Learn How to Write a Business Plan
Creating a well-written business plan is the first step toward achieving your entrepreneurial goals. With the right business plan format and vocabulary, you stand a better chance of compelling others, including financial institutions, to invest in your enterprise.
Where to start?
Before you sit down to write your business plan, be sure that you have analyzed the potential markets, including various segments of the population, your products or services will serve. Prior to actually worrying about how to write a business plan, consider the following:
- Do you see a viable market for the product you want to sell or the service you hope to offer?
- What demographic(s) describe your potential customers?
- Does your product or service hold special value to a niche market?
- Is your product something many people will be able to afford?
The next step is to establish the size of your potential market, as this will help you write your business plan. How big is the market? How large are potential competitors?
Once you’ve analyzed the market, it’s time to keep working on writing your business plan by identifying initial needs. What will it take to get started? Part of writing a business plan includes making a list of the materials you will need. Whether they are tangible things like desks for employees or intangible ones such as the time required to do market research, it’s important that you list them all.
While you’re at it, start researching potential locations for your business. It could be that you will be able to work from home, but maybe you need to find a restaurant already equipped with ovens and other items, or perhaps you need a nice retail space in an established shopping area.
We know that you’re eager to get into the nuts and bolts of how to write a business plan, but first, you need to be sure that you have a product sample ready to go, if applicable. Be sure it looks attractive.
Work to identify potential investors throughout the process of writing a business plan. Familiarize yourself with the 5C’s of lending: Capital, Capacity, Collateral, Conditions, and Character, too. You will need to have covered all of these bases before seeking funding of any kind.
Structuring Your Business
We’ll get into how to write a business plan shortly, but before you get down to it, take some time to define your company. You are going to need this information to get started.
- Why does your company exist?
- What products and/or services will you offer?
- What specific needs will ultimately be satisfied once you are in business?
Be sure to think creatively, as showcasing your business’s competitive advantage will help you stand apart. Speedier service, special features competing products don’t offer, and other attractive advantages are all worth including.
Design your company by considering how many employees you will need and the skills they will offer. How will you hire them? How will they be organized? You will want to include your expectations for future growth in your business plan, but for the time being, decide how much help you will need to get started and work on convincing your funding sources that your new company will turn a profit.
While you are in the process of gathering the information needed to write a business plan, consider whether you will need to hire a manager or if you have what it takes to be a good boss. Investors will want to know that you are capable of running a business before providing funds. How will you handle wages, retirement, insurance, and other entitlements? How much do you know about tax-related issues?
Creating a Marketing Plan
How will you reach your customers, and how will you present your products and services to them? Failure to create a solid marketing strategy is a mistake many entrepreneurs make. Potential investors need to believe that your idea will succeed, so provide assurance that you will be able to reach customers effectively.
What will your sales philosophy look like? Will you be developing a large clientele consisting mostly of short-term customers, or will you work with a core group of major clients? Investors want to know. This part of the business plan gives you the opportunity to sell yourself, so pull out all the stops.
Business Plan Writing Tips
This section contains some important do’s and don’ts for writing a business plan, along with some pointers that will help you get started. You’ll also find out how to begin and end a business plan, plus you will learn some special vocabulary words associated with business plans.
Business Plan Do’s and Don’ts
- Determine your startup costs before you actually begin to write a business plan. If your budget dictates that you won’t be able to get the best of everything at the beginning, prepare to do that. Get what works, is affordable, and is necessary. Avoid frills.
- Put yourself in investors’ shoes. Before submitting your business plan, ask yourself whether there is anything an investor would like to know before putting money toward your product or concept.
- Organize the information in your business plan carefully. A poorly organized plan is a recipe for disaster.
- Do your homework before sitting down to write. Even if you have a good idea about how to write a business plan, the hours you spend working will be wasted if investors’ questions are left unanswered.
- Don’t feel discouraged. Writing a business plan is a long process that can take days, weeks, or even months depending on the amount of time you have to focus on the actual planning phase.
- Edit your business plan as you go. Look for lapses in continuity, and be extra-persnickety about seemingly little things like grammar and punctuation. Every detail matters.
- While the Executive Summary portion is placed first in the business plan format, it’s a good idea to actually write it last. By the time you have written the rest of your business plan, you will be able to articulate what it is that makes your product or service stand out.
- Do not submit your business plan for review until you have had it analyzed by someone knowledgeable who will be honest with you. Ideally, have more than one person review your plans.
- Embrace criticism from reviewers. When you are close to a project – especially one as meaningful as a business of your own, it can be very difficult to identify potential shortcomings.
- Be prepared to answer tough questions from investors. Try to anticipate questions and provide answers in the plan. Demonstrating preparedness will put you in a favorable position.
- Be honest. Do not embellish anything. Falling short in the honesty department is a surefire way to have your business plan rejected and position you as a pariah.
How to Begin and End a Business Plan, Plus, What Goes In the Middle?
One of the biggest questions entrepreneurs have when learning how to write a business plan is this: “How do I get started?” Another question is, “How do I come to a conclusion?” A business plan isn’t rocket science but it does need to follow a specific format.
Think of writing a business plan like writing a small, very well-organized book. It should begin with a dedicated title page and contain all of the elements found in the following example.
Special Vocabulary for Business Plans
In addition to a well-organized business plan format, it is important to use recognized terms that demonstrate your level of preparedness. Investors and other funding sources are most likely to give you the help you need when you prove that you are willing to work hard to achieve your goals. The following business plan vocabulary terms will help you create a document that stands out.
- Executive Summary: A mission statement with a description of the business and a summary of future plans.
- Market Analysis: An industry description and detailed analysis. This part of the business plan includes information that identifies the target market.
- Company Description: This portion of the business plan outlines the nature of your business and includes primary factors that you believe will make your company a success. It names marketplace needs that you are working to satisfy and describes how your product or service will meet marketplace needs.
- Organization and Management: These are important sections to include in your business plan. You can blend the two together or present them singly. These details prove that you have put thought into how your company will be structured, and it always includes information about the company’s ownership. If applicable, it includes management team profiles and outlines the qualifications of your company’s board of directors.
- Marketing and Sales Management: Again, these are factors that should be included in every business plan, whether alone or as a combined unit. They define your marketing strategy, growth strategy, and communication strategy. They also outline channels of distribution, market penetration, and provide a good picture of what your overall sales strategy looks like.
- Product Line and Services: Products and services lie at the heart of every business plan. What will you sell? What services will you offer? What makes them unique? Include data about raw materials, suppliers, and patents or patents pending.
- Funding Request: The funding request should include current needs, future needs, potential changes, and potential impacts to your company’s income stream. Place your funding request at the end of your business plan.
- Appendix: An appendix is an extra section that is not required. If you have important documents such as resumes, references, or legal documents, place copies of them here.
Remember that a business plan is a roadmap, and that planning properly leads to success. By creating a well-organized business plan format, you place yourself closer to achieving your goals. Be sure to take advantage of the many free resources Ginger offers, and make your business plan stand apart from the crowd.