How To Write A Business Plan For Your Small Business

A business plan is a planning document that summarises the operational and financial objectives of a business. It contains detailed plans and budgets showing how the business will pursue and realise its set goals.

Why You Need A Business Plan For Your Small Business

A business plan is a vital first step for anyone starting a business.

It is the due diligence needed to prevent you from wasting time and money on a business idea that might not work.

If you have a business idea, you need a business plan to determine if it will make money, since you would not want to start a business when you are not sure that it has a good chance of being profitable.

Your business plan will help you secure the support of the people who will work with you in the business, particularly members of your senior management.

Also, your business plan will help you convince potential investors that your business is likely to succeed. A business plan will show the capacity of your business if you need to borrow money from a lending institution.

Your business plan is your tool for thinking through the key elements of your business and serves as the roadmap for starting, growing and scaling your business.

It guides you through every stage of your business. It is the foundation for your business.

How To Write A Business Plan For A Small Business

Here is a step-by-step outline you can use to write your business plan, with a listing of the key sections and essential components of the plan:

1. Executive Summary

This section comes first, but it is the last one you write. It summarizes the key elements of the business plan and gives a bird’s-eye view of the plan. This make or break section is critical in the sense that this is where the reader will decide whether to continue reading, not to speak of considering the substance of the plan.

2. Industry Overview

This requires a general overview of the industry that your business is venturing into. It should include trends, major players and aggregate sales estimates. It should also show how your business plans to place its stake and position itself within the industry.

3. Market Analysis

Examine your primary target market. Focus on your geographic location, the demographics of the market, and how your product or service will meet the needs of its consumers. This is where to show your knowledge of the people who are likely to patronise your product or service. It should contain informed estimates about the volume and value of products or services you may sell to your target market.

4. Competitive Analysis

Investigate your direct and indirect competitors. Assess their competitive advantage. Analyse how your product or service will enter your target market. State the unique selling proposition of your product or service, if any. Articulate how your business will distinguish itself and compete successfully in the marketplace. Explain your strategy for gaining a share of the market.

5. Sales And Marketing Plan

Outline your sales strategy. Talk about your pricing plan. Discuss your proposed advertising and promotion activities. Showcase the benefits of your product or service. Present what is unique about your business and your product or service. Describe how you will get your product or service to your target market, and how you will persuade people to buy them.

6. Ownership And Management

State the legal structure of the business, including its management and staff requirements. Name the key players in the senior management team. Show the internal and external resources available to the business.

7. Operating Plan

Disclose the physical location of the business, including its facilities and equipment. List inventory and supply requirements, and employees needed to run the business. Include such operating details such as the manufacturing process, if applicable.

8. Financial Plan

Describe your funding needs. Provide detailed financial statements. Analyse your financial statement. Present your three main financial documents: Balance Sheet, Income Statement and Cash Flow Statement. For a start-up, the third document will be your Cash Flow Projection.

9. Appendices And Exhibits

These include any document to support the foregoing sections. The essence is to provide additional information to give credibility to the business plan. Examples include, but are not limited to, market studies, photos of your product, contracts, etc. that apply to your business.

10. Title Page and Table of Contents

After completing all sections of the plan, create a title page and insert it at the beginning of the plan. Create a table of contents, which assigns a page number to the start of each section, and insert it immediately after the title page.

By the time you work through this process, you will have a complete and well-thought-out business plan, a living document that will guide you in starting, growing and scaling your business.

5 Keys To Unlocking An Investable Business Plan For Small Business

The business plan presents your business to a potential investor or financier. It also represents your best effort as the promoter of the business to clarify your plan for the business. The plan must therefore follow a format that will assist its readers to quickly scan and understand the vital data about your business. For these reasons, five elements are critical to the preparation of an investable business plan for starting or growing your business.

Here is a guide to help you produce a business plan that will be investment-ready:

1. A Basic Structure

Your business plan must be easy to read. There are certain things that your reader, a financier or investor, is looking for. The basic format of your plan must include the Cover Letter, Title Page, Table of Contents and Executive Summary.

While the cover page explains why you have produced the plan and why the reader should be interested in it, the title page should disclose the name of the business, identify its promoters and brand/product images. The table of contents will help the reader move around the document to find what is where. This should be followed by its contents, which focus on such items like the target audience, products or services and current and projected financials.

2. Executive Summary As Investors’ Pitch

The primary objective of the plan is to attract investors’ interest or secure financing. And, because you, the promoter, is not likely to be present when the plan is being reviewed, its summary has to convey the essence of the document in very few words. It must be short, sharp and, more importantly, it must clearly pitch your proposal. By so doing, a busy investor or financier can get the gist of your story at a glance, with minimum effort.

Your reader will almost always start reading your plan from the executive summary and will only go beyond it when it engages attention and holds promise. It must have the glue that holds the reader, hence it must be presented as a pitch that lures the reader to want to learn more about the business. Because of its importance, it is advisable to leave the writing of the executive summary to the last, even though it comes early in arranging the content of the plan.

3. Unique Value Proposition

A bankable business plan should tell your readers in what areas you are providing value to your customers, but more importantly, how your value proposition differs from what your competitors are offering your target customers. It should be able to show what your core business activities are (ensure you’re able to narrow them to a few basic ones).

4. Market Analysis

The more information available, the more your lenders and investors can estimate and calculate their risks. The market analysis segment of your business plan should expose them to various factors at play in your target market or industry. It should contain the size and status of your market (is it declining, expanding or stagnant?), a detailed analysis of your competitors, who your target customers are, the market forces at play, and the risks involved in your business operations.

5. The Marketing Plan

This is a comprehensive outline of the overall marketing effort of the business. It is the marketing strategy of the business, the blueprint of how it will acquire customers and meet its sales targets. The marketing plan provides information on the product or service, pricing, promotion and estimated sales and revenues. It also includes branding and positioning of the business, target markets, segmentation of its customers, competition analysis, critical success factors and key performance indicators.

6. The Assumptions

These are the things that you consider true for the purpose of developing a strategy and making decisions about the business. These are informed disclosures of the uncertainties and risks that are associated with the enterprise.

Examples of the assumptions of your plan may include, but not limited to, the likely behaviour of your customers, regulations that could impact operations, changes in employee remuneration, number of days in your financial year and interest rates on borrowed capital.

Some assumptions might not be obvious in the plan. However, the ones stated in it must be based on well-researched findings, not the result of guesswork. Nevertheless, the value of your plan, relative to your assumptions, is to serve as a yardstick for determining their correctness or otherwise, by helping to understand and explain variances where they occur.

7. The Financials

The financial information in the plan foretell the trading activities of the business over a number of years. They begin with how the business will source the money it needs to start or continue to run, dovetail into how much it will spend on its various activities, and how much it will generate as income for the business and profits for its owners.

A well written financial plan is at the centre of a bankable business plan. But it is also the most intimidating part of your business plan too, which is why most business owners try to avoid it. Your lenders want to see your cash flow statement (a positive cash flow is a good indicator that you can handle your business’ expenses). They also want to see your financial needs, what you would spend the money on and how you plan to pay back the loan. Your financial plan is not complete without your financial statements and financial projections that give a realistic forecast of your business’s future revenue and expenses.

Without delving too deeply into financial analysis, the plan must aim to present figures that indicate a balance between being unduly pessimistic and overly optimistic. It must, however, layout the best case and worst case scenarios, including the framework that will manage the cash flow of the business.

These proven and tested recommendations will fine-tune the working draft of your business plan. As a final step, to get the finishing touch, get your associates or partners to review your final draft prior to submitting it to an investor or a lender.

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