A business plan is a reflection of your vision and what your company stands for, which is much more than merely a lackluster document, simply filed and forgotten. To frame in simple words a business plan is a document containing operational, financial, and marketing plans of a business in thorough detail. It's that one document that can build up or tumble down investors' interests, as it provides readers with precise and clear information relating to
Future growth and development plans of the business
Sources and allocation of financial resources
Major areas of attraction for investors.
Actions do speak louder than words, but in the novice stage of your business, a thorough business plan can take you places. It’s the content that matters. That is what we attempt to embed in when we create and label it as a business plan. The flow of a business plan seldom changes. What catches the eye is your approach to creating a flow. After understanding its basic meaning, it is of utmost importance to observe the purpose of a good business plan. In times like today, any existing or start-up business requires a planned set of guidelines that will help the business in taking steps forward. It not only ensures proper functioning along with clarity but also supports an ever-changing dynamic business environment. A well-defined plan reflects the seriousness of a business in managing its affairs. The Purpose Of A Business Plan Proves To Be Most Beneficial In Defining: Operational Plan: as it delineates goals and objectives for short and long-term operations. Along with that it distinctively draws out roles and responsibilities of personnel for quick and efficient working for the attainment of business targets. In total, the functioning of any business depends on tasks to be achieved and coordination among personnel for achieving such tasks. Financial Plan: as it helps in framing out all the future monetary requirements for growth and expansion. Adding on, it also presents the management with possible cost-effective sources of finance to raise funds from. Money happens to be the backbone of every organizational structure hence, having clarity over its cash flows, equips the finance department with better tools to be strategically prepared. Marketing Plan: because it helps a business in evaluating and promoting its products and services to the target audience. Additionally, it assists the marketing department in understanding consumer needs, available substitutes, market competition, and the competitive advantage that the business has over its competitors. Marketing planning further assists in SWOT analysis (strength, weakness, opportunity, and threats) which answers all the relevant remaining questions for the business. The Focal point: It keeps goals clear, providing clarity about what is supposed to be achieved, what actions are required, and what should be the frequency of those actions to attain such goals. It keeps all tasks and actions coordinated and aligned. Different aspects of the business: A better and in-depth understanding of the industry is a must for starting up a business or expanding the business. It helps with being considerate about the nitty-gritty of the industry. Hierarchy in the organization: A business plan is not merely a document that explains only business tasks and goals, it also draws out roles and responsibilities and accountability of every member of the company irrespective of their position and appointment. This develops a flow of harmony and teamwork. Deviations: Goals are a prerequisite for a flawless business flow. That is how we can define the ”standard performance” that we wish to achieve. Once the tasks have been completed, both the expected results and actual results can be then compared to find deviations and causes behind their occurrence. The next step in creating a good business plan is to grasp all the elements. A business plan must be extensive and comprehensive. Thus, an in-depth understanding of its elements assists with creating a clear, precise, and attractive plan. Let’s look at the elements one by one.
Elements Of A Business Plan.
Executive Summary
As the name suggests, it helps the reader to gain an overall view of the business. It includes all details like, the name, location, product and services, business statement, the organizational structure, financial plans including ethics and values that are held close by the business. It is also known as a ‘mini business plan’ because having read this, familiarizes the reader with all the basic and important details about the business. For an investor, a business plan should be interesting and full of opportunities, that list investment opportunities with potential growth and should ignite the desire for initiating an investment. Usually, the executive summary is two pages long and it should be around 10% of the business plan. It is wise to write it after completing the rest of the business plan so that everything important is included in it.
The key elements of the executive summary:
Objective/short- long term goals of the company
Products/services that are being offered, what kind of solution it offers to the customers
Target market/ who are the customers
Marketing and sales strategies. How the company plans to reach their target customers and what are the necessary steps. What steps can be taken by the company to make its product/service visible to the masses?
List of competitors. What are we competing against, and how do they function?
Budget and funding projections. How much fund is needed, for what, and how the company plans to accrue such funds.
