Outline your business strategy: Business Plan

Unlike what many people might think, a Business Plan is not simply a description of your business. It includes market analysis, marketing strategies, financial goals, funding and liability information, and company structure details. 

Even if you are a sole proprietor, it will help you to set concrete goals and plan the future of your business. A Business Plan will also make it easy for investors to say yes. However, you'll need to do a bit of work to be able to create a comprehensive plan. Below are the steps you need to take to write an effective Business Plan:

1. Identify your business's primary goals

What are your goals for the business within the next five years? This, along with what exactly you're offering as products or services, should be stated at the beginning of your Business Plan. Make it concise and easy to understand even to people who aren't familiar with industry jargon.

2. Make an executive summary for your Business Plan

The executive summary highlights all the information that you will present in the Business Plan. This summary goes beyond your primary goals to include things like your mission and product or service details, but should be no more than two pages. If possible, make it no longer than one page.

Writing a good executive summary for your Business Plan is important because it may be the only thing an investor reads to decide if they even want to bother with reading the rest of your plan. It should be able to grab the reader right away and entice them to want to learn more. Here are a few tips for writing an effective executive summary:

• Tailor it to your audience, change whenever needed.
• Add a sense of urgency, make it timely to the market and ideal to move on now.
• Include what needs it fills in the market, what real problem it solves.
• Make it more personable by using language like "us" and "we" rather than "the company."
• Use confident and positive words and remove indecisive language.
• Write it without worrying about the length and then shorten it as much as you can.
• Avoid cliché terms like "best in the world" or "industry disruptor."
• Show it rather than tell it.
• Test it before you send it.
• Write it after the rest of the plan is complete and well researched.

If you do not need to share your Business Plan with others, you may not need an executive summary. However, it is a good exercise for building your elevator pitch for times when you talk about your business with potential investors or clients.

3. Write your business summary

Write a description of your business, including information about your general industry, outlook, and current trends and competition within your niche, as well as what needs it fills for potential customers. Your business description shouldn’t be longer than one page unless you are citing specific statistics and research.

4. Detail your strategies

General Strategy and Implementation Strategy

This section details the plans for promoting the business through sales promotions and pricing strategies. Use this section to clearly outline all plans for promoting the business. Include the most basic ideas, such as posting signs and flyers, and the more complex plans, such as hosting promotional events or contests. This section should assure potential investors that every effort will be taken to make this business venture a success.

Marketing strategy

How exactly do you plan on reaching your new customers? If it is a small local company, are you going to put up signage and attend local events? If your business is online, will you pay for ads or hire an online marketing or SEO company? Do you have strategic relationships with already established businesses? A good market analysis might also help you to see the potential weaknesses in your current marketing strategies so that you can set realistic goals. You can make your marketing plan as long as you need it to be. Here, the more detailed you are, the better.

Exit Strategy

An exit strategy describes how the business will end, although that does not necessarily mean going out of business. It may include selling the business to a new owner, passing it on to a family member, or even using an initial public offering (IPO) to go public.

5. Provide an analysis of your market and competition

What will you offer that is better than your competitors? Research your core competition. Analyze what they are doing well and where they are failing. If you can find weaknesses that you can capitalize on, make note of those weaknesses in your Business Plan. Take the time to differentiate yourself in the areas in which you are similar.

You should also be able to describe your market in quantifiable terms, like how many potential customers are in the market and what you expect them to spend. Remember that this part of the plan will be of as much interest to potential investors as it is to you.

How to evaluate your business competition

Often small business owners are so excited about their product that they forget to consider their competition. If you are planning on opening a local business, you likely know your competitors. But if you are starting an online business or are in a large city, you'll benefit from some market research.

One way to perform this analysis is to create a side-by-side comparison. You can compare pricing, product offerings, web presence, user review scores, size of business and market reach, customer profiles and more. If you are starting a restaurant, you could compare menus, pricing, customer loyalty and patron reviews. If it is an online business, you can compare keyword terms, social media presence, subscription pricing models, or customer service responsiveness to find a competitive angle.

You may even benefit from hiring someone to do the research for you since they might be more objective than you. For instances, companies with large budgets may hire a marketing agency to evaluate the market for them. Regardless of your budget, market research is not a step you'll want to skip in the business planning process.

How to make a SWOT analysis for your Business Plan

A SWOT analysis can increase your business awareness and provide a valuable addition to your Business Plan. It’s split into four sections - Strengths, Weaknesses, Opportunities and Threats - with each one detailing the various relevant attributes and downsides to your business and the industry.

6. Describe your development and operation plan

It is important to plan how you will help your business to succeed. Lay out the general tasks and functions that your business engages in on a regular basis. Include the formal organization of the business, responsibilities of administrators and employees, and ongoing development plans. Here’s a tip: you'll get more investor confidence if your key members have a proven track record in running a business or working in the industry. 

7. Include a financial analysis and plan at the end of your Business Plan

This section lays out your financial bottom line. List your financial assets and liabilities clearly. Be sure to also make it clear what you’re asking investors for, and the projected return investors can expect to receive for their investment. 

Putting together the specific figures that you need as well as a clear plan for how the money will be paid back can be quite effective in this section. Because financial information can be quite complicated and confusing, you should consider putting it in chart format. You can create a basic pie chart or graph sheet. If possible, use colors to make your visuals easier to read. You want investors to be able to understand your company’s finances at a glance.

How to make a financial plan for your Business Plan

Investors like to see that you’ve done the math. Including detailed financial information proves that you have a grasp of the all-important monetary aspects of running a business. Unless you’re setting up a charity or social enterprise, you need to be aiming towards making a healthy profit.

Projections you must include in your proposal are: 

• Employee salaries and overhead costs.
• Revenue and sales.
• Percentage of return you expect from your products or services.
• When your business will produce enough revenue to cover all costs (break-even point).

A cash flow forecast is one of the most important elements of a financial plan. The amount of capital you require can be determined largely from accurate predictions of cash flow. Even if your profit is high, a lack of readily available money can lead to major problems including insolvency. For example, if you’re waiting for substantial Invoices to be paid, while you may be owed a lot, without cash in the bank, you may not be able to manage your expenses, pay employees, or order new supplies.

The simplest way to forecast cash flow is to list monthly income and expenditure costs, preferably with annual totals. Try to think pragmatically and account for all kinds of variables. For example, you’ll probably need to use more heating over the winter months so your gas and electricity bills will increase. Similarly, if your product is seasonal (like an ice cream stand or snow plowing business) then you’ll need to revise your income for the relevant season.

A Profit and Loss (or P&L) Form indicates how well a business has performed overall. It differs from the cash flow forecast in that it shows how much profit has been made (or the amount of loss sustained) over a specified period (usually a year), but it doesn’t account for actual cash in the bank.

Overall, for this part of your Business Plan you'll need to map out how you plan to finance your business, even if all you have so far are projections. Do you have a business loan? Are you going to pay yourself a salary from the business? How much of the seed money will be from your own savings? Investors will also want to know if you plan to take on additional debt or if other investors are involved.

You'll also want to show how you plan to pay back debt and when you expect to be profitable. After all, the return on investment (ROI) is a key element of any Business plan, showing how much effect an investment will have upon the business. 

State a realistic repayment period – it’s better to overstate the time required to avoid disappointment and show that you have taken various scenarios into account. You should also state how exactly your investors will make a profit. Will you repay them with interest? Do they get shares in the company?

An investor will want to know exactly why you need their money and what it will be spent on. You may have an excellent business idea but you’ll have to prove that the funding sought will directly lead to success.

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