Now that you know the importance of a business plan in entrepreneurship, how about we get to know how to write a good business plan?
Consider the business plan to be the silent arbiter of your business: it will judge the viability of the business, solve every argument that may rise in relation to processes, and decide what will be done. It will not only provide direction for you but will also attract investors. Knowing how to write a good business plan is an indispensable first step for your business and its success. Here are the most common sections found in a good business plan.
The Executive Summary
See this as the snapshot of your business. It should answer some quick questions like, what your business is about, what are the products and/or services you will be providing. You must know your competition and what they are doing, and be able to clearly state how you will stand out from the competition in terms of value-added. Include your mission statement. If you are already in the business, talk about your company’s progress so far and future plans. If you are starting up, then focus on stating concisely what motivated you to start, and why now? A good way to begin is with your one-sentence pitch. Here is a simple, yet winning, example from the front-runner of The Founder Institute’s 2012 One-Sentence Pitch competition:
“My company, Airto, is developing a web-based social seating check-in platform to help air travellers see who is on board their flight and use Facebook and LinkedIn to assign all flight seats with one click.”
In this section, you will get into more detail on what you do. State the problem and the solution you bring to the market place. This approach is ideal in proving why your business matters. You should be solving a problem that actually exists and have factual evidence for this. That’s why research is inevitable. Be specific on the products/services you’re providing, and the customers you’re targeting. If you think you have some super powers, any top-level talent you have to hit the ground running, this is the place to mention it.
Research on your industry, market and competitors. Inspire trust in potential investors by displaying your understanding of the market place you will be competing in. You are coming into the business to be better than your competitors. It is thus vital that you have an idea of their strengths and weaknesses. You’ll have to show potential investors that there are two kinds of people in the market place: there is you and there is “the rest”. In other words, let them know what separates your business from the pack.
4. Organisation and Management
This section is about your business and management structure. Will it be a partnership or a corporation? What is the hierarchical order and who are the decision makers? It is all about describing your company and team in greater detail. Appeal to your reader by showing them it’s not just all about the product and services, but the people behind the scenes making things happen. List their positions and a brief description of their functions. If you have plans for new hires, discuss it in this section and explain why.
5. Products and Services
Give more details about how your business will “solve” the problem. What will be the benefit? This is where you make clear the nature of your product or service. Present the general idea and the benefits. What is the cost for production and what will be the cost in selling a piece? How will it appear to and be used by consumers? How will it be marketed? Will there be packaging involved? If you judge that your processes are a bit complex and would be lengthy to put in words, consider using a diagram that shows the various steps involved. However, move such diagrams to the addendum, and indicate to your reader with the phrase, “For more detail, visit the addendum or appendix (insert page number).”
6. Financial Projections
This is the section where investors will spend the most time. Be accurate and realistic. Proper financial planning is a key determining factor to the success or failure of any business. Detail out your expenses and profits. What are your quarterly projections moving forward? Do you have outstanding loans? Supply such information as your balance sheet. If your business is already running, you will be presenting your financial history of about one to three years. If you are starting up, do a projection for the next two to three years.
A good way to close your business plan is to pitch a funding request. Be clear with what you want financially. This is will reveal how serious you appear and how serious you will be taken. Are you requesting a partnership or a loan? You can add any supporting data here to enhance your pitch.
Then there is the appendix, an optional section in your business plan that includes any technical diagram to explain your business or its processes. You can also add references as well as resumes in this section, anything to show you are good at what you do.
Failing to plan is planning to fail by default. Now you know how to write a good business plan. Get down to the paper work!