Business plans aren't just for startups. In fact, most small business owners can benefit from creating and implementing a business plan in their day-to-day operations.
Regardless of where you are at in your entrepreneurial journey, the benefits of having one are plentiful. Not only will you develop a better understanding of your competitors, but you will also see the bigger picture of your own company, and appreciate the role that each of its numerous elements plays in driving success.
Of course, it will also be the reference point for investors and other stakeholders, so without one, it's unlikely that you will receive any external investment.
So, given its undoubted importance, how do you go about writing one?
Hiring a professional is one option, but ultimately, there's no reason why you can't write a business plan by yourself. After all, unless you are approaching an investor that has precise criteria for the way your business plan should be presented, you are free to keep it simple.
To guide you in the right direction, we've broken the plan writing process down into nine easy steps; this is how to write a simple business plan.
1. Describe Your Company
Your first task is to describe your company to potential investors and others reviewing your plan. Aim to achieve this in 3 to 5 paragraphs.
In the first paragraph, introduce the key (and current) business players, such as the founder(s) and owner(s). You should also disclose the location of your business.
You will also need to describe:
- your values
- your mission and vision
- a brief (not detailed) summary of the products and services you offer
- the societal need you intend to address by providing these products and services
The company description should include the critical elements of your business that will give potential investors and stakeholders (including yourself) a clear picture of where your company fits into the market, and how it will benefit your target audience.
Your business description will evolve with time, so be sure to review this description regularly or as appropriate.
2. Outline Your Goods and Services
Once you've finished describing your company, you will need to compile a detailed list of your products and services. This task will take some time, but you will walk away with a better understanding of your business offerings, as well as a few ideas on how to effectively market them.
When formatting the presentation of your product and service offerings, start by grouping them into classes and then add the appropriate products and services as subheadings beneath each group heading.
Include a general description for each group and explain how that class of products or services serves your target audience. Under each subheading, describe the product or service's unique fit within your offerings and how it is complementary to the general need of your target audience addressed by its corresponding group.
3. Define Your Target Market
Whereas the previous two steps have made you consider who your target market might be, in this section, you will pinpoint it.
If you are targeting individual send users, the definition of your target market should include age, gender, culture, location, relationship status, sexual orientation, religion, personality type, interests, mental state or any other characteristics unique to your target population.
Alternatively, if your target market is comprised of other businesses, then include the company size, industry, niche, location, and any other elements of your target business audience.
Target markets are best expressed in a paragraph or two (as opposed to jot structure) for more fluent reading. If you are targeting both individuals and businesses, be sure to note this and provide a breakdown for each. You may also be marketing to multiple individual populations or various business populations.
If you have a detailed marketing plan, meanwhile, then include it in the appendix.
4. Identify Your Competitors
Understanding what you're up against is a critical aspect of business. Therefore, if you haven't yet researched your competition, you will want to do so now.
As a general rule (but not always), your competitors will be in the same vicinity as you. Take stock within a reasonable radius to identify other businesses in your industry that overlap with your niche. If you are working with an e-commerce platform, many of your competitors will be in cyberspace.
Once you've identified the key players in your industry, ask yourself: what are they doing well? How are they achieving customer loyalty? How are they creating the best value for money?
It is important to note all of the things that your competitors are doing well so that you can find ways to do them better.
You should have a separate heading for each main competitor and include a 1 to 2 paragraph analysis of their strengths and weaknesses.
5. Perform a SWOT Analysis
If you're unfamiliar with company SWOT analysis, it is an evaluation of a company's strengths (S), weaknesses (W), opportunities (O), and threats (T). Being brutally honest with yourself about these traits will likely feel uncomfortable, but it is necessary to address potential issues before they arise.
Create a subheading for each element of the analysis and complete each section in sequence, beginning with strengths and ending with threats.
It is also helpful to jot factors down before proceeding to write an analysis. This will give you a chance to go over each section a few times to brainstorm anything you may have missed.
Under each category heading, write two paragraphs: one about what your strengths, weaknesses, opportunities, or threats are and a second paragraph about how each will affect your business and how you will capitalise on or circumvent as needed.
6. Illustrate Your Organizational Structure
At this point, take a break from writing to draw a detailed diagram of how your business works. It should follow the chain of command and distribution of responsibility, including where each employee fits into the organisational structure. You may also want to include subcontractors and end-users to demonstrate how and when each member interacts with clientele.
Below the diagram, add each employee's position and provide a brief job description for each.
During this process, you may realise that a new position is necessary for smoother operations, or that an existing position is not needed. Feel free to adjust as needed, and ensure that you revisit this setup as your business evolves.
7. Highlight Key Financial Data
This section is particularly important for investors, with your financial data being drawn from your business budget; therefore, if you haven't already prepared one, you should do so now. Conversely, if you have an existing budget but it hasn't been updated in a while, make sure you review and adjust accordingly.
Your financial data will outline the goals and reasoning behind your business budget figures, with investors paying close attention to the figures you allot for revenue. They will want to see how you arrived at those numbers, and what indicators there are to support the sales volumes that you are projecting.
This section should also reference the sources you used to estimate your more notable expenses, as well as any additional financial goals you have for the period.
8. Summarize Your Plan
Now it's time to prepare your executive summary. The executive summary is located at the beginning of your plan and should give investors a good idea of what to expect without having to go into a vast amount of detail.
You should include the most critical elements of your business plan in this summary; one approach is to cover each section of the plan as a subheading of the executive summary and provide a small brief for each one.
9. Create an Appendix
Your appendix should consist of any relevant supporting documentation for the information contained within your business plan; for example, we've already established that you will include a business budget and, if you have one, a detailed marketing plan.
You may also wish to include any relevant business data you've uncovered in your research, such as financial intelligence to support your claims, competitor financials, staff qualifications, or any patents or trademarks you've received.
Any supporting documentation you have referenced (or will go back and reference to strengthen your plan) goes here.
That's all there is to it - a simple step by step guide to creating a business plan, appropriate for myriads of business uses, including loan applications, certifications, presentations and management consultations. Put it into action and remember to adjust as you grow and flourish.
Do you have any other business plan writing tips? If so, let us know in the comments below.