Organizational hierarchy. How many members are there, their field of expertise, and how they are the best suitable for the company.
Strategy and plan implementation. How the company decides to go about its plans and methods they adopt to actualize the laid plan.
Company Description
Company Description comes after the executive summary. Here the company gets a chance to present itself to the reader, explaining its history, reason of origin, nature of business activities, legal standpoint, introduce its short-term and long-term goals, and the means through which the company aims at meeting customer needs. While preparing the company’s description the company gets a chance to tell its story. There are a handful of details that must be mentioned while penning down the company description. These are listed below.
Name of the Company: The legal name under which the company is registered, must be mentioned.
History: How the company came into being, ideas behind it, the story/incident that led to the formation of the company, inspirations that ignited the desire to form the company, etc.
Location: Headquarter(s) location.
Objectives/long-term goals: This is what guides every action of the company and showcases what the company aims to achieve. It is usually presented in quantitative terms so that it is easier to compare later.
Mission Statement: A message that the company aims to give as its core and brand. It should be accurate and less than 30 words.
Business description: Current business atmosphere, favorable conditions, and prominent requirements of the business that are essential for a proper flow and strength of the business.
Business structure: Type of business whether it is sole proprietor, partnership, company, etc. Reasons for choosing the current business structure and why it works best for the company must be mentioned.
Industry description: Mention the type of industry the business belongs to. Automobile, telecommunication, construction, pharmaceutical, or any other industry. Current situations update and expected future shifts are to be mentioned as well.
Product/Services
This section of the business plan describes all the details related to the product and services that the company intends to offer. Here the company is presented with a chance to come on top amongst its competitors by convincingly delivering the quality of the products and flaunting a little in the process. This section mentions the values and benefits that will be offered to customers. In today’s times, competition is pervasive, thus it has become necessary for the company to project how their product/service is superior in the market. It includes the following details
Description of the product/service
Pricing of the product/service
Comparison of product/services offered with those already existing in the market ( Businesses are not to be compared)
Details regarding collection and conversion of demand data
Extra efforts that the company is putting in to make its product/services notable
Costs of production and revenue generation potential
Provisions and treatment of Intellectual properties.
Future of the product/ service
Market Analysis
The market analysis leads a company to present potential opportunities which the company identified and can take advantage of for creating their own space in the market. Quantities and numbers come to play in this section. The market environment is dynamic, thus to portray the responsible, ethical and vigilant nature of your company, it is essential to make people know that your company conducts authentic research and tries to learn at every turn to produce better results. In case of a sudden change in plans, chalking out plans, projects the fearlessness and confidence of the company in dealing with uncertain situations rationally. Make sure this attitude is conveyed clearly and vividly. Market Analysis deals with a company’s decision about
Whom to target and how to approach the selected audience
Best strategies to be employed for reaching the target audience,
Assessing challenges and grasping the overall wave of trends prevalent in the industry.
While preparing a market analysis, certain points are essentially mentioned to exhibit professional analytical skills. And in the process, subtly improve our worth. These headings are mentioned below:
Target Market Analysis: This analysis includes all the relevant details about the target market. Who is being targeted, how they will be reached, what problem of theirs is being solved, what needs are being fulfilled, and the demand of the product/services majorly geographically. Quantitative data is to be presented here for better analysis.
Competitive Analysis: All the details about the competitors are to be included regarding competitive grounds, availability of substitute and complementary products, their strategies, and how your strategies are better to gain a competitive edge.
Industry Analysis: It explains the overall environment of the industry. It includes expected changes, current, and future trends, opportunities that the company may be able to use as building blocks. Similarly, threats, if not dealt with could prove to be corrosive, and of course current conditions for the business.
Operations And Strategy
This is the most crucial element. Realizing what’s written on paper is when things get tricky. Jotting down all the steps, methods, and procedures from mind to paper then creating reality, is what it is in a nutshell. Easier said than done though. Goals determine daily and other periodic tasks and thus, the operation section of a business plan entails how to achieve the set goals. Strategies and methods opted are to be mentioned. An explanation as to how daily tasks will be achieved is not required. Basic noteworthy points are:
Clear-cut explanation of how demand data will be Converted into revenue figures.
