A business plan is an important part of starting your own business as it states all the essential elements required for the right execution of the startup. Below given is a step by step guide on how to make a business plan. The startup plan is also very important for presenting it to the authorities at the time of getting licenses or permits.
Also, it is presented in front of potential investors in order to get the source of income. The process involves making a convincing business plan that leaves a good impression on your potential investors. If everything works according to the plan then you will proceed with the execution of the plan.
Writing a business plan involves a series of steps and each stage is equally important. The business plan could be written in various formats and none of them are wrong. Apparently, there is no right or wrong way to write a startup business plan but there sure is a way to write an effective one, which we will be discussing in this article below.
Importance of Writing a Business Plan
It is a road map for your startup strategies which helps you in determining everything that is related to the business that you are going to start. A good business plan helps you form a structure of your business and makes it really easy for the execution to be done properly.
Not just the execution, but it also helps in the growth and expansion of business as well. Business plans are written in a format that determines everything in the right manner, as well as it helps in focusing on every element of the business plan.
Apart from this, a good and effective business plan will help you in bringing the investors and partners in your plan. This will work as an impressive factor for your business plan that will accommodate the execution of the whole thing.
Rules For Writing a Business Plan
There are basically three simple rules to which your plan should abide by. They are listed below:
1. Keep it short
The business plan should not be extra lengthy, boring and filled with extra details, it will just make it more confusing. Rather it should be concise so that the reader will be easily able to understand it. When you will present your business plan to the potential investors or authority figures, you do not want to scare them off with a 100 or 50 pages long business plan. So it is important to make it readable.
A lengthy plan will also remove the scope for refining. It will fail to serve its whole purpose and will lie in the dust for the whole year.
2. Write for the convenience of the Audience
It is important to shape your business plan in a way in which your audience can understand. For this first, determine who will be your audience what kind of language do they understand. You can understand this with the help of an example, let’s suppose you are starting something related to the electronics company but your potential investors are not familiar with its aspects then you need to develop the business plan with the language that they will understand it.
3. Don’t expect yourself to be perfect
A lot of entrepreneurs will just be stepping into the business world when they had to write their first business plan. So you should not expect yourself to be perfect. As mentioned before, there is no right or wrong way to write a business plan. Your business plan could also be the short one which consists of all the necessary details.
It is just created so that you will get the outline of your business model. Once you start moving further with the execution, you can edit the details again.
Elements To Include in Business Plan
There are various elements of the business plan that needs to be included mandatory in it. This will help you build a better startup plan. The rest of the things that you are going to add in your plan will revolve around these six elements. They are as follows:
1. Executive Summary
The executive summary is basically a brief outline of your business model stating all your goals and purposes. It sums up everything that one needs to add in its plan. Regardless of whether it is a service-based industry or product based industry, it should mention the brief description of it.
Every business model consists of some objectives, these objectives need to be fulfilled in order to call one’s plan successful, so that should be mentioned in the article. Apart from this, the executive summary of your business model should mention your competition and the description of the market.
At last, do not forget to mention the growth potential of your business plan that will eventually help you in getting the funding requirements which should also be there in the executive summary.
The executive summary is a very important part of your startup business plan because it is the first thing that investors or authorities are going to notice. It could either make the deal or break the deal. It helps you in the following:
1. Tighten the concept
As executive summary focuses on the more important part of the business model, it leaves out less important topics. Your concepts should not be too fuzzy, because it will make the executive summary lose its purpose.
2. Determining the priorities
Like said earlier, that the executive summary part of the business plan only mentions important details and leave less important factors and issues, it helps you in determining what your priorities are and stating the objective.
3. Makes further planning easy
The executive summary serves as the outline for the whole business plan therefore it makes it easier for the person to write the rest of the business plan.
The opportunity part of your business plan helps you in determining the potential growth of your business and also the demand for the product in the market. It also helps you in deciding what are your objectives and how the market accommodates the scope of your business model.
Important things that should be mentioned in your business are some statistical data that will help the investors in understanding the need of your business model in the market and apart from this, you can also add some authentic survey results that help in determining the opportunity scope of the market.
