The purpose of the college education is to help students to become an all-around and conscientious people, and also to prepare them to the life where they need to find jobs, make career, and run own business. That’s why one of the usual college tasks is to write a business plan.
This document is necessary every time you have to deal with significant values of time, money and other resources to manage them properly and make everything running efficiently.
The Essence of a Business Plan
A business plan is a guide that describes the way you want to run and cultivate your business. It is a general definition which in the real implementation will cover the following ideas:
- Business purpose, strategy, and tactics;
- The structure of your business;
- Analysis of the marketplace
- Cash flow projections;
- Working plans with the milestones and specific dates;
- Financial plan which will provide essential values and numbers on sales and expenses.
And the skill to write a business plan properly can hardly be overestimated.
You have to provide a business plan for the business loan application, as it has to support your intentions. Also, you have to present it to the investors when you open a new business. And you absolutely should have and constantly update the business plan when you already run your business to be ready to face new challenges.
Thus, we have created this article to help you to write a business plan which will suit any of your purposes.
Requirements for a Good Business Plan
While it was considered before that this document must be long, detailed, and very formal, nowadays most businessmen prefer shorter laconic business plans. There are very short examples about one page long, but this is not often.
An average business plan is about 5 to 10 pages long, and this is enough to cover all the required benchmarks concerning the strategy and the tactics of business development.
The shorter business plans have more advantages:
- They are more convenient for potential investors, as they would not like to dig deeply into dozens or hundreds of pages of text.
- They are better for your own business, as you will track your efforts and results, and it is easier when you have clear and laconic concepts with understandable means of tracking and evaluation.
A successful business plan must meet the following criteria:
- Compliance with the purposes and needs of your business.
- Practical feasibility.
- The possibility to track and estimate the results of its implementation.
- Definition of responsibilities.
- Clear understanding and identification of assumptions and risks.
- Readability – it must present the information properly to the audience you target.
How to Write a Business Plan with the Correct Structure
Your business plan is a very practical tool that must help you to achieve your targets in the business. Even if it is a college assignment only, you will need to research a lot of materials and create a document with the required components.
This is a relatively short (1-2 pages) piece of the document that must include the basic information about your company, your scope, your tasks, and your needs. You may consider the executive summary to be a very brief Introduction aimed to grasp the attention of the readers and present the main ideas of the full business plan. In most cases, potential investors demand the executive summary only to get familiar with your plans and decide whether they want to discuss the possibilities further. If you make them interested in the executive summary, they will ask for more information and proceed with the negotiations.
The executive summary must also include certain obligatory elements:
- The business overview – a one-sentence description of your work and its aims.
- Problem – the challenge which inspires you. It is mostly the description of some users’ needs which you might satisfy with your products.
- Solution – the products or services which you develop. Explain how it can resolve the problem.
- Target market – description of the customer you create the product for. Note that it is crucial to be specific when you describe the customer. It is impossible to succeed if you target a vague audience.
- Competition – the explanation of other solutions which are present at the moment and their strong and weak points. Here you should briefly explain how your product would overplay the competitors.
- Company overview and team – it is a brief description of your team members. Here you should stress why you are the best people to perform the task.
- Financial summary – it is, perhaps, the most important part of the executive summary. Here you need to provide your calculations concerning the expenses you plan, and grounds you base the profitability estimation on.
- Funding requirements – here you should define how much money and/or other resources you will need to implement your idea.
- Milestones and traction are the required conditions for the investors to understand if you have an idea only, or you already made some progress. Also, this allows tracking your further results, as they will know what and when you plan to do and what aims you want to reach.
Concentrate on the essence only in this part. If your investors get interested, you will provide them with the details, and you will negotiate the rest of the conditions.
This section contains detailed information about the problem which you are going to solve. You have already defined it briefly in the executive summary, and now you have to describe your product in the context of that problem.
Your task is to explain what exactly your product does and how its functionality is applied to the problem on the market. This information should not puzzle your readers or listeners, because they already possess some basic understanding thanks to the executive summary. Here you will explain the details more about the case and refer to the additional factors which you had to omit in the “Introduction”.
- Provide the competition analysis: will you be the pioneer on the market, or you will have to fight for the place? Who are your current main competitors, which are their strongest sides? Do their products have faults, and which?
- Present your trumps: which advantages does your product have to overplay the competitors? How are you going to offer your product on the market? How will it resolve the problem? Refer to a real example of a user who faced that problem and was able to get rid of it with the help of your product.
- Describe the target market of your potential customers. You need not only to explain the ideal customer who will pay for your product. It must be very specific: you need to discover their age, gender, jobs, hobbies, personal preferences, etc. At the same time, you should already have an understanding of the size of this market. This will estimate your sales and profit. And if your potential audience is very small, it would not motivate the investors, unfortunately.
This part of the work precedes the creation of the business plan. The Execution part should cover the thorough investigation of the market, understanding your buyers and competition. The results of this analysis are provided in the previous section, and here in the Execution section, you should formulate which place your company takes on the market and in the current competitive environment. Also, you need to state how exactly your business is different from the alternatives, and which features can help you to attract the customers.