Various tactics and techniques to be used to scoop out opportunities.
Drafting out plans, from procurement of inventory to making the sales.
Methods and formulas are used to derive the price of the products and the cost-effectiveness of the business.
All the helping hands must be acknowledged and mentioned. Highlight how their contribution helps your business to perform better. Another important aspect to cater is to providing reserves and provisions the company has maintained to deal with uncertainty. This showcases the readiness, flexibility, and adaptability of business. This is called "Contingency planning"
Management Team
Among four M’s of management (Money, Machine, Material, and Man) Man has been the most valued and significant M. It is simply because money, machine, and material are all created by man. Man is the only coordinating element required to optimize all other M’s. Thus, Humans as a resource are a vital asset of a company. Under this heading, a company introduces its people and their valuable contribution to the affairs of the company. Everything about management planning and maintenance is mentioned here. The sub-headings are as follows:
Name of the team members with their designations
Educational qualifications (preferable to have qualifications complimenting their designation)
Work experiences (any highlights about their past accomplishment to be mentioned)
Their expectant Roles and Responsibilities
Training and developmental programs
In some cases, when the company is small it is suggested to attach the resume of each member.
Financials
The financial section of the business plan must be prepared to project the financials with utter transparency. Many times our decisions are influenced by what investors want to listen to, to raise funds. Which ultimately deviates from the path of transparency. The growth prospects of the company can be explained here in detail. Five sub-headings that assist in making this section wholesome are as follows:
Revenue model: Revenue is all that a business seeks, thus the revenue model must be simple enough to present a clear picture of how revenues will be generated from business activities and factual enough to believe that it can be true.
Financial requirement and allocation of funds: Pretty straightforward in understanding, the company aims at explaining how much funds are needed, their sources, and allocations. Return on investment(ROI) should be more than the cost of funds. This must be reflected in the projections. If ROI is not more than costs, it looks skeptical. And such doubt can be a turnoff for the investors.
Financial statements: Actual calculations and computations are demonstrated here. Whatever company has planned with its fund should be reflected in its accounts, therefore preparations of Income Statement, Balance Sheet, and Cash Flow Statement is crucial.
Future Financial Projections: Though this subheading isn’t necessary, it is advised to present financials projecting growth in the future to build interest among investors. The goal here is to prepare the expected/ anticipated position of the company reflected in the form of an Income Statement, Balance Sheet, and Cash Flow Statement for upcoming years. It could be prepared for 3 months, 6 months, a year, or more depending upon business operations. This showcases the optimism and confidence of the company.
Exit Plan: At last, a company should also prepare its exit plan. Just in case, due to unfavorable circumstances, it requires a shutdown. Nothing can be 100% certain about businesses. Thus, having an exit plan ensures the safety of investment for investors.
Types Of Business Plans
There are several types of business plans according to business suitability. The business plan can be classified into 7 types, which suit various needs of respective businesses. Here is an introduction to that:
Startup Business Plan: As the name suggests it is written and planned by new companies. Usually, the motive behind writing this plan is to attract funds from investors to accelerate the growth of a business.
Strategic Business Plan: It explains strategies that the company will follow to meet its goals and objectives. SWOT (strength, weakness, opportunity, and threats) analysis happens to be one of the main points as it helps the company to focus on possible opportunities and threats. The best tools and the best use of tools are included so that work can be done optimally. It is mostly made for internal use of the company and mostly results in the fulfillment of lagging goals.
Feasibility Plan: This is to check and conclude whether a new venture can be successful. It usually deals with either of two situations,
If the company wants to introduce a new product in an existing market
If a new market is to be attracted for an existing product
The main aim of this type of business plan is to find out how profitable a new venture could be. If the plan shows a high probability to be successful it is then put into play.
