Important Things You Need To Know To Write A Proper Business Plan

Writing a business plan is the first step that entrepreneurs must take when developing a strategy for success in the business world. Your business plan acts as a map to the future successes that you hope to create as you establish your business and start to sell your products or services. Business planning is the first step in rolling out a new brand because it allows you to take note of all the challenges and potential benefits that you stand to face as you make your first strides into the world of entrepreneurship. Writing your business plan takes some foresight and effort but it doesn't have to be an incredibly difficult process or one that takes a very long time.

Building a business plan ensures that you've taken the time to think about your business model, the product or service you'll offer, and any potential hurdles that stand in your way. By thinking about these features of routine business, you will be better equipped to navigate the business world more broadly. With a core understanding of what business planning is and how to create your first business plan, you can get started on this crucial task and set yourself on the path to success much easier.

Why use a business plan

Building a business plan is all about research. You will spend days or weeks thinking about the type of company you want to establish, roadblocks that might stand in your way, and strategies for success that will make your journey all the more enriching. The Harvard Business Review notes that a complete business plan is also crucial when seeking funding from sources outside your personal savings or immediate social group. Creating this document allows you to establish key tenets and projections for your company's day-to-day operation and future. Without a business plan, serious institutional and individual investors are unlikely to part with their money to support your endeavor. 

While a business plan doesn't ensure that you will successfully find investors, it does provide a framework for how you will conduct your operations and how you stand to make money in the marketplace. Institutional investors and lenders will review your documentation in an effort to decide whether the business is likely to be successful or not. Business planning, therefore, serves in a secondary role that essentially amounts to advertising yourself and your brand to lenders and investors.

Unfortunately, some business leaders fail to create concise business plan documentation, and while it is possible to find success without this core road map in place, you'll need luck to accomplish it. Writing a business plan helps you iron out all the details and consider potential problems before you invested your time and money in the venture.

Business plans make use of seven essential sections

A business plan can come together in a very personal sort of way, but the typical business plan outline provides details on seven crucial segments of a new business' efforts to establish itself and compete in the marketplace. This structure is a tried and true method for developing a plan of attack when establishing a new business. By following this formula that includes seven essential sections, you will effectively work through all of the core features of your brand and business model.

Starting with the executive summary, your business plan lays out a brief but informative overview of who you are and what you do. Next, the business plan should delve into a description of your company and a general understanding of what it does. After this, you'll want to outline the products or services that your business offers to the marketplace. Then your business plan will launch into an analysis of the marketplace and how you will fit into it. You'll then discuss key strategies for business success and outline brand implementations that will set you and your business apart from the competition. Finally, the last two sections include an overview of the organization itself and the financial projections that you've established running into the future.

The traditional plan versus a lean startup document

You'll need to decide whether you're going to write a traditional business plan or rely on a lean startup document for the bulk of your research and business process documentation. For the purposes of this article, it will be assumed that you are following the traditional business plan model for writing your foundational document. The SBA notes that a lean startup document isn't always adequate when seeking financial support from investors or lenders. So even if you choose to develop a lean startup document to begin with, there's a good chance you'll want to eventually follow this up with a fully formed business plan. A lean startup document is a good starting point for business owners who are developing a simple brand operation or who expect to go through evolutions in some or all of the seven integral sections of a typical business plan writeup.

Writing a business plan is all about research and analysis. The longer you spend thinking about these aspects of how you will approach customers, form relationships with suppliers and consumers, and compete in the open market, the better position you'll be in to create and continue experiencing success for the long term. As a result, it's almost always recommended to develop a fully formed business plan rather than relying on a lean startup document to govern how you conduct your daily operations.

The executive summary

The executive summary is the first section of a typical business plan document. This area acts like an abstract for your research period. It suggests a framework for how you intend to make money, how much you stand to gain through the establishment of the business, and how you will overcome key challenges. Your executive summary is the first opportunity to impress investors, and it will act like an elevator sales pitch that you can return to in the event of hardship or confusion as your business progresses.

The City of Philadelphia reports that your executive summary is the most important component in developing a good business plan, while recommending a summary that ranges from a few sentences to a few short paragraphs in length. This section should be concise and to the point, providing anyone who reads your business plan with a brief but highly focused overview of the broad strokes of your business and operational model. Simply put, anyone who looks at the executive summary should walk away with a highly accurate understanding of what your brand does and how it does it. It can be helpful to write a draft of the executive summary early on in your business planning process and then return to this section toward the end of the planning phase. Reexamining the executive summary after you've completed most or all of your research and business plan can help you build a clearer picture of the business as a whole.

A brief company description

Your company description includes details about who you are as a brand and what you hope to accomplish while serving any type of customer that you plan to interact with during the course of normal business operations. This is a space to go into detail about your generalized mission statement, approach to solving consumers' needs, and details about your brand's process as a whole.

