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What is a business plan? Complete instructions on how to write one

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What is a business plan? Complete instructions on how to write one

Definition: A written document explaining the nature of the business, the sales and marketing strategy, and the economic background, and including an estimated profit and loss declaration. Reference: Business Plan, Entrepreneur.com

What is a business plan anyway?

The business plan is a document that covers the main goals of the company and contains detailed analyzes, plans, and budgets showing how the goals will be achieved.

The business plan is a kind of road map that leads to success. For any entrepreneur starting a business, this is a vital first step. For any entrepreneur who has been in business for a long time but does not have a business plan, this would again be a very useful step.

What does a business plan contain?

The classic structure of a professionally prepared business plan includes several important sections. They are:

  • Summary
  • Analysis of the environment
  • Market Analysis
  • Competition analysis
  • Marketing plan
  • Management plan
  • Operational plan
  • Finance plan
  • Applications

Let's see what a business plan should contain, section by section.

1. Summary

The summary is usually placed at the beginning of the business plan, but it is best to compile it last.

The summary summarizes the key elements of the entire business plan and is the first thing anyone reviewing your business plan will read. It saves the reader's time on the business plan by briefly introducing it to the main idea and preparing it for the details that follow.

That is why it is important that this summary is at the top level - it is written clearly, concisely and in essence. Its recommended length is no more than two pages.

The summary should also provoke interest in the reader to read the rest of the plan. It should be written in an interesting way and in the context of the need for a business plan - for credit, for investment, for internal use.

In general, the summary will include answers to the following questions:

  • What is the product? Do you offer a product or a service? What needs will your product meet? See also What is the Product Life Cycle and what are its phases and cycles. Strategies for the stages of the product life cycle, BVOP.org 2020
  • What is the market? What does the ideal customer look like?
  • What is the business model? How will your product meet the needs of potential customers?
  • What is the competition? Who are your main competitors? What is your strategy for competitive supremacy? What are your unique competitive advantages?
  • What is the marketing strategy? What are the key elements of your marketing? How will it reach customers? How will it be sold?
  • What is the management strategy? Who are the key executives of the company? What are their knowledge, skills, and expertise?
  • What is the operational plan? What are the main stages of starting or developing a business? What are the key deadlines and steps?
  • What is the financial plan? What are the main financial indicators that you will strive for in the next one to three years - income, expenses, profit, etc.?
  • In addition, and as appropriate, information may be added to the summary of the business plan about:
  • What is the company's mission? What does the company do? What are its key values ​​and business philosophy?
  • What is the history of the company? How did it originate? When was it founded? By whom? What are the most important facts about it, such as the number of employees, production facilities or sales offices, etc.?

Remember that the resume is the first thing the reader of your business plan will read. Therefore, when you compose it, put yourself in the place of the person who will read it and ask yourself - “Is it exciting? Is it interesting?" If the answer is "No", think about the reasons and correct the summary.

The summary is often defined as the most important part of the whole business plan.

2. Analysis of the environment

The analysis of the environment is that part of a business plan that presents the industry in which the company operates, incl. trends, major players in the industry, key factors, market size and volume, market shares. Reference: Analysis without paralysis: 12 tools to make better strategic decisions by Babette E. Bensoussan and Craig S. Fleisher

When compiling this part of the business plan, it is useful to consider the environment as consisting of two parts - the external environment and the internal environment.

With regard to the external environment, you should address the following topics:

What is the industry? What is its size? What are the trends in it? What niches does it include?

What factors have the greatest influence? What are the key economic, social, demographic, technological, political factors?

What is the legislation? What basic laws, procedures and rules should be followed in the industry?

Who are the main market players? Who are the main competitors? Who are the key suppliers?

With regard to the internal environment, you should address the following topics:

What exactly are you doing? What is your product? Is it a commodity? Is it a service? Is it a combination of the two?

What is your target market? What is characteristic of him?

What is your unique offer to customers? What specific customer benefit does your product bring? What specific need best satisfies? What makes you special for customers - lower price,

higher quality, faster delivery times, better service?

