“If you don’t know where you are going, you’ll end up someplace else.” – Yogi Berra
Sure, Yogi was likely talking about baseball and not business, but the wisdom imparted remains the same: Planning matters.
Regardless of the industry you’re in or the size of your business, whether you’re a start-up or established, having a business plan is key to creating success.
While a plan is crucial for an entrepreneur looking to secure funding; even proven enterprises benefit from a business plan.
A professional business plan helps you identify your goals, clarify strategies, recognize barriers and evaluate feasibility. Essentially, it is a roadmap to success, and if you don’t have one, well, you could end up someplace else.
Following is a comprehensive guide to writing a business plan. From why a business plan matter’s, to what you need to know before you start; here are the insights and inspiration you need to write your own successful plan.
Why business plans matter
The main reason many companies have a business plan is a good one: money!
When you’re asking a bank or investor for funding, a business plan shows that you know your product and the benefits it provides. It proves you know your market, you understand your financials and you’re aware of potential roadblocks. Finally, and arguably most importantly, a business plan demonstrates you have a strategy for the future.
Admittedly, having a plan doesn’t mean you can predict the future (2020 taught us that lesson in spades) but it does show that you know what you need to do in order to succeed.
Studies have shown that businesses with a plan grow 30 percent faster than those without one. Likewise, organizations that have a plan to review and update regularly as they track progress can reach goals and advance the business at a greater rate.
Having a business plan forces you to know your company, warts and all. Not only are you more apt to catch any fiscal issues, such as intermittent cash flow, but also you are better able to make economic decisions, such as hiring new employees or purchasing better equipment. By recognizing risks, you can come up with contingency plans. And when you do make a financial decision, you make it with confidence.
Your business plan provides the foundation on which you can base other plans, be it marketing, strategic, hiring or other. It helps you see a bigger picture and plan your priorities. Finally, a business plan is a tangible asset. You have proof that you’ve put time, research and effort into your enterprise, and you understand every aspect of it. It can act as a guide for service providers or contractors, it can be used to secure financing, it can be shared with staff to help them understand objectives and goals. Your business matters; so does its plan.
Before you start writing a business plan, do these 7 things!
You’re convinced you need to write up a business plan. But wait! Before you hop right in, there’s something you need to think about before you get started, namely market research.
Performing market research takes time and money, but this is your business and personal finances we’re talking about here! It matters, and it’s well worth it.
So before you write your business plan be sure to do these 7 things. (For a bit more detail, you can check out this article.)
1. Determine your market
Who is your target market? To whom are you trying to appeal? Ensure you have a good understanding of who will buy your product. Then try to determine the size of your target market.
2. Define “the problem”
A market problem is your target customer’s stated or silent challenge. A customer needs to be able to recognize their problem and understand that your business offers the solution to it. This creates the market demand that drives your entire business. The key to finding a market problem is to carefully listen for frustrations or “if-only” statements that arise during discussions with your target audience. It must affect enough people in a significant way that makes it worth solving.
3. Define “the solution”
Once you have a legitimate problem you need to provide a feasible solution. Describe how your product/process solves the customer’s problem. Remember to focus on the benefits that a customer gets from the product rather than features that they may not relate to or understand. Then ensure the product or process can be tested.
4. Collect secondary market research studies
Explore what information is available in respect to your target audience, the market problem and similar solutions. Can you confirm a problem exists? Are other similar solutions already available? Why are you a preferred choice? Will new technology make your solution obsolete or irrelevant?
5. Conduct primary market research
You must conduct your own market research on your target audience – impartially and thoroughly. Direct mail, telephone, online, focus groups, observation surveys or a combination of these are excellent sources of data.
6. Process the data
Analyze the collected data for patterns, apply logic to distill understanding and interpret the information. This step doesn’t come easy to everyone, so seek help from experts if necessary.
7. Determine if your research supports your business goals
No matter what the results, you will have learned plenty. Either you found out you need to rethink things before you got in too deep, or your original thesis has merit. Whichever way, you’re ahead of the game!
Now that you’ve covered all these steps, you’re ready to move forward. It’s time to write your business plan!
Key components of any business plan
This is where things are often won or lost. Generally a page or two in length, the executive summary provides an overview of your business and your plans.
It clearly states the problem your business is solving, who your target audience is and brief financial projections to entice the reader to keep reading.
Depending on your format, this section of the plan could also include a mission statement (a few sentences that summarize long-term goals) and a vision statement (a sentence or two about your impact on the world and the greater good when your mission is achieved).
