“Do I need a business plan?”
This question has been frequently asked by founders and other entrepreneurs. Indeed, who can blame them? In a world of fast-paced startups and technological advancements, what does a document like a business plan have to do with the success of the modern organization?
But despite all the modern tools and analytics, a business plan still has a place in the contemporary setting.
Why do you need a business plan?
A business plan serves as a business’ guide, its roadmap to success. Business owners would rely on the business plan every now and then to ensure that they are on the right path and are not deviating from their course.
Of course, a business plan can be dynamic, in the sense that it can change as the business grows. What might be important when you are a struggling startup, for example, may no longer be relevant when you become a company with 100 employees.
Business plans are helpful for startups, established businesses, entrepreneurs with business partners, and businesses that are looking for financing. Here are some of the things a solid business plan can provide:
- Define agreements with partners
- Showcase the strengths of a business
- Bring accountability
- Highlight the trajectory of a business
Aside from helping you secure capital and funding from investors, having a detailed business plan also ensures that you will not be derailed when you come across turbulent times. With a well thought of plan, you will have contingency plans in place and will be equipped with the proper tools when things go amiss.
How to write a good business plan
The future and longevity of your business depend on a solid plan, so you have to make sure that it is as well-written as possible. Here’s how you can do so:
1. Define your purpose and goals
Not knowing your purpose and goals would be akin to going to battle without understanding why you’re there. Many companies have lost good opportunities because their vision of their company is murky at best.
Before you get started, you have to know what it is that you really want to do.
- What is your purpose?
- Why does your business exist?
- Who is your target audience?
- What do you want to accomplish?
- Where will you find the financial support you need to launch your business?
These questions must be explored and expounded upon on your business plan.
2. Do proper market research
Once you have identified your business’ identity, it’s time to conduct proper market research to establish your competitive edge. You need to understand who your competitors are, what they are doing in terms of product development and marketing, and how you can penetrate the market.
Here is how you can do thorough market research:
- Identify your buyer personas – This will help you know who it is that you are trying to target. This involves identifying your target audience’s location, age, gender, occupation, income, and motivations for them to use your product.
Once you know your target personas, try to imagine a day in their lives and see how you can best communicate with them.
You don’t have to be restricted to one persona. For example, if your products are soccer gear for young kids, your typical persona would be a child of about 8-12 years old. However, another persona that you can target is the child’s mother, who is an adult woman who wants something affordable without compromising the product’s quality.
- Gather a sample group – Once you know your target audience, choose a small sample group. You can talk to them or send out questionnaires – the idea is to know your buyer persona’s consumer behavior.
- Know your competition – You have direct competitors, or those selling the same product. On the other hand, you have indirect competitors, who are selling a similar product.
For example, if you are selling cookies, then your direct competitor are bakers who sell cookies. On the other hand, your indirect competitors are bakers who sell cupcakes and other pastries.
- Analyze your data – Finally, condense your results and see what insights you can glean from it. This will give you a better idea of how to proceed with your business.
3. Speak your audience’s language
Being able to communicate with your audience in a language they understand (less jargon and industry terms) would help you become more relatable to them.
So if you are selling affordable dresses to teenagers, do not complicate the language. Likewise, if you are talking to other businesses, you need not over explain as they well-versed on industry speak.
4. Keep it short
You might be tempted to write down every single detail you can think of. But that would only be a recipe for you reading your business plan once, shoving it in a drawer, and never seeing it again.
What you need is direction, not a bloated document. Keep your business plan clear and concise—this is a dynamic document that changes as your business grows, and keeping it short allows you to be agile with your approach.
5. Keep it simple
Don’t be afraid if, in the beginning, you seem to be a little lost—the business plan is designed to get you on your feet, after all. As long as you are passionate about your businesses and your plans for it, then you will continue to learn as you go along.
A business plan is a guide, not a compendium of everything you need to know.
6 Components of a good business plan
Now that you know how to create a good business plan, here are the parts of it that you shouldn’t miss:
- Executive Summary – Put the most important things here—the items that you would want your potential investors to see at a glance.
- Business Description – This describes your company’s business model and your company’s mission-vision—your inspirations and your driving force.
- Market Research and Sales Strategic Plan – This section talks about how you want to market and distribute your products. This includes your buyer personas, and how you would want to communicate with them.
- Production Plan – This explains your products and services, and also talks about how they work. For example, if you have different subscription plans, this is where you detail each one.
- Operations and Management Roles – This describes your organizational chart and holds you and your members accountable for their actions. Who is responsible for what? This would clearly illustrate those responsibilities so you will know whom to turn to for different circumstances.
- Financial Plan – This section details the following – where you will get your funding, your initial expenditure, how much you expect to get from investors, and what would happen when you don’t get the funding.
If you are uncertain about how to write a business plan, here are two samples to get you started today:
At the end of the day, the success of your business would rely on how you properly manage it. Your business plan is only a tool; it is up to you how you will wield it.