The ‘Execution’ part of your business plan mentions how you are going to take the opportunity and turn it into a fully functional business plan. In this part of your business plan, you will be answering some questions like how you are going to execute your business plan? and what are the ways to run and expand it?
Apart from this, this section will also mention all the strategies and plans that you have developed for your business plan.
4. Company and Management Summary
The company and management part of your business plan includes the requirements and the team for your business plan. This chapter in your business plan will not only describe your current team but also the requirement for hiring some employees and what are the roles they will play in your organization.
The business plan of the running business model will also mention the legal aspects related to it, plus, the location of your company.
5. Financial Plan
A financial plan is an integrated part of the business plan that will feature the cash flow systems of the business model. It will mention how much financial funding is required and where. This will help the investors get the final number. Apart from this, it also includes the sales rate of your service or product, your income statement and also a proper balance sheet.
The appendix is usually the chapter where all the additional information regarding the business plan is mentioned. It should be relevant to the subject but it sure consists of some extra information. It includes things like organizational charts, the rescues of the key leaders of your company or organizations, upcoming products, and facilities and their pictures, some extra details about the product or the service offered by your business model, etc.
Types of Format in Business Plan
As I said before, there is no right or wrong way to write a business plan, the more important thing remains its purpose which needs to be fulfilled in order to call any business plan successful. Typically they are of two types:
Both of them have their own purpose, while the traditional business plan is a more common one, it is also the longest one where one needs to add all the required information about your business plan. On the other hand, the lean business plan is rather a short one and accounts as a less professional one.
1. Traditional Business Plan
It is considered as the professional business plan which is requested by most of the investors and authority figures. It is elongated and includes every element in detail. A traditional business plan is a comprehensive model that focuses on all the important components of the business plan.
The executive summary is the first thing noticed by the people reading your business model so make sure you have written an effective summary that clarifies everything. It should mention why your business is likely to be successful and what are the components that will accommodate your mission.
Add all the basic details about your company from the number of employees to the location and market scope. Executive summary plays the role of outline for your business plan and includes all the major details meanwhile leaving out the less important ones.
The description of the company includes information about the company in detail. You should add the location of the company, the objectives that you are going to fulfill by your organization, the functions performed by various employees in your organization.
Apart from this, you can also state the competitive advantage of your company and all the factors that work in favor of your business plan.
Market analysis is the analysis of the market for the scope and opportunity of your business plan. Your business plan should mention the competitive research in this segment and also how the opportunities will help you in the execution of your business plan.
Before starting any business plan we first analyze the market to find all the relevant information related to the scope of your business plan and what is the demand status of the product and services provided by your company, so all that should be mentioned here.
Organization and Management
In the next chapter, we have organization and management which basically mentions the organization structure of your company and how you manage everything in your business structure. It mentions the number of employees and their function at the organization. Apart from this, you can also feature an organizational chart for the power flow in your company.
Also, various legal aspects are also concerned here also you should mention in this part of your company whether it is the company is booked under limited liability, partnership or private limited, etc.
Service or Product Line
In the service and product line, you will list all the products and the services that you are including in your business and what are the purposes served by them. Also, list how they are beneficial for your customers and are better than what they have already.
Apart from this, you will also need to show your patent and copyright filings in order to ensure that you have the full right of the products and services that you are going to sell.
Marketing and Sales
The marketing strategies for your business are varied and there are numerous amount of ways that can be used for promoting your business. This part of the business plan will include how your business plan will reach all the potential customers and what are the ways you can retain them.
Marketing and sales play a great role in making a business plan successful. There could not be a single right way to do it but thousands of ways in which it can be achieved. Your investors will expect you to list everything about your marketing strategies here.
If you need funding for your business plan this is where you should list all the requirements for your projects. You should determine the cost of everything in this segment whether they are needed for the execution of the business plan or the employee needs, etc.
It should be mentioned clearly how much funding is required by your business plan in the coming years and how you are going to use it. It should include everything from machinery, tools, equipment involves, the commercial land required, number of employees and for what purposes, what will be their pay salaries, etc.
