A business plan is a roadmap. It's a guide you use to outline your business identity and objectives. Making a business plan is one of the most important steps that every startup should take.
A business plan is a common must-have for almost every venture you're gonna take on, which can decide how your business is going to survive. Your business plan is so important that it can make or break your business.
I understand why many find creating a business plan extremely overwhelming, with all the information you have to include and whatnot. That is why I created this step-by-step guide plus bonus tips to help you create an effective business plan.
Keep in mind the basic guidelines
- Use simple language. You wont impress anyone with complicated composition and vocabulary.
- Include every vital piece of information.
- Keep it short and concise.
- Know your audience and create your business plan with them in mind.
- Write in a language your reader can understand.
- Be honest about the challenges and competitors you face.
- Avoid over-optimism/pessimism.
- Always proofread. Create a business plan free of spelling, punctuation and grammatical errors.
- Include and highlight any information that puts your business one step ahead.
Choose a format.
Keep in mind the purpose of the business plan and the audience its meant for when choosing a format to use. Here are some of the common formats of business plans.
- Traditional Paper A traditional business plan is usually written in extensive paragraph form. It is more formal and is often requested by potential investors.
- Slideshow This format is easier to create and less formal. You can illustrate your business plan with graphs, images and bullet points. This is a good choice to present your business to potential investors, customers, dealers or partners.
- Interactive Media / File This is a little like the paper format but with a more contemporary template. You can try interactive PDF files and other online media.
Follow an outline.
The following are core elements every business plan needs. They are outlined in the order they typically appear in a basic business plan.
1. Executive Summary
The executive summary is the first section of your business plan. It highlights all the crucial points and statement from every other section of your business plan.
As the title implies, write a summary so that your reader will not lose interest midway. Try to get your point across with minimal sentences. The ideal length for the executive summary is 2-3 pages long for the typical 25 pages and above traditional and formal business plans.
The executive summary is typically written last to ensure that you won't miss any vital detail. Your executive summary should be enticing enough that to convince your audience to read your business plan in full.
2. Company Description
Coming out after the executive summary is your company overview. In this section, highlight the details about your company -- registered name, location, nature of the business, number of employees, goals, and objectives, etc.
Instead of paragraphs, use tables to outline vital information about your company.
3. Products or Services Overview
Describe what products or services your company offers. Emphasize the value you provide to your clients and/or customers. Other vital details you should include in this section are pricing, benefits, how to use the product, future offerings. You can include images in this section to support the information you provided.
4. Target Market
Discuss your target customer with a brief description including their personality type, age group, income level, gender, etc.
When describing your target market, narrow it down. Be specific as much as possible. Instead of saying "everyone in the Bay Area" narrow it down to "young professionals and fresh graduates". Explain how your products or services are relative to the market you are targeting.
Doing so makes you look more knowledgeable about the industry and market you are entering. This gives your reader the assurance that you know what you are doing. You can use graphs and/or tables for this section.
5. Competitor Analysis
After your target market, you should also describe and outline other businesses sharing your target market, with the same or similar products/services. The purpose of this section is to determine and address the strengths and weaknesses of your competitors.
Explain how you can take advantage of your competitor's weaknesses and what areas should you improve on to prevent possible threats. Doing and presenting a SWOT analysis is very much recommended.
6. Sales and Marketing Strategy
Based on your target market and competitor analysis, how will you build your sales and marketing strategy? In this section, outline how you will sell, promote and price your products or services.
Make use of graphics, images and other media to support the details you have provided. Include samples of your planned promotional materials.
7. Operations and Management Summary
Highlight everyone involved in the business, both external (service providers, suppliers, etc.) and internal (teams and employees). Cover all the logistical aspect of your business. Discuss how the business functions on a continuous basis.
Explain how your business works where you source your materials, the manufacturing process, distribution, etc.
Enumerate and define the responsibilities and capabilities of various teams and the tasks assigned to the employees.
8. Financial Analysis
This section of your business plan should contain all the financial details of your business. What the financing looks like now and projections of what will be needed in the future.
Break things down and lay out your expenses and profits. Creating a profit and loss report can help effectively highlight your financial statement. Though it is usually the last part of a business plan, your financial factors are one of the most important aspects of your business that your audience will want to know.
Writing an effective business plan does not guarantee success on the spot. But you can use it as a tool to achieve your business goals, ultimately leading to success. Just like your business credit score, your business plan is a very valuable resource. You can use it to build connections and improve company value.
In life, everything must be done in a certain way, and its no different in the world of money. To make your business plan an effective tool, devise it to be strong and continuously polish it to keep its potency.
Check out my blog for more resources on how you can successfully start and grow your business. Want to know how to become a successful entrepreneur? Get my free cheat sheet to business success now!
I’m a 7-figure business startup consultant, best-selling author of “The Wealthy State of Mind,” and international motivational speaker, with a passion for helping entrepreneurs achieve success in business. Using the methods I’ve developed from helping businesses achieve success over the past 10 years, the Entrepreneur Academy was born. Inside, entrepreneurs are taught the fundamentals of building a successful and profitable business based on real-world tactics that are responsible for generating millions of dollars in business profits.
