Understanding the importance and how to write a business plan is very for potential business owners as well as entrepreneurs. The importance of a business plan is not only to source funds, it helps to provide directions and a set of actions to achieve the business’s corporate objectives. So, this article explains the importance and how to write a business plan for a business.
The importance of business plan
The business plan is very important to every business either small or big. It provides a clear direction on how to manage a business toward the attainment of its goals. The business plan serves as a roadmap to the business by highlighting the structure of the business, how to manage the business and its growth strategies. A good plan helps to share your ideas with others such as your new employees. With a plan, you will be able to know what it takes to make your business successful.
Additionally, it helps to get funds to finance the business or bring partners to the business. The first thing that will connect your business with potential investors or business partners is your plan. A proper business plan will provide investors or business partners with information about what your business is all about and a set of actions to achieve its objectives. By this, it enhances the confidence of the investors to get good returns on their investment. Therefore, the business plan is your power tool to convince potential investors to invest in your business.
How to write business plan step by step
Business plan format
How to write business plan step by step depends on the business plan format. However, the format of the business plan depends on the purpose of the plan. The plan can be majorly categorized into two; Lean startup and traditional plan
Lean startup business plan
This is a plan that is easy and quick to write. So, you can choose this format if your business is relatively easy and simple to operate or your business requires frequent changes in the plan. This format involves a simple description of the business, its customers, value, strategy, tactics, finance, and others. It involves important sections of your plan in a summarized way. The important part of writing your lean startup plan is to keep all the sections short. The lean startup plan may include the following sections:
This section involves a clear and concise statement of the unique value of the business. I.e. statement of the value that the business is bringing to the customers. You must be able to communicate the unique value that your business is providing to the customers.
This is the section where you concisely explain the problems that your business helps customers to solve. Here you answer questions like what problem that my business solves for customers? Why my business exists and others?
Products or Services description
This is the section where you explain your products or services and the importance of products or services to the customers. Additionally, you explain why your products or services are the better choices for the customers. This is where you answer a question like what are you selling?
You analyze the competitors in this section. Businesses sell what you are selling from whom your customers will buy if not from you. You also explain what gave you competitive advantages over your competitors.
This is where you define your target market and you have to be specific in defining your customer segments. Because your products or services cannot be all customers, it will be for certain customers. You define their target age, gender, income class, shopping habit, and others.
You define the channels through which you communicate with your customers. This includes where you sell your products or services, either online or offline, or both.
This is where you define your marketing strategies. How you are going to advertise your products or services and the type of advertisement you are going to use.
Every business needs funds to run business effectively. This is where you talk about how you need to start the business, where to get it and how you are going to use the money.
This is where you set a budget for your business. Sales budget, cash budget, and your budgeted income statement. The sales goals and cost of running your business are considered in this section.
Traditional business plan
This format involves a detailed or comprehensive analysis of your business. You need this format of the plan if you want a detailed plan to source funds from traditional financial institutions. This is because investors, as well as lenders, usually require the traditional plan. However, this format of the plan is time-consuming. The number of sections in this plan depends on your needs and the sections that help to satisfy the needs. A traditional plan may include the following sections:
This gives an overall summary of the business plan. This section explains why your business is in existence and how it will be a successful business. This includes the objectives, purpose, mission, products or services, location, management team, and others of the company. You also need to include financial information in this section.
This gives detailed information about the business. This provides information like the name, address, contact, hours of operation, and other necessary information of the company. This is the section where you write about the strengths of your company. What problems does your company solve for the market? It is important to explain what gives your company competitive advantages ahead of the competitors.
Products and services description
You explain what your company is selling or offering to the market in this section. What are the benefits of your products or services to the customers? What is the product lifecycle? What are intellectual properties such as copyright, trademark, and others planning to acquire? Is there any ongoing research and development on your products or services? All these questions and others need to answer in this section. You also need to explain the components and techniques you use.
Market and competition analysis
In this section, you give a detailed analysis of the market of your niche as well as the competitors in the industry. You should also explain how you are going to compete in the market. In the analysis of the competitors, you need to analyze their weaknesses and strengths. You explain what your competitors are doing that is working for them and how you can do it better than them. This will allow the development of strategies to gain competitive advantages.
Organization and management plan
This is the section to explain the legal structure and form of business and how the business will carry out its operations. In this section, you highlight the responsibilities of your management team. The knowledge, skills, and experience of your management team and how they will contribute to the success of the company. You can also include the CV and resumes of the key members of the team.
Marketing and sales plan
This section will include your marketing strategies of how to attract and retain customers into the company. You also need to include marketing promotion strategies in this section. This section should include your sales budget.
This section will include the financial requirement if you need funds for your business. You state the amount of money you need and how you intend to use the money. The type of the fund required whether equity or debt capital, terms of the funds, and repayment period if it is debt should be stated in this section.Finally an easy way to get up to $5,000 at BadCreditLoans.com Get Started!
This is the section you include your income statement, balance sheet, and statement of cash flow for 3 to 5 years if you are an existing business. For a new business, you include forecasted capital expenditure, income statement, balance sheet, and statement of cash flow. You can use charts and graphs to give a visual financial story of the business.
You include other documents or materials to support your business plan especially if such documents are required. This will include a letter of reference, legal documents, patent rights, product pictures, and others.
Writing of business plan is very important for both new and existing business. Therefore, it is important to understand how to create a business plan for your business. To create your plan, you need extensive research of the industry and market of your choice. However, if you need someone to guide you on your business plan or want someone to take the stress away from you, you can contact us at Bizinfong.
Subscribe to our newsletter!
Afeez is one of the founding partners of Marasas Consulting limited. He consults for both individuals and entities in the area of accounting, management, audit, tax, and investment. He has a wide range of experience both online and offline which allows him to provide relevant and timely professional advice and assistance to business owners with their accounting, tax, management, audit, and investment plans.
Afeez is a member of the Institute of Chartered Accountants of Nigeria (ICAN) and a member of the Nigerian Institute of Management (Chartered). He is a certified Google analyst and strategist. He earned his Bachelor degree in Management and Accounting from Obafemi Awolowo University, Ile-Ife, Nigeria, and earned an ordinary national diploma in Accountancy from The Polytechnic of Ibadan, Oyo State, Nigeria. He earned certification in “Excel Crash Course” and “Reading of Financial Statement” from Corporate Finance Institute, Canada.
Afeez is dedicated to helping clients achieve business success by helping them to establish solid and sound accounting, tax, and financial processes.