What is your market share? What is the maximum market share you can win? What are the shares of the main competitors?

What are the barriers to entry is the industry? How will you overcome these barriers?

How do you protect your product or company? What brands do you own? What partnership agreements have you signed? What patents, exclusive or special rights do you have?

You should be able to summarize the analysis of the external and internal environment in a few paragraphs. Some of the topics in this section will be covered in more detail in the following sections of the business plan.

3. Market analysis

Market analysis is that part of a business plan that describes the target market of the company, incl. the main features of customers and their needs. Your main task here is to show that you have an excellent understanding of the customers you want to sell to and clarity will be your marketing strategy.

The most important thing here is to define your target market. In the language of marketing, this is also called "segmentation".

For example, if you offer products on the B2C market (business to customer - customers are individuals), it is possible to use the following indicators for segmentation:

Age. In what range does the age of the customers vary? Are the customers children? Are they elderly? Are they retired?

Gender. Are the customers men? Are they women? Are they of both sexes?

Marital status. Are the clients family? Are they single?

Family. What are the peculiarities of the family in the clients? How many children do they have? Who else participates in the household?

Location. Where do customers live? How will I sell to them - locally, regionally, nationally? In the international?

Education. What is customer education? Average? High?

Income. What is the average income of customers?

Lifestyle. What are the main features of customers' lifestyles?

Location. Do customers live in a particular location?

Motivation. What excites customers? What are they most interested in? What motivates them?

Size of the target market. What is the size of the target market?

There are other indicators of market segmentation, but for the purposes of your business plan, the above should do a great job.

Example

For example, if I have a restaurant, my target customers may be vegetarians and vegans, men and women, from the city, aged 25-49, with a very good education, high income, who lead a healthy lifestyle.

If you operate in a B2B market (business to business - customers are companies), it is possible to use the following indicators for segmentation:

Branch. In which industry do customers work? How long have you been working in this industry?

Size. What are the annual turnovers of client companies? How many employees do they have? Are they micro-companies? Small businesses? Medium companies? Big companies?

Location. Where are the customers? How will I sell to them - locally, regionally, nationally? In the international?

Positions. What positions do people who make purchasing decisions occupy? Are they top managers? Of middle rank? Of low rank? What is their functional (technical) specialization?

Served markets. Who are your customers' customers? Who do they sell to? What are they selling?

Motivation. What excites customers? What are they most interested in? What motivates them?

Size of the target market. What is the size of the target market?

For example, if I offer accounting services to other companies, my target clients may be micro or small companies with an annual turnover of up to BGN 200,000, with a staff of up to 10 people, from the city and the region, without restrictions in the industry or business.

You should be able to summarize the market analysis in a few paragraphs. If you serve several target markets, you will need to make room for each of them in your business plan.

4. Competition analysis

Competition analysis is that part of a business plan that identifies direct and indirect competitors and presents a vision of how to overcome their strong competitive advantages.

Competitive analysis is a challenging task. Accurate information is needed to make such an analysis, and this requires research.

Depending on the target market that your company focuses on, determine the main competitors. Think of all the companies that offer similar products to customers in your target market. Think about companies that offer substitutes for your products. They can also be serious competitors.

Example

For example, if I sell laptops, my competitors may be other laptop stores in the city. But they can also be large national equipment chains. They can also be online merchants. They in turn can be Bulgarian or foreign sites. Etc.

The harder part follows. You need to gather specific information about your main customers. You should be aware of:

What markets do competitors serve? What are their main market segments?

What exactly do competitors sell? What are the main features of their products? What are the main benefits of them?

Why do customers buy from the competition? What are the unique competitive advantages of the competition? What specific needs do they meet?

What are the features of competitors' products? What is quality? What are the prices? What are the delivery times? What is the service?

What is the marketing strategy of the competitors? How do their customers learn about them? How do their products reach them? How do they advertise? How do they price?