Your company description offers a space to elaborate on your team, any physical location assets that you'll bring to bear, and a background of who and why your company is. Building this company description can help you craft your origin story and the narrative that you will sell your consumers over the life of your operation. This is a great place to start when building a business plan because it's perhaps the easiest information to put down on paper. Chronicling your journey from idea to a fully-fledged company can help you make sense of the journey and sell the idea of your brand and product offerings to both investors who you might be looking to for a cash infusion and to your future clients.

Product and service offerings

Of course, a list of your product or service offerings is also a crucial part of the business planning process. Coupled with your company description, a detailed layout of the types of products or services that you offer can give any reader a clear picture of what you do and why you do it. Whatever it is that you offer as a business, clients will need to understand what they're buying in order to gain value from it. Detailing the specifics of your product or service will help you create a baseline for how your business will describe and market your offerings going forward.

Accion Opportunity Fund reports that the product and service section of your business plan should provide fundamental information about the things you sell, but this section shouldn't get bogged down in all the complex details and jargon that you'll need to work through internally. Your business plan should make the enterprise approachable to the layman. This means that the details surrounding your business should be easily understood by anyone who picks up the document. Once again, your product and service offerings section is a great opportunity to flesh out a fully formed idea that you can then take to the market and build a thriving business around. Spending time thinking about how you would describe your company's offerings to someone completely new to the idea is a great way to make sense of your journey forward into the future.

An analysis of current and future market conditions (and competitor analysis)

Analyzing the marketplace that you'll be competing in the business plan's next section. Research is crucial when completing your business plan and suggests that you should spend more time researching the marketplace and where you'll fit into it than you do actually writing the document. Analyzing the market requires you to think through a number of essential conditions that will support or stifle your ability to generate ongoing sales and profit. You'll need to think about the core consumer that you are trying to reach, how you can market yourself for maximum exposure, and the kinds of limitations that might be imposed on your brand.

It's not enough to think about just your own product or service lineup, you'll also need to spend a considerable amount of time thinking through the ways in which consumers will learn about your product, use your service, or select your brand over offerings by competing businesses. Understanding your place in the market and the conditions that dominate the present and may change it in the future is a fundamental component of business planning. Understanding these undercurrents and analyzing how the market may change in the future is the sign of a core business team that's poised to experience staying power and success.

Key strategies, business implementation, and potential, direct challenges

After analyzing the marketplace and establishing where you'll likely fit into it, you'll want to focus on developing key strategies that will formulate your overall approach to the market and to sales. This is also a space to think through unique challenges that face your team, business processes, and more.

Some key strategies implemented by businesses of all types include a focus on customer service improvements, cross-selling to ramp up profits, pricing models that outcompete other brands in the space, and the building and leveraging of a technological advantage of some variety. Establishing a framework for how you will do business and the strategies you will employ to create and maintain a competitive edge are essential parts of the business planning process. You might have built a large team of highly experienced programmers or sales professionals, for instance, coupled with strategies for leveraging this expertise within your ranks. As such, you may be onto a winning formula for developing long-standing customer relationships. But in order to activate these advantages, you'll need to understand them.

Lastly, in this phase, it's also crucial to think about challenges and potential pitfalls that will naturally rise up to meet you throughout the course of business. Using a SWOT analysis framework can help you develop an understanding of where your strengths and weaknesses as a brand lie in relation to the marketplace as a whole.

Team management and brand organization

One of the final sections that should be incorporated into your business plan is an outline of your management team and organizational chart. An org chart helps readers understand how your business operates on a personal level. An organizational chart provides both details about who does what in the organization, and who and how they report to colleagues. Many startup businesses have trouble with organizational integrity because there are lots of moving parts and responsibilities with little established hierarchy of authority. Developing an organizational chart will give your brand structure as it begins to establish itself and expand in the marketplace. Including this detail in your business plan clarifies any potential communication issues that could derail the progress of your business before your brand gets off the ground, eliminating this potential threat before it can ever form.

It's also a good idea to outline the roles and responsibilities as well as a brief professional and personal background of each of the people involved in the management team. This can help establish a personality for the business going forward and lends credibility to the core managers of your business as they seek to finance the company or reach out to potential clients in an effort to begin building a sales pipeline.

Financial projections and a plan for making money

The last section of your business plan should go into detail about how you intend to make money and what you expect to earn over the short to medium term. It may also be useful to develop projections on a longer time scale, but you'll want to be wary about making extraordinary claims for the future. Intelligent business planning involves the estimation of how much you stand to gain from the establishment and expansion of your new business. Yet this section regarding finances can be fraught with risk when it comes to approaching investors to finance your operation. Making claims that you can't back up, failing to disclose important elements of your finances, or leaving out key details regarding your ongoing financial results can lead an investor to walk away from the discussion even if they love the idea that you've established.

You should include an income statement, a cash flow statement, and a balance sheet in your business plan to complete the financial projections section of your road map. These elements show an investor the essential background elements of your ongoing profit and loss over any years you've already been trading in the marketplace. It will also provide an understanding of how much cash you take in and how much you require to accomplish day-to-day operations and future plans for growth or expansion. Lastly, you should include a detailed layout of your business's current assets and liabilities.