It's time to roll up your sleeves and get everything down on paper.
When you decide to document your brilliant ideas and strategies for your new business, follow this 5-point guide to keep the process simple and fun!
Before you can begin to write your business plan, it’s important that you’re clear on its purpose. Business owners need a plan for three reasons: to obtain financing, to attract investors, and to guide team efforts.
Lenders want to see how you intend to repay them. Investors want to know how your business will eventually quadruple their money. Your employees (or just you) will use your plan to guide business building activities.
With a clear purpose in mind, it’s time to start writing up your plan.
Step 1: Research everything
Your plan should demonstrate the feasibility of your business and how you intend to achieve profitability. To do that you’ll need solid research.
Before you type one word, find out:
- The cost to start-up your business
- The cost to run your business monthly
- How much customers will pay
- How often customers will buy
- Where else customers buy
- What lies ahead for your industry i.e. trends
- Which suppliers will fuel your business and how much they will charge
- Who will run the business i.e. management team and employees
- Who will advise your business i.e. accountant, lawyer, mentor and consultants
The more information you collect, the better. You may not use all of the data you collect but it will help to have it handy in case someone asks you questions or challenges your strategies.
Step 2: Prepare the financials first
It’s useful to do your thinking through numbers. Nothing is more real than dollars, ratios and percentages. Working to put together your financial figures will force you to think about different aspects of your business.
There are three main financial statements to include in your plan.
- Income Statement: The income statement presents your actual or projected revenue, expense and profit or loss.
- Cash Flow Statement: The cash flow forecast indicates the amount of money entering and exiting your business each month.
- The Balance Sheet: The balance sheet takes a snapshot in time of business assets and liabilities.
Step 3: Write the body of the plan
Use the numbers from the second step to explain your thinking. For example, the revenue projection found in the income statement is based on your anticipated sales, the number of customers you expect to sell within the year, and how much money each one will pay.
Explain the strategy behind those numbers in the body of your plan.
Describe your thinking within these key business plan sections:
- Executive Summary - Clearly state what you're asking for in the summary. Address business concept, financing requirements and management team. Touch upon any major trends affecting your business future.
- Business/Product Description - Share information about what your company does, what it sells, who it serves and why you see opportunity there.
- Market Analysis – This describes your industry, gives information about the target market, and explains how your product or service will meet the needs of the target market. It should discuss the size of the target market, the market share you hope to gain, the pricing of your product or service and your projected gross margin. It should also present the strengths and weaknesses of your competitors.
- Marketing, Sales and Distribution - Provide detail on your target customer and how you intend to reach them. Touch upon your strategies for advertising, social media, customer service, direct selling and getting your offering to market.
- Operations - Help the reader understand the inside of your business by talking about the methods employed by your company to produce a product or render a service.
- Management Team - Here’s where you can brag about the credentials and experiences of your team. Be sure to disclose any ownership stake.
- Employees - Identify key staff positions you intend to fill within the first few years, and describe their responsibilities. Include an organizational chart to help visualize the reporting structure.
- Advisory Team - Lenders and investors may take comfort by reading your list of qualified advisors, mentors and consultants. Line up key support in the areas of finance, accounting, law, marketing, operations and human resources.
- Financial Statements. – As mentioned in step two, the financial data will include information such as an income statement, cash flow forecast and balance sheet. Include any historical financial information (e.g. last year’s numbers) if your business is already up and running.
Step 4: Share it
Once you’ve written a basic draft, share it with people who can provide objective feedback.
Approach an accountant, lawyer, banker, marketing specialist, and other experienced business owners for their input. If you are seeking investment, ask an investor to review it from their unique perspective. You want people to punch holes in your strategies, challenge your numbers, question your research and make you sweat through the answers.
Step 5: Edit, shorten & tighten
Longer business plans are not necessarily better business plans.
Take the feedback from the review stage and get to work on the final version of your business plan. Go through the whole thing to see where you can tighten your thinking, clarify your intentions or remove any unnecessary sections. Remove any flowery language. Make your plan crisp and concise by boiling it down to the bare essentials.
If possible, ask a few of the people who first reviewed your draft plan to read through the edited version.
- Keep it short - Aim for a plan that is 10 to 15 pages plus a few pages for appendices.
- Address the immediate future - No one has a crystal ball to predict their business future in 5 or 10 years, so focus your business plan on the next 3 years only.
- Design it - Spend a few dollars on the services of a graphic designer to visually spruce up your plan.
Before you take action on any of the information above, we recommend consulting with a qualified business advisor that understands your unique needs and situation for your specific business and/or personal plans.