What strategic advantages do competitors have? Technological advantages? Financial power? Market advantages? Experienced leaders?

In the business plan, you should clarify what your competitive strategy is, ie. how your company will fight the competitors in question. This will require you to formulate a package of features and benefits of your product that are attractive and even unique, in order to be able to find an insufficiently well-served market niche to conquer and dominate.

Example

For example, if I open an online flower delivery store, I could try to offer customers the widest selection of fresh flowers and bouquets, with the highest quality decoration, with free shipping and a refund option in case of dissatisfaction.

The purpose of analyzing competition in a business plan is ultimately to find your own competitive advantage - the unique benefits that only your company can give to customers and the competition cannot.

5. Marketing plan

The marketing plan is that part of a business plan that reveals how the company will combine the elements of its marketing mix to get customers to buy its products.

In other words, the marketing plan clarifies the question of how and thanks to what your products will reach customers.

To this end, the marketing plan should include information on:

Product. What are the characteristics and benefits of the product? What is your unique offer to sell to the target market?

Pricing. What price range does your product fall into? Low, medium, high? What is your pricing strategy? What is your cost? How will you realize sustainable income and healthy profit?

Sales and distribution. How will your product be sold? What distribution channels will be used? What is the process you go through to get the product to your customers?

Advertising and promotions. How will the product be advertised? Television, radio, press, internet, magazines, catalogs, direct mail, point-of-sale advertising? How will the product be promoted? Through free samples, discount coupons, displays at points of sale, product demonstrations?

Here you can describe all other important activities related to the marketing of your company - advertising materials, PR campaigns, internet presence, participation in trade fairs.

You should offer information about the marketing plan in a few paragraphs.

6. Management plan

The management plan is that part of a business plan that describes the key managers and employees who will contribute to achieving the business goals. The management plan also presents the management structure of the company.

People who will read your business plan will probably pay special attention to this part to find out who are the people behind the realization of the business idea. It is not very difficult to prepare a good-looking business plan, but when things come to fruition, you need people with specific competence - knowledge, and skills.

In the business plan, present information on the following topics:

Property.

What is the legal form of the existence of the company? Whose property is it?

Management team. Who runs the company? What is his education, training, experience? Who manages the production? Marketing? Sales? If the company is larger, who heads the R&D and Human Resources departments?

Organizational structure.

If the company is bigger, what is its organizational structure (diagram)?

Staff.

How many and what employees does the company need? What part of them do you have at the moment? Are new people to be hired, in what positions, when?

External assistance.

What external specialists and consultants does the company use?

A business plan can only benefit if it includes the professional CVs of key executives. Such biographies should be concise and specific, preferably in a volume of 1 page each. They should describe the specific knowledge and skills with which each member of the management team contributes to the success of the company.

Even if you make a business plan for a very small company, incl. and from one person, having a well-designed management plan section will show that you are thinking seriously about your business and the human resources you will need once the business grows. This is normal. After all, a business plan is a document that looks to the future.

7. Operational plan

The operational business plan is that part of a business plan which describes the physical assets of the company - production facilities, equipment, buildings, warehouses, offices, representative offices, as well as any important details related to the production process of the product.

The operational plan provides information on:

Manufacturing process. How is the product produced? What are the main stages? What is the production time? What are the main problems within the production? What are the risks?

Delivery. What does the supply chain involve? Who are the key suppliers? Who are the alternative suppliers in case the work with the current ones is stopped?

Quality control. How is quality control carried out? Is the company certified according to the rules of a certain quality system?

Tangible assets. What tangible assets does the company have? What buildings? What technique and equipment? What materials? What other important tangible assets does the company own or should own to ensure smooth product production? What is their value?

Available in stock. How are stocks of finished products, raw materials, and materials stored and tracked?

Cost. How is the cost of the product calculated?

You should be able to summarize the operational plan in a few more detailed paragraphs. Some parts of the operational plan may require more detailed description, but this is normal.

