A business plan is a document that is required when starting any business, whether it is starting a bank, car wash business, shisa nyama, or investing in a franchise. A business plan not only assists in obtaining funding from investors or lenders, but it also assists the owner(s) in remaining committed to the company and knowing its future direction.
When starting a business, creating a solid business plan is critical, and the length of the plan should be secondary. A business plan can be any number of pages long, depending on the type of business being discussed.
For example, a calacatta marble mining business plan can be over 50 pages long, complete with illustrations and research on mining operations. A few page business plan can be expected for some simple businesses, such as a cigarette vending machine operation.
However, the number of pages in a business plan does not indicate the quality of the plan. Knowing what to include in a business plan has a significant impact on the quality of a business plan. Whether you are writing for a bank loan or a NYDA grant, your business plan must have certain characteristics.
This article will walk you through the process of creating a high-quality business plan for any type of business. Before we delve into the step by step guide on writing a business plan we first define a business plan below.
What is a business plan?
A business plan is a document that clearly defines a company’s objectives and thoroughly details how the company will achieve those objectives. A business is intended to educate both external and internal audiences on the company’s direction. As a result, reading a company’s business plan will benefit everyone in the organization.
A business plan is typically used by small businesses as a guide and to attract outside investors to invest in the company. It must be industry educational and provide a step-by-step guide on where the company is headed and how it will achieve its objectives. This is detailed by considering both the company’s short-term and long-term goals.
A business plan is important because it shows the internal and external audiences what the founders of the company are planning and envisioning. A business plan can thus be updated or a new one can be created if adjustments to the old business plan are required. As a result, a business plan is also a dynamic document that should accommodate changes as market systems change.
There are various types of business plans to consider as you begin writing one. These types of business plans are discussed further below.
What are the different types of business plans?
There are two types of business plans to consider before writing one. The two types of business plans to consider are lean startup and traditional business plans. A lean startup business plan, as the name implies, is shorter in length than a traditional business plan.
Lean business plan is the most uncommon type of business plan because it can be one page long and lacks detail. A lean startup plan is typically used to launch a new business or product, and it is primarily used to develop products that customers already want.
However, investors may require additional information before investing in a lean startup business plan. Thus, when dealing with investors, it is preferable to have the entire business plan ready.
A traditional business plan is the most common type of business plan because it is more detailed and leaves no stone unturned when it comes to business details. The traditional plan includes all of the elements of a business plan as well as additional material such as financial projections and illustrations.
As you now understand what a business plan is and the different types of business plans available, below we provide a guide to writing a business plan for any type of business.
9 Steps of writing a business plan
Step 1: Start with an Executive Summary
An executive summary is a high-level summary of the entire business plan. As a result, summarise the most important information from the business plan. The purpose of this section is to introduce the reader to the purpose of the business plan. The following points should be included in the executive summary:
- Company information,
- Products and services that drive the business,
- How the market is structured,
- Business’s position in the market, and
- Company’s financial standpoint.
Summarise all of these important points in a formal manner, and keep the descriptions brief and straightforward. The reader will gain a clear understanding of what the company does, where it is now, and where it is headed in the future.
The executive summary can include short, medium, and long term goals. This informs the audience about where the company intends to be in the near future and in the future.
Step 2: business objectives
This section of the business plan describes the company’s future plans. The author must demonstrate to the reader where the company is heading. This includes the inclusion of a company’s short, medium, and long term objectives. These goals will need to be broken down step by step.
For example, if you are seeking funding, you must explain how the funds will help the business achieve its short to long term objectives. If additional funding is required, the details must be emphasized here, as well as the stage at which the additional funding is required.
Step 3: Market Analysis
A detailed market analysis must be completed in the market analysis section. This is an examination of the market in which your company operates. The market consists of the customers or clients you wish to serve. A compelling customer analysis is required, as well as a discussion of how the demand for the service or goods is being met in the current market.
Market analysis provides a comprehensive view of the target market, which should include geographic location, target market needs, and demographics. This is to demonstrate that you understand the market in which your business will or is selling goods and/or services.
