You read our article on why your startup doesn’t need a business plan. However, for whatever reason, you still need to write a good business plan for your company. No idea know where to start? ELR12 has your back.
What is a Business Plan?
A business plan is a document that outlines not only the goals of your company but also takes how you’re going to achieve them. It should include your company’s mission, the environment it operates in, its objectives, the strategies it will use to meet those objectives and any assumptions about future events these strategies rely on.
Business plans are an important tool for entrepreneurs. They allow them to think about their companies strategically and make good decisions. A well-written business plan can also help with raising capital (either through loans or equity, as explained in our previous article).
In other words, a business plan is a series of steps, or a guide, for any would-be entrepreneur or anyone who wants to start a new project. It consists of three main parts: an executive summary, a description of the company and its products and services, and a financial section that outlines key performance indicators.
Let us go over the guidelines for making a good business plan. But first off…
What Makes A Good Business Plan?
A business plan is an overview of your company, its goals, and the financial need that your company requires to reach its goals. It is essential to have a well thought out business plan for any company in order to be successful.
In order to write a good business plan, the first thing you should do is to determine what kind of business you want to start or expand. You also want to know how much money you will need in order to get started. In addition to how much money is required for the business to succeed.
An investor, banker, or other lender will not give you any money until they see that you proposed a well-researched and thought-through project. They also need proof that your proposed project will bring them a profit.
So, a good business plan is one that will convince investors to fund your idea. It should be well-written, easy to read and easy to understand. It should also be in a way that makes it easy for the reader to take in the information presented. Something so complicated they can’t figure out what you’re trying to say or so confusingly formatted they spend more time struggling than reading will not sell them on your idea.
Step 1: Define your goals and objectives
In simple words, goals are what you are trying to accomplish. Objectives are the specific steps that you will take to achieve your goal.
Defining your goals and objectives is a fundamental part of how to write a good business plan. You need to know what you are trying to accomplish before you can start strategizing the steps needed to get there. Setting your goals and objectives helps you identify the direction you want your company to take and shows investors or banks where their money can go furthest in helping your business grow.
There is no universal template for how to create a list of goals and objectives. You need to identify the business area where you want to focus. Then draft a plan that addresses those aspects of your company. The process starts by defining what it is you want to achieve with your company. And then figuring out how much time or money it will take.
Using the SMART acronym as a guide, goals should be:
- Specific: very precise with no room for misinterpretation.
- Measurable: quantifiable, and progress should be easy to track.
- Achievable: attainable — not outlandish or unrealistic.
- Relevant: contributes to your broader, overarching goals.
- Time-bound: has a defined start and end date.
Step 2: Determine the market opportunity and assess the competition
Market opportunity is a driving force for any business. It is the reason why companies exist in the first place. If there were no market opportunities, there would be no need to start a business.
The market opportunity is a term that refers to the possible money-making potential of a business venture. It is the total amount of money that can be made from selling products or services in a given market. In order to find out the market opportunity for your product or service, you need to find out how much money can be made in this niche.
A popular way to think about the market opportunity is through competitor analysis; this includes understanding competitors’ strengths and weaknesses and their positions in the marketplace. It also includes identifying gaps that your company can fill. Those gaps are what would allow you to achieve competitive advantage over these competitors.
Keep in mind that it’s highly unlikely for any new venture to enter a market and take over an existing company that has been operating for some time. If you’re looking at entering a new industry, focus on opportunities where there are no major competitors and/or companies with deep pockets and extensive experience in this area. You want to make sure there’s room for new entrants, otherwise you’ll never get traction.
Step 3: Describe your target customers
Customers are the backbone of any startup or business. Without customers, there is no business. In order to achieve a sustainable customer base, a business needs to find a way to appeal to their target market.
There are many different types of customers who have different needs and expectations. Business owners need to know what their target customers want. They also need to make sure their product or service is tailored towards these demands.
For example, startups and ecommerce businesses have a very different set of customers. For startups, customers are the lifeblood of the company. They are the ones who provide feedback and validate the company’s product or service. On the other hand, for ecommerce businesses, the customers are also their suppliers. The more customers they have, the more products they can offer to other potential buyers.
Therefore, all types of companies need to be able to understand what kind of customers they should target. Or else, they can’t write a good business plan that will help their business model succeed.
Step 4 : Evaluate financial projections
Financial projections are a very important part of a business plan. They show what a company expects to happen in the next few years. With regards to its financial position and how it will earn more money. Financial projection helps people predict the likelihood of success for a company. And judge whether the company has enough resources to achieve its goals.
Financial projections detail both short and long-term financial data and demonstrate the cash flow of the business. They depend on a company’s past performance and future plans. They can help generate forecasts for expenses, revenues, capital expenditures, borrowing needs, and cash flows. Financial projections supply stakeholders with an understanding of what they can expect in the next few years based on present expectations. They also help evaluate different scenarios such as how the company will perform in case sales drop or when interest rates increase.
In order to create a financial projection document, you need to have a good understanding of your business potential as well as any risks that may be associated with it. You will also need to know what products or services you are going to sell and how much they cost in order to make an estimate of how much revenue will be generated from them.
While it is important to provide accurate forecasts in order to avoid too much risk or unexpected surprises, there is no perfect formula for creating accurate projections so these should just be seen as estimates rather than facts. Financial projections are only as good as the information you put into them. There are many reasons that projections may not be accurate. But the best thing to do is to make sure that you give your projections the most accurate data possible.
Business plan bonus tips to stand out
Now that you know how to write a good business plan, it’s important that you use every possible tool at your disposal to make your business plan stand out:
- Use clear, concise language.
- Create a strong title and use an eye-catching cover page.
- Add multimedia content.
- Include charts and graphics.
- Offer evidence and supporting documentation.