Operational Plan: It is also known as an annual plan. It primarily focuses on the operations of the business for an accounting year. Annual goals, awards that the company aims to bag are listed. Team introduction is also given for clarity.
Expansion Plan: It is made when the company envisions expanding its business. These plans have detailed information concerning future growth plans along with funds that the company requires from an outside investor.
What-if Plan: It is prepared when a company is desirous of entering into a new business venture which is somewhat risky and can prove to cause loss. Thus to be prepared for the worst a “ what-if” plan is made stating plan B for the company in case it fails.
Lean Plan: It is a short plan as it only focuses on attracting possible investors for the business. It includes just the basics about any business without having to go into long details and descriptions.
Be Confident And Creative. Tips For A Business Plan :
A Business plan must be equipped with a lot of creative ideas. Here are a few tips to help you form a business plan that you can be confident about.
Be Articulate: Articulation must be pervasive. Whether the write-up is wordy or incompetently explained, either of the situations is unfavorable. Have a flow of unfolding information in every new heading. Repetition of anything must be avoided. Practice precision
Familiarity and uniqueness: Familiarity is always easy to trust. Where uniqueness is always intriguing. I am sure the business plan you propose is unique. If not unique, it has to be a rarity. So your unique idea must be combined with a familiar idea, or it must be linked to a familiar idea. For example, you are proposing a cafe with various sweet corn dishes. This is rare. Now, the experience of the chef, variety in the menu, a favorable location, the nearby market area is some of the fields where familiarity can be generated and linked.
Avoid mentioning impractical aspects: A business plan that can be visualized is our goal here. It doesn’t matter how it sounds. The plan should be practical and must be supported with facts and figures.
Believe in your vision: It's not for mere motivational purposes. Believing in yourself makes all the difference. If you are convinced then only you can pass on that determination. Believing is how you will maintain your essential confidence.
Understand the client: A proper understanding of the client’s requirements is a must. Remember, We are here to aid the client with his aim. We can provide him with inputs, sure, but the business plan is to be made as per the clients’ vision and understanding. We don’t want to waste our efforts.
Study the market and competition: The market is a bottomless pit. It is never enough. For a good business plan research must be spotless. There must be no question unanswered. Always be well-read with what you claim
The constructive mentality to excel: Mindset is of the essence here. Having a constructive mentality to reach the top will reflect in your business plan. The mentality of advancing by stepping on others must be avoided. This sincerity should be reflected in the business plan. Focus on how the market will be advantageous for you.
Have a solid calculation of budget and projections: It is all about the money. Past, present, and future of it. An efficient budget and practical projections are very important. Proper fundraising plans and approaches must be followed. Cash flow projections must be made for at least 3 years. An idea that will generate cash flow must be highlighted. Variable expenses must not be overlooked.
Quick to Comprehend: Use as many pictorial representations as you can. Pictures are easy to understand and hence leave an impact on the person seeing the business plan. Using charts and pictures is a simple yet extremely effective tool to have an impact.
Follow Lucid Formats: Referring to formats is important because they cover all the important aspects to be discussed. But we should avoid using complex formats. We should use formats that are easy to understand and follow.
Show trust in your team: We must be able to convey the faith that we have in our team. A proper introduction of all the team members must be there. This instills confidence in the viewer.
Preparing a Business Plan indeed isn’t always as easy but mastery skills come with clarity and practice. All of the above-provided information has been assembled for You, to help you learn and explore all different segments of a business plan, which you were unaware of or needed precise understanding of. By following above mentioned tips and steps, without any doubt you’ll be able to master your business plan as well. Below are some thoughtfully prepared FAQs that will direct you to your specific doubts and queries.
FAQs For Business Plan:
Q Definition of Business Plan
A. A business plan is a reflection of your vision and what your company stands for. To frame in simple words a business plan is a document containing the client’s operational, financial, and marketing plans of a business in thorough detail.
Q Purpose of a business plan?
Q 7 components (elements) of a business plan. Briefly explained.
Q Various types of Business Plans and their suitability.
Q Creative ideas and tips for writing a Business Plan.
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