How to Write a Business Plan
A good business plan defines your business, identifies its goals, and serves as a tool for introducing the company to investors, partners, employees, and others. It is best thought of as a business roadmap -- where you want to take the business and what resources are needed to make that happen.
It highlights obstacles to avoid, allows for efficient use of resources, organizes a company's financial information in order to anticipate the expenses and profits of the business, and helps you focus your marketing efforts. Learning how to write a business plan will pay dividends down the road, and may help you secure funding.
Business plans give employees and investors (as well as reminding owners) a broad understanding of the business, along with specific numbers to analyze. No matter the industry, a business plan should always track three concepts, which often overlap: communication, management, and planning. Below, we will cover these three elements as well as approaches on how to write a business plan.
The business plan communicates the viability of your business to potential investors, attracts partners, and helps convince key employees to sign on. It acts as a tool to manage, monitor, and evaluate your progress, as well as allowing you to modify plans as your project progresses. Finally, the business plan is a planning tool which acts as a roadmap through different phases of your business, taking into account potential hurdles and how best to overcome them.
While the emphasis of your business plan will vary according to your goals, when you write a strong business plan you provide your business with a key element for success. Business plans are equally important to small or big businesses. These plans force owners to think strategically and analyze with clarity the current business climate rather than simply leaping into a situation before looking. A good business plan doesn't guarantee success, but a company without a solid business plan is far less likely to succeed than a business built around a carefully considered plan.
Who Is Your Audience?
Generally speaking, business plans define the business by identifying goals and setting out how you aim to achieve them. One of the first things you should consider in writing a business plan is the audience you plan to reach. Writing the plan to attract investors will require substantially more persuasion than writing a business plan to keep yourself on track.
Looking for Capital Investment
If the primary objective of writing the business plan is to attract investment capital, then the plan should reveal your vision of the company alongside a healthy dose of salesmanship to convince investors that your plan is feasible and will be profitable.
You have to show investors that you are an expert in your field, or that you at least have a solid grasp of the industry (this is where heavy numbers and analysis come into play) and how your company can excel in that business climate. Think of your business plan as the resume of your company that will be examined by an employer. You want to accentuate the positive, while remaining honest about your ability and experience.
Business plans should include:
- A summary of the purpose of your business and a company description
- An executive summary (details of the organization and management of the business)
- Market analysis (emphasize your place in the market while being honest about competitors)
- A funding request
- Marketing and sales strategies
- Financial information about your business (this should be detailed, with information about start-up costs, expenses and revenues, etc.)
- A professional resume or resumes of those in charge of the business, which sets forth business accomplishments and/or expertise.
The plan you present to investors should track the three objectives of a business plan mentioned above (communication, management, and planning), and highlight the strengths of your business model and the niche in which the business will operate.
Particularly true of business plans aimed at attracting capital investment, your business plan should be polished and professional. It's difficult to project an aura of confidence if there are grammatical or mathematical errors, or if the plan is otherwise poorly presented. Numbers should be double-checked by someone with professional experience and the actual writing ought to be assigned to someone within the company who has experience writing business plans or farmed out to a professional writer who can better present the message.
Stay on Target
If the business plan is intended primarily as a tool to keep your business on target (i.e., you are not seeking outside investment), most of your energy ought to be spent analyzing and predicting financial information. You're not pitching the business to yourself, so you can dispense with most of the salesmanship, but keep it professional since you may be showing your plan to contractors, employees, customers, etc. in the future. As long as the financial projections are accurate and you competently describe your business operations and goals, you'll be in good shape to keep your business on the right path.
Even if you're not a financial expert, you will need to absorb and master certain financial concepts -- for the health of your business as well as for the business plan. General concepts such as breakeven analysis (how and when the business will turn a profit), estimating startup costs, and financing basics such as cash flow projection and management are essential. For specific information on financials which should be considered, go to the U.S. Small Business Administration's Website.
Even if the business plan is targeted at yourself simply to keep you on target, you will want the most accurate projections of financial stability. And in order to do that, you'll need a solid grip on financial concepts and an honest appraisal of the numbers you are crunching.
Get Professional Help When Writing a Business Plan
No one is born knowing how to write a business plan, it is learned through experience. You should consider seeking advice from mentors -- business people who have experience and can shorten your learning curve -- if this is your first time. And while it is not necessary to hire an attorney when drafting a business plan, it's usually beneficial to have an attorney help you in the beginning stages of starting a business. Contact a business and commercial law attorney in your area for more guidance.