How Do I Write a Business Plan?
August 10, 2012
You’ve probably heard that a business plan is essential in running a business, but are not familiar how. Here are the things you need to know in putting one together.
Benefits of having a business plan
A business plan can actually help your business in many ways.
- Improves profitability
Having an in-depth business plan greatly increases the chances of your enterprise being profitable versus not having one.
- Impresses lenders and investors
A comprehensive business plan increases the likelihood of lenders and financiers investing in or lending your company money.
- Saves time and effort
Yes, making a business plan isn't easy, but having a comprehensive strategy allows you to recognise and address issues before they occur, saving you time, effort and stress.
- Helps prioritise resources
A business plan lets you prioritise how to apportion limited resources like equipment, funds and time to make the most out of your earnings.
How to make a business plan
There are three ways to develop a business plan:
- Hire a consultant
A consultant can research and flesh out the details of your business plan. You’ll benefit greatly in doing so, allowing you to dedicate more time for your business. Getting a professional would help you come up with a better, more detailed business plan.
Then again, a consultant might not know the business as intimately as you do. You'll also miss a chance to know your business better, and you might end up not as certain or capable of applying the business plan. There's also the matter of paying the consultant.
- Do it yourself
Preparing your own business plan is a learning experience. You'll gain a better understanding of your business and pick up a few skills that can help you run the show. You won't have to pay a consultant either.
The problem? It's tough, and you might not have all the skills to make a comprehensive plan. The learning curve is quite steep as well, especially if you start from the very beginning.
- A combination of the two
Here's an idea: combine both concepts to get to an ideal outcome. Hire a consultant to guide you in parts you're unfamiliar with, and then develop the areas you're knowledgeable in. That way, you're still knowledgeable about your work and capable of implementing the plan, but also learn new aspects about your business.
Continually analyse the results of your business plan to keep track of your enterprise’s growth. Examine if the business has reached its objectives, evaluate what it needs to improve and see what approaches you can use to further develop.
Sections typically included
A business plan has several parts, with each focusing on a specific facet of the enterprise. Typical sections include the following:
- Executive summary
As the name suggests, the executive summary is a synopsis of the business. It sums up the important points of the business plan. And while it's placed in the beginning of the document, the executive summary is the final piece of the business plan that the author prepares.
- Business profile
A business profile provides details about the business. This normally includes the company's background, location, contact information, current status and goals. A business profile may be long enough to fill several sheets or can be as short as a single page.
- Market analysis
The market analysis section talks about your company's market and position in said market. It also provides details on your company's products and/or services, and describes your target market and market share.
- Marketing plan
This part discusses your company's strategies in attracting customers, advertising, market segmentation, payment methods, promotions and pricing guidelines. It pretty much shows why people would want your product or service.
- Operating plan
The operating plan talks about how the company provides your services or how your products are created. It should also touch on leasing terms if any, equipment used, materials/ingredients, other technologies needed and even environmental concerns. Bottom line, the operating plan covers how your business works.
- Management and labour plan
Your business plan also needs a section describing all personnel functions; human resources guidelines on employment and termination; skills training and development--anything that relates to your employees, their experience and proficiencies.
- Finance plan
Everything about money falls under your finance plan. This could range from cash flow estimates, funding sources, overhead expenses, return on investment and other details. If the purpose for writing the business plan is a loan application, then the finance plan should detail how the debt is going to be settled.
- Legal and risk management
Your business also needs a legal and risk management plan to pinpoint and analyse the possible effects of external forces like a strong economy or weaker market demand on your company. It also talks about business continuity plans and other strategies you can use to deal with risks.
- Action plan
When you say action plan, it basically refers to what your company needs to do to achieve its goals. This would include details on the employees in charge of specific tasks and schedules, and the resources needed to achieve the objective.
Remember: a business plan should also have an appendices section to support referenced data such as product specifications, customer testimonials, research data and legal documents.