Writing a business plan doesn’t have to be an intimidating task, but it does require foresight, honesty, and plenty of research. Here is an outline and some smart tips to help get you started.
Creating a business plan is the first and most crucial step to building a successful company.
A business plan is important because it communicates to everyone involved in the organization what the goals are, and how management plans to get there.
The parts that make up a business plan are straightforward. Here’s a step-by-step breakdown to get you started with your business plan, along with a few expert tips on how to attract investors.
1. Describe your startup
The first step is to simply describe the business you want to build. During the process, it’s important to be honest about the obstacles you’re likely to face.
Starbird suggests including a breakdown of the target market and customers. You should also be clear about the factors offering a competitive edge.
Be careful not to have any blinders on when it comes to your product or service. People spend a lot of time focusing on the features that make them unique without taking the time to translate that into a value proposition.
Do diligent research on what your market is, and how to communicate with customers accordingly. The most successful investors are looking for an idea that is going to have a clear and understandable market potential.
2. Have a thorough plan: Document all aspects of your company
As the founder, you need to be concerned about all parts of the plan. That means including any licensing agreements, or your location strategy, for example.
It’s especially important to know and understand your numbers. The number one reason firms go under is inadequate cash flow. If you don’t know what’s going on in that area, you’re going to be in big trouble.
3. Make sure the plan is modifiable for different audiences
Different sections of your business plan will be more important depending on your audience. Investors, for instance, will want to see your financial projections, whereas employees might be more concerned with the organizational structure of your company.
The SBA recommends that you project that status of your company for between three and five years into the future, though it’s a good idea to outline your annual goals, too. Keep in mind that the further ahead you look, the less accurate your conclusions are going to be.
A five-year horizon is fine, but a thorough business plan looks beyond that [up to 10 years], with the recognition that some of the forecasts would be of decreasing accuracy.
4. Include details to put you over the edge
When writing the market analysis, it’s a good idea to include any information about external growth trends, and why one company might have the market share. Pricing power – meaning how consumer demand would be affected if your company shifted its prices – is one detail that often gets excluded from business plans, but which can help put you over the edge.
It’s also important to keep your expectations realistic and honest: The biggest mistake entrepreneurs can make when writing a business plan is to be overly optimistic with sales and future cost estimates.
5. Remember why you care
Your business plan should reflect not only your financial goals, but also your values, and those of the community you’re working to build.