more customers find your business how will your business scale its staffing levels to ensure quality is maintained?
Where is your product going to be created, and how much of it will be created by third-party companies? What suppliers will you be using to obtain the inputs required to build the product? If something goes wrong with one or more of your suppliers are there backups available? A business plan needs to outline your relationship with these suppliers, whether it’s long-term contracts or a scheduled bid. Is your business going to be operating alone, or will it require partnerships in order to obtain key components?
Leading the organization
Leadership is a crucial component of every organization. When you’re writing a business plan you need to provide examples of the organizational structure, who reports to whom? Leaders who are already part of a company should have their bios included in the business plan with links to their past experience and accomplishments related to the role they’ll be playing in the organization.
How much capital do you have on hand, and how fast are you spending it? If money stopped flowing into your business tomorrow morning, how long could you keep your doors open and your staff paid? You’ll also need to understand how long it will take to achieve cash flow breakeven, which is the point at which the business is earning enough revenue to be financially self-sufficient every month.
Hard times can happen to any industry or business, even ones managed effectively! A business plan should provide examples of how a company will respond to things like a loss of funding or if the economy takes a significant downturn. The entrance of a new major competitor or the exit of a big customer could be devastating if not properly prepared for.
Exiting Your business
Some businesses stay in families for generations, but that doesn’t necessarily have to be the case. Every business, and every business owner, is different. When writing a business plan you should take a long view of exactly what kind of long-term goals the organization has. If the plan is to eventually have your business acquired by a larger company, who are the potential buyers? An IPO is often an unrealistic plan to rely on in the early life of any business, so you need to be realistic regarding what options you have.
If you need a business plan built by experts with a proven track record of guiding businesses to success, contact us at Black Sheep Business Consulting! Our unparalleled team of experts will build your company a business plan that will help you achieve your goals, regardless of your industry.