How to Write a Business Plan

business plan

A lot of articles have been written on how to write a business plan. You can find thousands of articles online on the subject of writing a winning business plan, but we find that most of them do not truly cover the actual process involved. So here is our contribution on how to write a business plan. The easiest and fastest, yet most professional way.

Questions to ask when starting a business

  • Is your establishment well located, and in an appropriate setting?
  • Do you need many alterations or construction?
  • Which company structure and type of incorporation is most suitable?
  • What makes your establishment, services or products attractive to guests or customers?
  • Who are your customers? What do they need? Can they afford it? Are they willing to pay the price?
  • Do you have a niche market? What is the size of the market? Do you know your competitors?
  • Do you have time, money, and perseverance?
  • Do you have good conversational skills? Can you listen well? Can you manage personnel?
  • Are you well-organized and familiar with the basics of sales, management and bookkeeping?
  • Have you done the necessary research (demand, competitors, your USP, ad campaign, and so forth?
  • When will you be making a profit?
  • Are your expectations realistic?

The written business plan

To write a business plan from scratch is unnecessary and a true waste of time when there are templates available that will help with the written part of the business plan. A program such as PlanMagic Business or other business specific PlanMagic program includes pre-written templates, many for specific businesses, where you have all the required parts in place. The PlanMagic business specific templates even include a detailed product mix providing ideas on what you could/should be offering to your customers and what this involves. Market data is incorporated where possible and many relevant details are already completed and inserted where appropriate for the business type.

Subjects to include are:

Introduction

The introduction should include the business description, business formation details, overview of directors and the management team, the business goals and/or mission, the business philosophies and/or identity, the geographical markets, and the vision of the future.

Business description example

ABC is a supermarket that resells a full range of food products (fresh, frozen, canned, dried and preserved), including meats (from our fresh butcher section), fresh fruits and vegetables (from our greengrocer section), breads and cereal products (from our bakery). Besides food products we also carry a full range of household products such as detergents, soaps and household cleaning products, beverages, including fresh and alcoholic, cosmetics and beauty products, personal hygiene (toothpastes, soaps, etc.), an in-house pharmacy, basic electrical and utilities, tools, school and basic office supplies. ABC Supermarket also has a photo print service, a copier service and a home delivery service.

Executive summary

The executive summary needs to reflect the most important parts of the business plan, and typically includes the main objectives, sales summary, details on strategic positioning and strategic alliances, required licenses, the key advantages, and the funds required.

Marketing

The marketing plan is the next part of your business plan. You need to include items such as the product mix, sales estimates, an analysis of the current product mix, a concise competitive research, complete market analysis, the marketing goals & strategies, pricing policy, the advertising & promotion plan, sales management and distribution details, and a SWOT analysis.

In the analysis of the market an historic and future picture must be made clear in which the following questions need to be answered:

  • What happened in the market in the last five to ten years?
  • What changed regarding cost, prices, suppliers, laws, margins, etc.?
  • What has become easier of more difficult?
  • What does the customer do differently or the same?
  • What are the competitors doing in my region?
  • Which products are currently in a growing market?
  • How are you or will be you positioned in the marketplace?

Researching your market to know more about your customers and your competitors is a critical step for every business. If a major corporation puts out a product that doesn’t sell, they move on to the next idea. If you put out a product that doesn’t sell, you’re out of business!

A market analysis forces you to become familiar with all aspects of the market so that the target market can be defined and the company can be properly positioned. A market analysis also enables you to establish pricing, distribution and promotional strategies. All this allows the company to become profitable within a competitive environment. You will also obtain an indication of the growth potential within the industry and this helps you to develop your own estimates for the future of your business. A projection of the market share for a business plan is a subjective estimate. It is based on the analysis of the market and on highly targeted and competitive distribution, pricing and promotional strategies.

Define a concise customer profile. You can use market segmentation, where there are more than one clearly definable markets.

Market segment 1

Individuals: male/female, average age is ______, their average income level is ________, {more demographic variables}.

Businesses: describe here the industries, sales levels, and any other relevant descriptors of the businesses you will sell to.

Market segment 2

Individuals: male/female, average age is ______, their average income level is ________, {more demographic variables}.

Businesses: describe here the industries, sales levels, and any other relevant descriptors of the businesses you will sell to.

Market coverage

The type of markets where your clients originate from or you want them to originate from. For example:

  • Banking & insurance _______%
  • International trade _______%
  • Governmental & diplomatic institutions _______%
  • Hotel & travel _______%
  • Media & telecommunications _______%
  • Medical & health care _______%

Marketing strategy

In general the strategies per product line will be to:

  • invest or stop
  • invest for growth
  • harvest
  • desinvest
  • operate selectively

The distribution channel is the marketing mechanism used to present, deliver and maintain the product.

Ask yourself the following questions:

  • What is the location of your business?
  • Why have you chosen this location?
  • What are the marketing advantages of this location?
  • What are the costs associated with this location?
  • What are the potential traffic flows from this location?
  • Where else can your product or service be purchased?
  • Are there other methods of distribution you have or will use in the future?

