Why do I need to write a business plan? You may ask. After all, it is just a small business or it is something I can think through off-hand. Really, it is somewhat true but I am of a different opinion. A business plan is a written statement that describes and analyses your business and gives detailed projections about its future, it covers the financial aspects of starting and expanding your business.
Before a business is established, series of researches must have been carried out some of which include: Market, Product, Financial, etc. A business plan consolidate these researches, acts as a guide during the lifetime of your business, and makes sure you take an objective unemotional look at your business. A good business plan provides detailed information about your company’s past, current and future operations. This information provided will be useful to potential investors and lenders as well.
The importance of a good business plan is not limited to the aforementioned. In order to ensure that your business progresses and can stand the test of time, a good business plan is inevitable. Most times, business plan is written with a view of using it to secure funding from banks, other interested investors. Hence, it is pertinent to bear in mind that for your plan to win the approval of its potential investors, there are desirable attributes it should possess: simple and clear, sequential and logical, concise but precise, models reality, use figure when necessary.
In addition to the above attributes, there are 10 things a good business plan must contain which include the following:
1. Executive Summary
The executive summary may be regarded as the most critical aspect of a business plan especially where outside funding is required. This section is always written last. It explains the fundamentals of the proposed business: What will your product be? Who will your customers be? Who are the owners? What do you think the future holds for your business and your industry? Make it enthusiastic, professional, complete, and concise.
As the name implies, the executive summary presents a summary of the important facts in the business plan. It should be noted that although the executive summary is the first part of the business plan to be presented, it is usually the part to be prepared last. The executive summary is often your initial face to a potential investor, so it is critically important that you create the right first impression.
This part of the business plan provides the basic details about the business plan. Unlike the executive summary which strives to persuade readers of the expected success of the business, the background provides necessary specific information about the business. It includes the vision and mission statements, ownership, legal status, location and facilities, the product/service, production plan and key success factor.
Whether the proposed business will succeed or not, depends on the market. Here you describe the nature and size of the market, the target market, key competitors and players, demand and supply analysis, competitive edge, etc. In this section you describe who will buy your products or services. Is the market growing or declining? It is of great importance to consider whether your company’s products and services meet the needs and desires of the target market. Also in this section, you should be able to show that customers exist for your business .
4. Marketing and Sales Plan
The marketing and sales plan section discusses how you intend to win over your customers. It include: promotion and distribution strategy, service delivery strategy and marketing positioning. What methods will you use to capture your audience? What sets your business apart from the competition? Answers to these questions should be made available in the business plan.
5. Organization and Management
Who will manage the business on a day-to-day basis? What experience does that person bring to the business? What special or distinctive competencies? When there are more than 10 employees create an organizational chart showing the management hierarchy and who is responsible for key functions. Having information about key personnel is an important but often misrepresented portion of a business plan. Here you give an accurate account of what they’ve done and what they bring to the table for this specific business opportunity. Provide pertinent, concise background information on all key players involved in the business.
6. Legal, Regulatory, Social and Environmental Issues
This sections of the business plan answers the following questions:
Will the business be registered? What legal form and why? Are you environmental friendly? How does the business affect the wider society? Who are the regulatory authorities? Do you keep to the rules? Starting a particular business will need the knowledge of the necessary business permits, licenses, franchises, etc needed to startup.
7. Financial Plan
This section provides answer to the following questions:
• Will the proposed business be profitable?
• Will the proposed business deliver wealth to its owners or promoters?
• Will the business be able to pay its maturing obligations without sinking into bankruptcy?
The detailed analysis of the following are also given: initial, forecast of sales, estimate of costs, working capital, start-up capital required, depreciation, cash flow projection, projected balance sheet, etc.
The details provided in this section of the business plan will be based on your projected financial statements. These statements provide a model of how your ideas about the company, its markets and its strategies will play out.
8. Risk Analysis, Contingency Plan and Exit Strategy
The following questions are answered here:
• What are the risks the business is open to?
• What is the exit plan for the business in case of unforeseen eventuality?
SWOT analysis (Strength, Weakness, Opportunities and Threats) is also presented here.
Although it may be the last thing on your mind when starting a business, providing an exit strategy with your business plan can be a great help later on in the life of a business. Sometimes a business may not turn out to be rewarding as initially expected. When such is the case, it might be reasonable to withdraw from such a business. The danger here is that any attempt to back out from a business after making the investment outlays always portends huge losses for the investors. therefore investors want to know how withdrawal from the business in such case could be effected with minimal lose.
9. Other Considerations, Conclusion and Recommendation
This section analyzes the economic justification, commercial viability of the business, conclusion and recommendations. Does the product or service offer good benefits to the industry, economy and the society. Is the project viable commercially?
In documenting a business plan, claims are usually made; the business has a patent or it is registered. The appendix is the section you attach documents to prove your claims such as photocopy of certificate of incorporation, approvals, licenses, organogram, assumptions behind the figures, etc.
Summarily, a good business plan possesses or enables the following:
• Serves as a guide for starting and expanding a business.
• Gives an integrated view of your business – it discusses all aspect of the business.
• Gives a list of goals and steps to follow.
• It is an instrument that helps to communicate clearly with all interested parties such as stakeholders, potential investors, accountants, suppliers, etc.
• Helps to convince other parties that you can manage the business.
• Helps the company stay focus on your goals and strategies.
• Improves your management capabilities by giving you practice in anticipating situations both good and bad for your business.
• Helps uncover obstacles you might have otherwise overlooked.
• Trains you to analyze, organize, and make better decisions.
• Shows the available market for the business’s products/services.