8. Financial plan

The financial plan is that part of a business plan in which a financial analysis and forecasts for the financial condition of the company are made. This is where information about the company's balance sheet, income and expenses and cash flows (or their forecasts) is provided.

Depending on the specific needs in connection with the preparation of a business plan, the information should be given here on:

Sources of funding. Is borrowed capital used? Shareholder? Own? Are subsidies used?

Repayment schedule. How will loans be repaid in case of the availability of borrowed funds?

Estimated income and expenses. Revenues from sales by products (goods or services). Costs for salaries, rents, raw materials, materials, warehousing costs, marketing costs, rents, consumables, maintenance, etc.

Estimated cash flows. What are the cash trends by month, based on forecasts of expected revenues versus estimated costs?

The financial plan should be prepared using tables, be concise, reasonable, and well reasoned.

9. Applications

This part of the business plan, which is usually the last one, includes any additional useful information that is relevant to the business idea. This may include:

  • Product photos;
  • Copies of contracts, agreements, patents;
  • Certificates from various organizations;
  • Market research.
  • What should be the length of a business plan?

Probably the most correct answer is "It depends". It depends on the purposes for which the business plan is prepared, for which company, by which managers, etc.

As a rule, if the business plan is being prepared for presentation to other people or organizations, for example when seeking funding, it should be more detailed. If the business plan is prepared more for internal purposes, for example, to outline the main goals and strategy of the company, it may be shorter. But it may not be.

As a guide, the length of the summary could be 2-3 pages, the main part of the business plan could be 10-20 pages, and all the details, as long as there are any, can be added in appendices to the plan. In this way, everyone who reads the business plan will be able to get acquainted briefly with the basic information, but also to go into details if they wish.

Some managers or entrepreneurs may find such a length too restrictive 

Some managers or entrepreneurs may find such a length too restrictive for their business, especially if the subject of the activity is more complex or the product range is wider. In such cases, the business plan may reach 50, 100, or even more pages.

I personally am not in favor of such an approach. I believe that the business plan should not aim to describe absolutely every detail of the company's plans and strategy. Rather, it is important to present the main ideas and the most important things.

That is why I believe that the business plan should be as concise, concrete, and clear as possible in order to do real work. A volume of 15-25 pages should generally be sufficient.

The tight structure and synthesized volume of a business plan are offered, for example, by the Sequoia Capital business plan model.

1-page business plan

Various business publications around the world in recent years have commented on a curious topic - a one-page business plan. They claim that it is a useful exercise for an entrepreneur or manager if he manages to reduce his business plan to an absolute minimum and to place everything important on one page.

In practice, there is not much difference between a one-page business plan and a summary of the plan. But while a resume usually fits on 2-3 pages, a one-page business plan should fit into one page.

The following structure can be used for this purpose:

Description of the problem of the clients - needs, needs, desires

Your decision - a product or service;

Target market - who are your customers;

Competitive advantage - what makes you unique, what makes you the best;

Marketing - how your product will reach customers;

Management team - who will manage the processes;

Financial forecast - income, expenses, cash flows, need for capital.

In order to gather everything on one page, one paragraph should be separated for each point. Such a minimalist approach provokes to think in-depth about the essence of business.

Thus, in practice, the one-page business plan will show the business model of the company or in other words - how you will make money.

In summary

Creating a business plan is a serious task. But not impossible if you have clarity about its structure.

I will also note that the business plan is the so-called "First creation" of things. These are the strategic ideas of the company's management, put on paper. Only when this "first creation" of things is successfully completed, it can be considered that the so-called. "Second creation", i.e. the transformation of ideas into deeds will be crowned with success.

Given this, you will not regret taking the time to plan your business. This time will pay off in the form of more focused and conscious actions in the management and development of your company.

About the author

Oliver Cassell, Writer at Business Value-Oriented Principles

Oliver Cassell holds a degree in economics from the University of California and is the author of Research on the Impact of Economic Conditions on Consumer Purchasing, 2011. Oliver has experience in modern online and digital marketing approaches and has a strong interest in modern big data approaches.

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