The obligatory elements you have to include and illustrate in this part of your business plan are the following:
- Pricing model. It will explain how you project your product or service on the market, for instance. Here both the investors and your future consumers can see what sectors you target your product towards, and how profitable it can be. Setting the prices bases on experience and thorough marketing research, but there are some general rules as well:
- It should cover your costs. You should think of additional sources of profit, a several-components model. Say, you may choose the subscription model with cheaper, but regular charges instead of the one-time purchase.
- The longer-term model of relationships with your customers can be more profitable. The pricing should meet the marketing criteria and the customers’ expectations.
- Promotion. Here you need to give your plans for the promotion methods you will use. There will be an ads campaign, building your team’s presence in social media, etc. In this area, you should define how much money you are going to invest in promotion strategies, and which income you think to obtain.
- Technology. This entry may confuse you, as it can be connected with the intellectual property and business secrets issues. But you don’t have to reveal them. Just explain how you can prevail over the rest of the contenders.
- Distribution – here you need to define how your product will get to the consumers. Simple, fast, and convenient delivery is a great advantage if you are a product company. In case you provide service, and the distribution is electronic, you may just mention this and don’t go into detail further.
- Milestones and metrics. The section includes the definition of the key steps and planned achievements. These data are required to evaluate your progress and see if you are moving in the right direction. It can be brief, but it must be present for the investors to understand how realistic you are.
- Key assumptions and risks. It is a crucial part of the plan, as any business has its risks, and you have to consider how you can react and minimize the negative effects.
Company and management summary
A well-known – and truthful – idea is that people are the key, not the technology itself. Investors give money and resources to the people, so they need to be sure there will be the right people.
Give brief information about your company – its location, history, and legal structure. Then give more information about your team.
Compile a short profile for the members who will work on the tasks, specify their level of expertise, mention the achievements. It is important to include references to the similar projects your team members worked in the past and succeeded, as it makes you look more reliable for the investor.
It is great if your team already has all the experts you need. However, it is not a problem if it lacks someone right at the moment. Just describe the job requirements and mention that you are searching for people possessing the appropriate skills.
As you deal with money, you must write a business plan in such a way that it covers all financial questions on profits and expenses. Usually, a financial plan includes the forecasts for the initial 12-months period with the monthly break-down, and then plans for the next several years, with more general numbers for the total annual profit and expenses. Most business plans have three-years financial plans, but in some cases, five-year plans are required.
Investors demand these plans to see how mature your team is and how serious you are in your business approach. Besides, this part is a part and parcel of the data from the “Opportunity” and “Execution” parts. The projections you offer must be grounded on the market research.
The following metrics are obligatory for this document:
- Sales forecast – how much you are going to sell. If you implement a complex model with separate prices for the product, maintenance, additional services, etc, then you should mention all these items. However, you should not go into details here, give your general views.
- Personnel plan – how much you will pay your employees. If you are a small team, mention each person, and for a big company, you can mention the departments only. Besides, you should include additional costs which are not included in the salary directly. There are different taxes, compensations, and insurances that you pay as the employer, for your team.
- Income statement or Profit and loss statement – the section where you can specify all your profits and all expenses and put them together. This should provide the most objective picture of your planned growth and profits. This is the section where you must show the balance for each month and define when it is going to be negative, and when it will turn to positive, and how quickly you will grow.
It is an optional closing chapter, where you put notes, charts, detailed calculations, etc. You may not compose this chapter at all, however, if you have some data remaining which you consider being useful, and you could not put them logically and naturally into the previous parts, then use the Appendix.
Some Useful Tips for Writing the Business Plan
When you gathered all the necessary information, formulated your statements and calculated the numbers of profits and losses, you can start to write a business plan. And here we have some additional recommendations for you.
- Don’t start with the “Executive Summary”. This chapter is the brief restatement of your full business plan, so, you need to have it completed first. The correct order would be: write a business plan, revise it, and then compose the executive summary.
- Use the Roman Numeral order for the sections.
- Check the document for mistakes after you complete it. Do it several times and make sure that your spelling and grammar are impeccable. Besides, double-check all numbers and calculations you present in your business plan, wrong numbers will ruin everything at once and for good.
- Re-read the document and check how it “sounds” for the reader. Did you clear all doubtful moments? How did you present the team members? Did you stress the benefits in such a way that people on the other side would catch your ideas?
- If possible, let your trusted friends or relatives read your business plan too, as they will have “fresh eyes” and can notice issues you might miss.
- Read the document aloud. There can be fragments that you might not notice when you write a business plan, but they will seem awkward and become obstacles when someone listens to the text.
- Add a cover page. It should be simple: just define the type of the document (business plan) and add the name and logo of the company and contact details.
The task to write a business plan is undoubtedly a serious task which demands much effort. However, it is a standard document with its definite requirements and specifications. You should not be frightened by this task, as you are an expert in your sphere, and you only need to present it properly. Now that you know how to write a business plan correctly, you can, by all means, do it.