How To Write An Effective Business Plan For Your Small Business

Now that you have understood the importance of having a business plan in Part 1 of our business plan series, let’s move on to how to go about writing one.

Writing a business plan can be a daunting task for most but it’s as vital as it is intimidating. But how exactly do you go about it? Where do you begin? What do you include? We’re here to help you with just that. Here’s how to get started with your business plan and what each section of your plan should focus on.

A business plan should include the following sections:

• Executive Summary

This is considered the most important section of a business plan as it gives a quick takeaway of your entire business plan and touches on your company profile and goals. Focus on giving a snapshot of where your company is, where you would like to see it, and why you think your business will succeed. Remember that your executive summary is your first chance to get your potential investors interested in your business. Though this section appears first in your business plan, it is probably wise to write the executive summary at the end because this is where you need to highlight your strengths and very often you have a better clarity of them after you’ve worked on the entire plan.

Be sure to include what your business is all about, your experience and mention what led you to start this particular business you’re pitching. If you’re an established company, talk about your company: founders, roles, the number of employees and office address, and how much your business has grown since its inception. Demonstrate the need or gap in your target market, and how you can solve it to show that you’ve done your homework. Lastly, give a summary of your future plans, i.e. where you plan to take your business. Generally, an executive summary is no longer than a single page and it’s best to keep it to that length.

• Company Description

The Company Description section gives a brief history of the company, the date and the place your organization was formed, the type of legal entity your business is and all its key milestones to date. Also, list the target industry, specific consumers, organizations or businesses that your company will serve. Include why the location of your business gives you a competitive advantage if any.

• Market Analysis

This section will demonstrate your industry and market knowledge through thorough research and analysis. Make sure you study the target business industry, the existing market and all your competitors. You need to include the following:

Description of your industry and market: Mention the current size, the trends, growth and general characteristics

Expected market share: Talk about the market share percentage and customer base you expect in a particular geographic area with a clear rationale behind your projections.

Define your pricing and margin: Include your pricing structure and your gross margin target.

Understand your competition: Identify your competition, direct and indirect, by-products, market segment or services their market shares and all of their strengths and weaknesses. Remember to also assess your potential to enter the same market and foresee hurdles, if any.

Regulatory restrictions: Also define any customer or governmental regulatory restrictions that can affect your business and how you intend to work on it. Mention the cost impact the particular compliance process will add to your business’s operational cost.

• Organisation and Management

The organisational structure of every business varies and you need to mention yours in this section. Mention all details about the company’s founders, profiles of the management and qualifications of your board of directors and advisory board.

In case your company is already established and is a few years into the business, talk about the role of each division or department in your company. Also, mention the kind of salary and perks you have for your employees. You need to focus on reassuring your reader that your employees are not just random names on paper.

• Product Line

This is the section where you talk about everything the reader needs to know about your product or service. Give a description of your product, its lifecycle, IP or patent filings and any R&D effort that is underway or you are planning on.

• Marketing and Sales

The marketing and sales section should outline how you plan to market your product and the sales strategy you intend to follow to make sure your business succeeds.

Marketing Strategy: Describe the market penetration, growth, channels of distribution and communication strategies you have planned for your business.

Sales Strategy: Mention how you plan to sell the product in the market and your sales force (internal or freelance representatives).

• Funding Request

If you are looking for funding for your business, this is the section where you need to outline your current funding requirements, funding you require in the future (over the next 5 years) and how you intend on using the funding; if it’s for working capital requirements, operational costs, debt or acquisitions.

• Financial Plan and Projections

In this section, you are expected to provide all financial data relating to your company’s performance so far in the case of older companies. Include information about your company’s revenue model, income statements, balance sheets, cash flow statements, any collateral you may have used to secure loans for your business and a ratio and trend analysis for every statement you provide. Also, describe your company’s financial projection for the next five years. Remember to make sure that your projections tally with your funding requirements as this will be looked into closely.

• Exit Strategy

This could be a standalone section by itself or you can club it as a part of your financial projections. Most businesses view acquisition as the most likely exit strategy. If it is yours too, then mention the type of companies that could be interested in purchasing your business backed by sound reasoning. You could also give the names of potential purchasers if any. An exit strategy not only prepares your potential investors but also prepares you for the worst so that you don’t panic and you know exactly what needs to be done.

• Appendix

Your appendix should contain your complete financial model (income statement, balance sheet and cash flow statement). Also include, any other supporting documentation such as customer lists, patents, awards, resumes of key members, pictures of your product, market analysis reports, letters of recommendation, etc. that will help convince readers that your company can succeed.

Now that we’ve gone through every section of your business plan, remember to write it from the reader’s perspective and not as somebody who already knows enough about your product and the market. It is important to bear in mind that the reader may not necessarily have enough information about the segment as you have researched and spent time developing and ideating the business and it’s product(s). Pay attention to every minute detail and have it reviewed by somebody who is not associated with your business because a fresh pair of eyes will help iron out any kinks in your plan. Lastly, remember to revisit and review your business plan over the years as different economic conditions and market trends can impact your business. Stay ahead of the game!

With these business plan tips in your kitty, we’re pretty sure you’ll have a winner right there.

Good luck!