Historic analysis

For existing businesses an historic analysis needs to be included in the business plan. This can consist of a general view, the market position, and the historic income statement and balance sheet.

The organizational structure

Next you need to provide details of the structure of the organization. Details of management and personnel, the administrative organization, as well as contingency planning should be detailed.

Operations

The operations plan needs to show the identity, location, premises, layout, specifics about operations where appropriate, and for manufacturers detailed production planning.

Financial plan

The financial plan (which can be taken from the financial projections) needs to include the investment budget, the projected return on investment, the viability of the business plan, statistical data (ratios), and a complete overview of projections for at least 3 to 5 years.

Risk management

Depending on business type and size, subjects such as risk reduction and exit strategy may have to be added.

Appendices

Several appendices can be inserted at the end of the plan to enhance the overall picture. You can think of company brochures, product brochures, patent or trademark information, and so forth. For sole proprietors/traders a personal income statement has to be included showing the financial position of the owner(s).

When you write a business plan it’s important to consider, who the business plan is for.

Internal audience

If you are to get the most benefit out of the planning process that leads to a written business plan, you have to be the most critical reader of the plan. You know you have a good idea or you wouldn’t even be thinking about writing a business plan. You may have to force yourself to be skeptical and to challenge every assertion contained in the plan. If you truly wish to succeed, you have to be realistic about your chances. The fact that you have a good idea doesn’t necessarily mean that you have a profitable idea. The time to deal with all the potential pitfalls is in the planning stage, not later on when unexpected events tend to be unfavorable and costly.

There may be others within the business with whom you will share the business plan, or pieces of it. If you have partners, co-owners, or a Board of Directors, those individuals should see the plan after its completion. They may also have significant input into the plan as it’s being developed. If you have employees, many of the goals that you set for them will be derived from the plan. For example, your sales projections translate directly into the expectations you have regarding the level of sales your representatives must achieve. In general, your people will be able to do a better job if they see exactly where they fit into your overall business objectives.

There may be parts of the plan that you don’t want to share with your employees. This is particularly true of portions that might reveal more than you want them to know about your finances. You may choose not to share information regarding how the business finances its operations. You’ll have to use your sound judgment regarding the type and amount of detail that will be relevant to each of your employees. In many cases, you may want to share with them only your executive summary and the top-line goals for the year. In other cases, greater detail will be necessary and helpful in motivating key employees to "get with the plan".

External audience

A written business plan is a requirement if you intend to obtain a line of credit or loan.

Let’s face it, banks are less willing to deal with small startups, so it is highly unlikely that you’ll get a loan without a written business plan. Lenders need to be convinced that your business operations will generate the funds necessary to repay the loan. Therefore, a plan destined to be shown to lenders will have to emphasize the financial side of your business, including detailed historical and projected cash-flow budgets. PlanMagic Business or other specific PlanMagic program covers it all and its original complete concept remains unique in the realm of business planning.

Others outside your business may also require the information and reassurance that a written plan provides. Venture capitalists and outside investors, for example, will want all the financial information that a banker would need, plus all the marketing, operational, and personnel information. These types of investors view themselves as co-owners. They also need to get a strong sense of your vision, experience and commitment to the company.

In addition to banks, venture capitalists, and other potential sources of funds, you may want to share part or all of your plan with vendors, credit rating firms and others with whom your business will interact. A written plan can be particularly helpful when negotiating with vendors regarding payment terms. Portions of the plan may also be shared with prospective employees in order to sell them on the future of your business. The process of writing the business plan will help you organize the information needed to prepare realistic job descriptions for use in recruiting employees.

Financial projections

The second part of a business plan are the financial projections. How much do you need to invest, how much do you think you will sell, what will the expenses be, what will be the profit, how is your cash flow going to be, what will your balance sheet show after 1, 2, 3 or 5 years? These are questions that your financial projections will have to show to be credible. There are only a few programs out there that will actually address all the details, and then most of those, do not address the thousands of details involved. From my experience there is one financial solution that addresses most of the details, and provides near-to-reality financials, and you guessed it, PlanMagic Business or other PlanMagic program aimed at a specific business.

With the financial planners of PlanMagic Corporation, you can:

  • plan any business like a pro
  • plan to finance any business start-up or expansion
  • surprise any potential investor with a thorough and complete presentation
  • analyze the financial situation with state-of-the-art analysis tools
  • stay up-to-date with the real financial situation at all times
  • try unlimited what-if and other analyses for 5 years without loss of data

Some PlanMagic key advantages

  • Includes wizards to simplify and significantly speed up data entry.
  • Performs validation checks for data consistency.
  • Fiscal year and forecasts can start in any month.
  • Forecasts include months, quarters, and years.
  • Up to 5 (AE 10) years can be forecast in one financial workbook, with no limit if multiple workbooks are used.
  • Views are collapsible for clear summaries.
  • Costs can be split between fixed and variable cost for contribution, break-even and similar analyses.
  • Projected balance sheets that are always balanced.
  • More than 40 charts illustrate trends in expenses, sales, revenues, cashflow and more.
  • The most advanced analysis tools available today.

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