Also mention what is your expected revenue and how you plan to pay off the funding and in how much time.
The financial projection is basically the segment that is included in the business plan to determine how your business plan will become the financial success and how it will generate high revenues. For this, you will need to mention all the cash flow system in your company and how you manage it.
This segment will also include the income statement of your business plan. You could include data from three to five years of your company and if your business plan is new then provide the available data that mentions how the plan will prove to be a financial success.
The appendix is that element in the business plan which is not a necessity but accounts for the additional details. Basically, this section features all the relevant but less important information about the business plan. This includes various licenses, credit notes, resumes of your employees, the pictures of your products or services, etc,
2. Lean Business Plan
This plan is less professional and a shorter one. This format of the business plan is best to describe your plan quickly and includes all the important aspects. They feature all the fundamental facts about the organization as well as the financial projections, requirements of the company, scope, infrastructure, value propositions, etc.
The lean business plan will provide you with a compact model of your business plan and will help you determine things more concisely. It consists of the following nine components:
Major Partnership Involved
This part of the business plan will include all the major partners in your business plan. Include the people who you have to deal with in order to get the services and manufactured products prepared. Businesses are often started with a partner who helps you equally in your business, so this segment will include everything about your partner and also the amount of power he holds in the organization.
Apart from this, you will need to add people like your manufacturers, suppliers, contractors, etc.
Main Operations or key activities are basically a list of things that you will perform through your business plan. In simple words you can say, this part features the main part of the execution process and how you are going to take it into practice. Apart from this, you can also mention the competition and how you can use it to your advantage.
Also, mention the scope of the market and how it validates your revenue generation.
Basic Sources For Execution
Key sources are basically your requirements for the execution of the business plan. Basically there are three types of key sources are there:
1. Physical Sources
Physical sources list things such as raw materials that are required for the product based or the service-based industry. This will also include things like machinery, equipment, transportation, storage facility, vehicles, etc.
2. Human Resources
Human resources include the staff and the team that is important to run a business. In this section, you will need to mention all those tasks and activities which need an employee.
3. Intellectual Property
At last, including the intellectual property in your business idea. This includes partnerships, customer database, brands, copyrights, patents, etc.
Selling point is also known as Value Proposition is a segment in which you will mention why the people will choose you instead of your competition. You need to include all the marketing strategies, part operations, facilities, etc.
Apart from this, the value proposition will help the investors understand why your business will be a success and why you are better than your competition.
Customer Care and Relationships
The customer relationship segment features how your customers will contact you and connect with you. Regardless of whether it is a service or product based industry, customer try to connect with the company for different reasons such as getting information, complaining about something, etc.
It plays a vital role in the company’s success, that is why it is important to introduce one in order to connect with your customer base.
Customer segments are one of the most important elements to include in your startup plan, basically, it mentions your target audience. Meaning which segment of the customers you will be going to target in order to sell your customers. Mention why the specific community of the audience is important for your product or service sales and how you will approach them.
Mediums for Selling
It is also known as Channels which means the mediums through which you will sell your products as well as connect with the audience. The channels are important when determining the target audience for your business.
Cost structure refers to different expenses of a business incurs. You will mention here what is your strategy related to the money and how it will the cash flow in the system. Also, you will have to mention where and how the money is spent and how will you manage it in the future.
Revenue Streams will basically feature the list of ways in which you are going to earn your profit. Mention all the ways that will contribute to your income. Even if the sources of income are multiple then you will have to mention each and every option. For example, direct selling methods, advertisement space selling, membership fees by the customers, etc.
As we have seen there are two ways in which you can present your business plan. It holds a lot of importance to the whole structuring of your business model. This will not only help you in determining the outline of your Startup business plan but will also help you present your plan in an effective and impressive way in front of potential investors and government authorities for the legal authorization of your business model.
This is the detailed structured plan of the business model. With the help of the above-mentioned techniques, elements, and rules you will be able to write a good business plan that constitutes all the important components in two different formats. These business formats are distinguished on the basis of their length and professionalism.
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