Provide a brief overview of your company and management team, because even an excellent product needs great support. Here’s where you explain why your business is the right one to take your idea to market. This section typically has four sections:
- Company Summary: Think of this like an elevator pitch: the how and why your company was formed, prototypes and products offered, other metrics about your progress so far.
- Your Team: Introduce key players, including owners, senior management, and other personnel. Mention any gaps you are seeking to fill; brief discussion of compensation can be insightful.
- Milestones: For newer companies, this can include incorporation details, signing of property leases, ordering prototypes, bringing in new investors.
- Critical Success Factors: Unlike traditional goals, they don’t have to be measurable so they can relate to client satisfaction, customer service standards, number of products sold, or number of new quarterly hires.
The Business Opportunity
Another chance to sing your praises! Focus on your specific products, services and the problems they solve for your target market. Break it into problems and solutions, focusing on the pain points in your target market, and the unique features your solution provides. You can also differentiate yourself from others already in the market.
This is where you demonstrate you’ve done your research, you know what your competitors offer, and can prove the market isn’t oversaturated. This section needs to include: total available market; market trends, growth rate; and key competitors.
Your Business Model
The way you structure your business will contribute to its success or failure. Thus, it’s vital that you provide evidence of a sound business model. Your plan should focus on these three factors:
- Your Unique Selling Point: Everything and anything that makes your product or process unique needs to be highlighted. This will be key to marketing what makes your product or service special.
- Revenue Streams: The COVID-19 pandemic taught businesses the value of multiple revenue streams. For your business plan, consider the different ways you will bring in cash outside of typical product sales, such as selling tickets to events and workshops, membership programs, selling online content, referral programs or partnerships that bring in new business.
- Sales Funnel/Business Pipeline: Sales don’t occur over a matter of minutes, rather it involves a process; it’s often referred to as a business pipeline or sales funnel. Interested parties turn into leads as they progress down a funnel that engages, informs and eventually turns browsers into buyers. Categorizing and tracking prospects as they go through your funnel can reveal a lot about the health of your business and the flow of leads.
Your Marketing Strategy
Another key component of any business plan includes outlining a marketing strategy. Obviously, this could get quite detailed. For a typical plan, focus on these key areas:
- SWOT Analysis:
- Strengths – Internally, what are your strengths?
- Weaknesses – Internally, what are your weaknesses?
- Opportunities – What opportunities are open to you, what trends can you take advantage of, and how can you turn your strengths into opportunities?
- Threats – What could harm your business, or how could your competition harm you?
- Target Audience: Details about your target customers as they relate to your product or service.
- Key Channels: Detail which marketing channels your target audience is likely to frequent, and create a high-level strategy for each one.
- Sales Plan: Describe how you plan to sell your product or service whether through your sales team, referral partners or other
- Key Performance Indicators (KPIs): Determine what your KPIs are. These are measurable goals and metrics, such as downloads of a free PDF, number of walk-in customers to your store, percentage of repeat customers, number or value of monthly sales.
A critical component of any plan, particularly those created to impress and influence lenders or investors. Detailed specifics are key and should include:
- Investment Proposal: Clearly outline how much capital you require. If you’re offering a stake in the company, say so. Are you looking for a silent partner? Make that evident. Spell out your expectations, and your
- Capital Allocations: Outline specifically how the funds will be used in the business, such as allocating funds for R&D, inventory purchases, rent or property acquisitions, staff wages, marketing, or investments.
Another vital part of a business plan, this section of your business plan will often include:
- Opening Balance Sheet: A spreadsheet with 2 columns: Assets (left) and liabilities and owner’s equity (right).
- Income Statement: A summary of income for the last 12 months in business; if you’re a start-up, provide as much information as you can to date. The statement should include gross revenue, gross profits, operating profits, profits before tax and net profits.
- Business Ratios: These indicate and determine the health of your company and can be debt-to-asset ratios, debt-to-equity ratio, cash ratio, working capital ratio, net profit margin, return on investment, and return on equity.
For examples of various business plan formats, check out our free business plan samples.
Writing a business plan – the takeaway
When it comes to writing your business plan, it can feel overwhelming. But remember, you know your business better than anyone. Nobody else possesses your enthusiasm for your business, so tap into that and let it shine through. If you run into roadblocks, you can always seek help from experts, but it’s up to you to get started.
The best business plans are the ones that get written.
Need help writing a business plan? Call on professionals with a proven track record of guiding businesses to success, contact us at Black Sheep Business Consulting. Regardless of your industry, our team of experts will build your company a business plan designed to help you meet your goals and achieve your dreams.