So, you want to start a business. You have the end goal in mind. You can imagine where this business venture will take you and all the fun success you can have. Awesome! Now what? There are so many things that need to get done to achieve your dream business. But before you do any of them, creating a business plan is essential. A business plan is simply a guide for your business - what your goals are, the methods of achieving these goals, and a time frame in completing the goals. Dreams are fun, but without writing out goals to accomplish them, they stay as just that - a dream. Without a business plan, trying to perform tasks for your business will have you running in circles, unsure where to go next or what you are trying to do. No business plan results in an unorganized mess, scaring people away from your great business idea. Some people choose to have a 20-page business plan, while others opt for the 1-page business plan. Whichever route you take, it is essential to consider your business goals and how you are going to accomplish them if you want your business to succeed.
Okay, so now you know the importance of a business plan. Ready to write one? It may seem quite daunting, but when I break it down for you, you will see it is really not too hard. You simply need to take the time to sit down and write everything out. There are a few significant sections every business plan should have, including an executive summary, opportunity, execution, company, and financial plan. In this post, I will explain each section in simple terms. You do not need to be a business major to make a great business plan! So, let's break it down one by one.
1.) Executive Summary
The executive summary is just what it sounds like: an overview of the entire plan's key points. If you are just writing a one-page business plan, this is the section you want to focus on. The Opportunity Section highlights what problem you are solving, your solution to that problem, who your target market is, who your competition is, and why your company is unique. The Expectations Section lists what financial goals you plan to achieve.
Problem: The problem section sets the scene for a common problem that people face. It has to be relatable. Many people have the problem of not being able to open a jar of food, so setting up a good scene in the kitchen and coming to a pause when the jar cannot be opened is an excellent way to explain the relatable problem. If you cannot think of a common problem that your service or product can solve, it probably means not many people will feel the need to buy it.
Solution: The solution section presents how your product or service can solve the problem listed above. Do you have a problem opening a jar? This new product will quickly open it for you. Explain how your business will make a potential customer's life easier. Everyone wants life to be easier. Help prove that you can do that.
Market: The market section describes your target market. Your target market is the people most likely to provide your sales. Target markets include finding the right person, content, place, time, format, language, and device.
Competition: The competition section describes who your biggest competitors are. What companies and products will people compare your product to?
Why Us?: This section explains why your company is unique and distinctive compared to the competition you just listed. Why should people choose your brand over the competition?
Forecast: The forecast section explains how much money you plan to make through your business within a specific period you choose - often a fiscal year. It lists how much you think you will produce in gross revenue (your total sales) based on how many transactions, and it also projects how much sales will produce over the next few years.
Financing Needed: The financing needed section is only required if you plan on pitching your business plan to an investor. This section would list how much money you need and exactly what that money would go toward.
If you are only doing a one-page business plan, this is where you would stop. These are all the key points. I personally am a fan of a one-page business plan if you are just keeping the business plan for yourself. It keeps you focused on your goals without allowing you to be overwhelmed. However, if you are using your business plan to pitch your business to an investor, a more in-depth plan will be required. I will briefly go over the sections needed for a full business plan.
The opportunity section is simply a more detailed description of the opportunity section in your Executive Summary. You really want to set up the scene in these sections. The sections would be:
Problem: Explain in detail why people struggle so much with their issues. Really make people empathize with the people struggling.
Solution: Explain why your product or service is such a great solution to that problem. Make sure to cover how it solves every part of the problem.
Target Market: With your target market, you can describe each of the four main areas of target markets: Geographic (where your customers will generally come from), Demographic (age, gender, etc.), Psychographic (likes, interests, beliefs), and Behavioral (tendency to be a loyal customer or shop around). Also include the size of these markets.
Competition: For your competition section, make sure to list specific companies you will be competing against. These alternative companies will be other places your potential customers may go instead. Then, under this section, explain why your company has an advantage over those other companies. Why should customers want your product or service and be willing to spend their hard-earned money on you instead of elsewhere?
The execution section lists how you plan to sell your products or services, also known as marketing and sales plans. It also contains details on how you will carry out the operations and day-to-day tasks to get your company running. Finally, it lists milestones and metrics you would like to accomplish.
Marketing and Sales: This section describes how you plan to get your company out there and sell your products. What strategies will you use to gain brand awareness and have people interested in your business? Will you focus on social media marketing or more traditional forms of advertising? These strategies should be based on your target market. If your target market is the elderly, then social media would not be the way to go. However, if you are selling phone cases, social media would be the wisest place to advertise. Once you gain that brand awareness, the sales plan comes in. How will you retain these customers and build a relationship with them?
Operations: The operations section focuses on more factual topics. You can list where your company will be located, what type of facilities you will use, and what kind of technology and equipment you will use.
Milestones and Metrics: This section lists milestones that you have already achieved in your business. If you have not attained any goals yet, write down goals you want to accomplish soon. You can also describe what success would look like for your company. Is it a positive cash flow? Would it be making a positive impact on the community?
The company section gives an overview of what your company is. Then, it goes into detail about your team.
Overview: This section gives a brief summary of who owns the company and what type of company it is (sole proprietorship, LLC, etc.).
Team: The team section describes who is on the management team and any advisors of the company. The management team lists who the owners are and how much percentage each owner has and any investors involved. It also lists the higher management employees. The advisor area lists who has mentored the owners and given helpful input into the company.
5.) Financial Plan
The financial plan section is the last section of your business plan (unless you are including an appendix). This section has three parts to it: Forecast, Financing, and Statements.
Forecast: The forecast section usually uses charts to express how much money is expected to be made in the upcoming future. It discusses the most notable expenses and what the profit or loss is expected to be. It also discusses sunk costs (costs that have already been used and cannot be returned, such as a study or training) and the break-even point.
Financing: The financing section discusses what you plan on doing with any invested money and where you expect to get the funds to continue running your business. This money could be from investors or past sales.
Statements: The statements section includes a formal chart that lists projected profit and loss in detail. It provides revenue, direct costs, gross margin, operating expenses, operating income, interest incurred, depreciation and amortization, income taxes, total expenses, net profit, and net sales. This is strictly a numbers-driven section. It also contains charts listing the projected balance sheet and cash flow statements.
And there you have it! Your business plan should be complete now. It may sound like a lot, but it will help you so much in tracking your business. Again, if you are starting a small business and just plan on keeping this business plan for yourself, the Executive Summary is the most crucial part. Whatever length you decide to do, make sure you dedicate time to think about your answers to each section.
I hope this helped you better understand how to write a business plan! Start it today. It requires no money, all it takes is a little time and some thought. There is no excuse not to do it! This is where the magic begins! Once the vision is written down, everything after will seem so much easier. You will know your goals and what you are trying to achieve. Do not be overwhelmed, just take it one section at a time. You got this!