Writing a Business Plan (Made Simple)
I read the other day that 49 out of 50 businesses are started without writing a business plan.
I was shocked…
Having done a business degree, all my early businesses had detailed business plans that ran to pages and pages of text with charts and numbers and projections and plans. It didn’t matter how much effort was put into them, they always ended up in a draw and were largely forgotten about.
Mike Tyson said everyone has a plan until they get punched in the face. Dwight D Eisenhower said planning is futile, the act of planning is indispensable.
What they meant is that the moment you start to act on your plan, the battlefield changes, your competitors and customers don’t read your plan.
What is a Business Plan?
Simply put, a business plan is a documented strategy for a business that shows its goals and its plans for achieving the goals. It shows a description and overview of the company’s future.
Here’s the thing about planning…
For every one minute you spend doing it, you’ll save at least 10 minutes in implementation. Whilst planning won’t guarantee a result, it will give you clarity and focus, arguably the 2 single most important determinants between success and failure.
Spending time on planning and strategy helps you spend more time in what Steven Covey calls Quadrant 2 – The important but non-urgent stuff, that is the hangout of the highly successful person.
I no longer condone mammoth business plans (unless you’re chasing funding or a sale) . I find that a relatively simple document is enough to help people get some clarity and focus is usually more than enough.
Why Should I Write a Business Plan?
I’ll admit. Planning is not one of the most glamorous tasks. But it forces you to actually think about the hard questions.
What is your business all about?
What are your goals?
And which direction do you want to take your business?
A well laid out business plan will:
Steer your Business as you Grow
It’s very easy to lose sight of your business goals, and especially once you start to grow. A business plan is like a compass, it will guide you through each stage of starting and managing your business. It will show you how to structure, run, and grow your business.
Help you Reach Business Milestones
When you have clarity of where you’re headed, you’re much more likely to get to your destination. You’ll even find yourself surpassing those goals! Remember that a plan doesn’t have to be perfect, and you can add things as you go.
Help you Get Funding
If you are looking to work with investors or partners, a business plan is truly the way to go! Having one gives investors confidence in you and shows them that working with you is indeed a smart move.
Writing a Business Plan
So, now that you know what a business plan is and why you should write it, let’s get into how exactly to do it.
Keep in mind that your business plan needs to make sense to you before it does everyone else. So, if you would like, keep it as short but precise as you possibly can. Remember, as much as it’s very important to and for you, it will be just as important to your potential partners and investors.
Here are seven components of a simple business plan:
- Financial forecasts
The First Component of a Simple Business Plan – Description
This section is also referred to as the “Executive Summary.” It also contains your vision statement, mission, and values.
It answers five key questions which are the classic 5Ws and 1H – What, Where, Who, Why and How?
What does your Business do?
Get to the detail about what exactly you are selling. Is it a good, service, or information? You can start to describe the value proposition in this section, which is the unique trait that your business has (among its competition).
Where are your Business Operations?
This section describes the location of your business. It could be online, physical, through mobile, or even mobile. Or it could be a combination. Whatever the case, list it down.
Who does it Benefit?
This section is where you describe exactly who you are targeting. Get down to their age, gender,tastes and preferences etc. You can read more about client avatars here.
Why would People Care about your Business?
What about your business would make the people you are targeting take notice of it? In this section, you can start to look into your mission statement, vision and values.
This section is also called your Value Proposition. As you complete this section, you might find that exploring value propositions uncovers marketable business opportunities that you hadn’t yet considered. So spend some time brainstorming the possibilities in this section.
How do your Products and/or Service Outshine the Competition?
Doing a competitor analysis is super important. What sets you apart from everyone else selling the same thing as you? This is called your Unique Selling Proposition. Explain how this will lead to customer success and loyalty.
The Second Component of a Simple Business Plan – Product
Once you’ve laid out your business and described it vividly, it’s time to list your products and services.
Even though the products will likely be explained throughout the business plan, they need a section that outlines them clearly for any involved partners.
If you sell many items, include general information about each.
At this stage, here’s what you should include:
Name of each Product
Here, you will state each name under your brand. You can add details like the materials used, packaging etc.
Describe new products you’ll launch in the future.
Source of each Product
You may want to include where you sourced each product. If it’s all locally made, state that. If you shipped the products in, state that as well.
Price of each Product
You also want to include the unit cost of each product. This will give you and your potential investors a good idea of your position in relation to your competitors. You can classify yourself as affordable or even high end, and you can target your customers with that mind.
The Third Component of a Simple Business Plan – Audience
Speaking of targeting customers, a business plan simply isn’t complete without the audience stated.