A market analysis aids in making more informed market predictions. Misconceptions will not be part of your business plan because you will be able to differentiate between what works and what does not. In the market analysis, income groups, age, rate, customer taste, and other factors must be considered.
Step 4: Competitive Analysis
What is your competitive advantage over existing competitors who provide similar goods or services? In this section of the business plan, you should answer this question. Much will be learned in this section not only by the intended reader but also by the business owner.
Every industry has a lot of competition and analysing the indutsry will help you gain a competitive advantage. Sam Walton, the owner of Walmart, which trades as Massmart in South Africa, would travel the world visiting supermarkets to inspect minor details such as shelf organisation, items on the shelf, aisle structuring, and so on.
Learning from competitors benefits your business and you as a businessperson in a variety of ways. You will be able to identify what others are doing correctly, incorrectly, and what you can improve.
This section can be better detailed for everyone’s understanding by using a SWOT analysis. SWOT analysis evaluates your company’s strengths, weaknesses, opportunities, and threats. The first half of the Strengths and Weaknesses section focuses on the internal environment, while the second half, Opportunities and Threats, focuses on the external environment.
Potential investors can determine whether a company will be able to compete in the market by conducting a thorough SWOT analysis. Internal and external factors can both make or break a company.
Step 5: Marketing plan
This section of a business plan provides crucial information on the marketing of goods and services a business offers. The section tackle explanations of:
- Pricing plan of goods and services,
- Advertising of goods and services which include the channels that will be used to advertise,
- The available sales strategy, and the benefits of the products and services being sold.
A marketing plan is essential because it details how the company will sell goods and services to the general public. The company’s unique selling proposition must be detailed in order for the intended readers to understand how the company intends to deliver services and products to the people.
One method for developing a selling proposition is to use the information on the SWOT analysis to understand why people will buy from you. This will help by utilising statistics gathered to demonstrate the business’s competitive advantage in the industry.
Step 6: Management Plan
This section describes the legal structure of the company’s management. An organogram is one tool that can be used to detail an organisation’s organisational structure and hierarchy. The organogram will detail the roles of each individual in a company’s management position.
A business’s human resource requirements should also be included in this category. Human and capital resources that the company requires to meet its objectives can be included. The skills required for each manager, as well as the level of experience required for each role, should be included.
Other inclusions in this section can be made by those writing a business plan for the purpose of funding. A company can think about getting advisory services that it may require. Funders like NEF provide business advisory services to the companies they fund; therefore, if your company requires such services, detail them and explain why.
Step 7: Operating Plan
An operation plan specifies how your company will operate in order to achieve its goals. This is one of the most important sections, especially if you are looking for investors. In this section, you will need to provide information about your company, such as where it operates, what machinery it requires, and what facilities it requires.
Furthermore, the inventory that must be purchased in order to produce the finished goods must be detailed in this section. Suppliers from whom the inventory will be purchased, as well as price ranges, must be mentioned. Should one supplier fail to meet demand, alternative suppliers can be included.
Explain the manufacturing process from raw materials to the finished product if your company is in the manufacturing industry. By including all of this information, the reader will understand the entire manufacturing process and what is required to create a product or service that is sold.
Step 8: Financial Plan
Now that you’ve written your business plan, the next step is to demonstrate that the company is or can be profitable. For an existing business, the financial statements and notes to the financial statements must accompany the business plan.
Financial projections will be required for both existing and new businesses. Financial projections should be made for the next five years, with monthly financial statements for the first year. The first 12 months of operation are critical because they detail how the invested funds will be used, the cost of sales, seasonal changes in sales, and other factors.
A company’s financial statements include a cash flow statement, a statement of financial position, and a comprehensive income statement. A professional accountant can help you with this.
Step 9: Include exhibitions and appendices
The final step in writing a business plan is to include supporting documents for your detailed plan. This can include market research, competitor research, product research, demographic research, and more. If you have used quotes from a specific source, make sure to cite your source in the business plan.
Conclusion
A business plan can mean different things to different people, but the document follows the same pattern for everyone. A business plan should educate readers and provide simple explanations as needed. Include a table of contents in your business plan so that the reader can easily navigate the document.
