Guide to Writing an Effective Business Plan

A business plan is one of the very first documents that founders focus on when starting a business. And the size of your business doesn’t fit into the equation. A business plan is especially effective when your business is one that requires extensive funds to start up. An initial investment from people outside of your friend and family circle requires evidence of your idea and its viability. While the specifics of a business plan will differ, below we have outline the essential areas/points you need to focus on when creating your own plan.

Essentials of an Effective Business Plan

Core Values and Purpose

This section lays down the general vision and values of the business or company you intend to start. For instance, if you are starting a clothing company, this section could include a statement on sustainability, diversity and affordability as the key values. This section should also include your own individual values and what you bring to the business. For example, your unique qualifications and experience-professional and personal and your ability to lead operations. Identifying these values will also help you in more essential business steps like structuring your business-sole trader vs limited liability company, objectives and goals and hiring strategies and requirements.

When drafting a vision statement, an easy step to guide you is listing down the people impacted directly by your business. In case of a local business focused on a small geographical area, this would mean the local community. In case of essential services like concierge nurses-this would mean the healthcare industry and so on. Now, it’ll be easier to visualise how your business will be different and or means to serve these parties.

This section needs to end with a short list of goals-both immediate and long term. This is a critical portion of the section as it will guide your efforts-both monetary and provide impetus when taking decisions.

Market Research

It goes without saying, researching your business competitors is key in order to stand out from them and even get started. This portion of the business plan will include research on your competitors. In many cases, you’ll find that your business is not viable at all and will need to regroup and change course. In this step, you will broadly make a survey of the potential market for your business, the number of active and successful players in the market, their growth-current and product offerings.

Last but not least, this section should include information on potential customers-is there demand for the products or services you intend to sell. Do the customers already have many options? What have been the recent issues customers have faced with current players in the market.

A market research document is the most extensive part of your business plan and the ones potential investors, lenders and partners will focus on the most. Therefore, it helps to take some time collecting up to date statistics and maintain records. For instance, in case you have a narrow market-in case your are a business that provides elder care-collect government data on the elderly population in your market region. Making future predictions in this section is important as it will prepare you for building a longer term plan. For instance, perhaps population projection states that the number of middle class people in the market area is predicted to reduce-you’ll know how to market your services differently.

Assets & Limitations

In this section of the business plan, you’ll need to list comprehensively your business and your own advantages and disadvantages. For example, a lawyer founding a legal tech company can list his years of experience in the field and awareness of clients in the market. A strong network of existing support in the field is also useful. Another example if you are founding a medical concierge business- a background or existing deal with suppliers will be a big USP. if you additionally have a Proof of concept through a trial run or initial introduction to customers- you can put that as a detail too.

Next, you will list down your business weakness and limitations. For example, no experience in education for an ed-tech company, product being extremely niche, etc. If you run a business that will hire, people from overseas, this would includes regulatory compliance with overseas lawyers. Make sure you provide solutions and make a special mention of big threats that need most care. For example, if you are producing a product that depends on an ingredient that needs to be imported, make sure you mention, extreme cost increase in imports.

Business Offerings

One of the most compelling sections of your business plan-here you will provide an extensive breakdown of your products and services. Make sure you describe the products, the research that went into conceptualizing the product-say a unique oil or supplement for example. For businesses that sell a range of services, make sure you identify which ones are the key services or products you are focusing on in the immediate future. If however, all products are essential to your business, list the features and nature of all. In this section, you’ll need to dig deep and provide information that affect compliance. For example, where ingredients are sourced from will affect tax levied on the product and passed down to customer-this will also affect price point

Prospective Customer

In this section, you will highlight or profile your ideal customer and target market. Make sure, aside from technical details, you also include an emotional profile that highlights pain points of your target customer. Some important details a customer profile should include their age, education, geographical location, income and values.

An idea of your customer’s values should not be understated. It will determine your marketing plan and your sales pitch. For instance, if you are selling sustainable groceries, it helps to understand why customers choose sustainable food and what they are willing to pay for it

Here, also write down, how your products fit this customer profile

Marketing

A marketing plan is the fun section. However, it can also be a deal breaker. In fact, some business are built and succeed on hype alone. And what is hype if not excellent marketing and promotion. In this section, you must lay down the strategies you plan on using to attract potential customers. Also highlight, how these strategies have succeeded in the past for similar businesses etc. Make sure you link your marketing plan to your customer. A luxury customer is not likely to be seduced by door-to-door promotion or emails. They desire exclusivity and your marketing plan should take that into consideration. For instance, an exclusive mailing list to launch your product is an excellent way to reach out to a luxury clientele. Other examples include, free passes to exclusive launch event, freebies for registering early, first look deals etc, limited edition sales etc.

A marketing plan must also include prices and alternatives. An excellent business needs to make choices daily-specially one that is starting up. This means, you need to make sure the money goes in the plan with the biggest and best ROI. Provide justifications for your choice based on examples and spreadsheets.

Logistical Requirements

Depending on the scale and scope of your business, you’ll need to know how much capital you’ll need to set up. A large part of investment is in physical infrastructure. A small online candle business will not require a facility for production. But, if you are running a physical store, you’ll need to pay rent, hire cleaners, someone to design the space etc.

Logistics also include details of how your products will be manufactured, number of people need to manufacture, supplier details, existing connections etc. If you and your team require special equipment to carry out production or provide service, include details of such requirements as well.

This section is an absolute must and helps you price your products and determine the minimum amount of money to stay afloat in case of no sales

Finance & Accounting

Last, but not least, you will need to include a finance and accounting section. This section will detail the finances involved in running your business, projections of profits and/or losses, assets and money required to start up. Most importantly, you’ll need to show external parties that your business is viable and when they can potentially see a return on their investment. Some important documents to include here are an income statement (details of revenue sources, potential expenses) and a balance sheet (equity stake in business, assets owned, etc.

To Wrap Up

A business plan is not only a document important for engaging external parties but it also helps crystalize your own ideas and kickstart innovation. In case of a small business, a proper business plan will ensure you are protected from risks that come from going in blind.