Your business persona is actually the basis of your marketing plan, if not your entire business.
You’ll need to keep this person as you make strategic decisions.
What can you include in this section?Your target audience’ demographic, geographic, psychographic, and behavioural features.
- Demographic features – Age range, gender, education, income, marital status etc.
- Geographic features – Where they live, where they work, and where they’re commonly employed
- Psychographic features – Their lifestyles, interests, opinions, attitudes, personalities, and values.
- Behavioural features – What technology they use, how they spend their free time.
The Fourth Component of a Simple Business Plan – Marketing
This section is all about your marketing plan.
It’s a clear description of your marketing efforts, which are, of course, informed by your ideal customer.
Typically, this is where the 4 Ps of your marketing mix would come in. Let’s look at each of them.
In this section you take a look at each of your products. Break it down by cost, packaging, color and branding, plus additional costs like shipping etc.
Explain what differentiates your product from others in the market.
In this section you want to break down the price of your product. How much profit are you making from each product? And what are your overhead costs? Be sure to include the costs of production and selling.
It will help you to defend your pricing and even make some financial forecasts.
Where will you sell your products? Be sure to justify why you have chosen the specific means of selling the product. If it’s purely online, identify the limitations of that with regards to your specific product.
Promotion is all about getting your product to the ideal customer. It will very likely form the bulk of your plan.
You’ll need to be very tactical in this section. Break down all your sales actions. Examples of sales channels are E-commerce platforms, social media, brick and mortar location, or even Mobile Point on sales.
If you’re a startup, you may find value in traditional advertising such as TV, radio, and newspaper.
The Fifth Component of a Simple Business Plan – Operations
Simply put, in this section you’ll go into how you structure and operate your business.
It’s all about the logistics of the business. Include the roles and responsibilities, and certifications and permits needed to launch your business.
In this section, some new overhead costs that you hadn’t thought of may start to emerge. You may want to make it a process of flow chart, because essentially logistics are the workflows you implement to make your ideas a reality.
Let’s take a look at the components of operations that you can’t afford to overlook:
State where you will source all the raw materials needed to create your product. If you don’t need to assemble any raw materials together, then just state where your (finished) products will be coming from.
Will you make, manufacture, wholesale,or ship your products? Explain the length of production and show how you will deal with the fluctuations in demand and supply.
Depending on what your business is all about, you will need equipment. For example, if you’re a photographer, you most likely need a camera, lenses, editing software, a laptop, maintenance costs, and even a camera bag.
Lay down on paper all that will be required, down to the lightbulbs and everything in between.
How will you deliver your products to the consumer? Will you do it all in house, or will you require the services of a third party? If you can foresee any challenges or loopholes in this process, you’ll need to fill in those gaps.
Depending on which country you are in, the nature of your business and other logistics, you will probably need a licence.
You may need some professional assistance here to find out the regulations and what’s required from you, lest you land yourself in trouble.
Roles and Responsibilities
Now it’s time to talk about each person in your team and their role in the business. Include their currently filled roles, ideal candidates, and any management gaps.
If it’s a one man show, state that and also explain your responsibilities.
The Sixth Component of a Simple Business Plan – Financial Forecasts
For any business to make sense, it needs to be profitable.
No matter how unique and grand your idea is, regardless of how much time, effort or money you invest, your business’ life will depend on how much money it makes.
Remember, this section will help you to secure potential investors.
Here are some of the things you want to include in the financial forecast:
This is a financial statement showing you all of the company’s income and expenses. It gives you and your readers an overview of the money in the company over a certain period.
If you haven’t launched your business yet, in this section you can estimate the future projections of the company with the same information.
A balance sheet is a summary of all the assets, liabilities, and capital of a business. It’s a quick snapshot of the business finances.
If done correctly, a balance sheet should balance because the total value of the business’s Assets will ALL have been funded through Liabilities and Equity.
Cash Flow Statement
This document is similar to your income statement, with one difference: It accounts when revenues are collected and when revenues are paid.
If the cash you have coming in is greater than the cash you have going out, your cash flow is positive. When the opposite scenario is true, your cash flow is negative.
This statement helps you see when you have a surplus of cash or when you’re low on cash, then you can make plans accordingly.
Writing a Business Plan – Our Summary
You’ve probably heard the saying, “If you fail to plan, you plan to fail.”
And cliché as it sounds, it’s 100% true. You need a plan, and so does your business.
In summary, here are the six components of a simple business plan:
- Financial forecasts
If you would like help in creating or refining your business plan, get in touch. Outside ideas are on a mission to help people and businesses grow. We have a range of support that can help you.