Some believe that “If you fail to plan the business goals, then you are also planning for the failure of your business. Some might argue that a business could have equal chances of success without a business plan, but the odds are greater for the such entrepreneur to fail sooner or later. Multiple studies have suggested the fact that businesses with a written and formalized business plan are more likely to achieve their financial viability goals as compared to their non-planning peers.
Normally, business plans are used as a strategic tool by entrepreneurs to not only focus on the steps necessary to make their business idea successful but also to maintain their focus throughout their journey while keeping their short-term and long-term goals in hindsight. In the absence of formulation, execution, or implementation of a strategic business plan, even the most promising business plans could be of no use. And, in case the founders of a start-up are looking to raise funds from institutional investors and lenders, it is crucial to have a well-documented business plan which speaks for itself.
Thus, formulating a business plan for your start-up could make a world of difference for entrepreneurs which involves steps such as determining their target audience, understanding & figure out ways to make a better reach to them through marketing campaigns. Read further to find out the best ways to create a strategic business plan to help your business start on the right foot-
What Is a Business Plan? What does it consist of?
Essentially, a business plan is a written document that outlines your ideas and strategies for launching, managing, and eventually exiting your new venture. It is a roadmap that describes the start-up from marketing, financial, and operational standpoints. Start-ups as well as mature businesses require secure business plans.
Outlining business goals and milestones will help you assess your business requirements and function efficiently. A well-constructed business plan can be crucial for the success of any entrepreneurial endeavor. It is to be understood that the business plan needs to be evolved from time to time as youlearn more about your market.
A business plan is also an important document aimed at the external audiences of the start-up. For instance, a business plan is used to attract investment from investors even before it starts generating income and could even help to secure loans from lending institutions. Besides, a business plan can also help a start-up to develop coordination between the executive team regarding strategic action items & targets to meet their goals.
Though business plans could be beneficial for start-ups, ideally every business should have a plan which should be reviewed periodically to reflect on the goals that either have been met or have changed. Sometimes, a new business plan has also to be created for a mature business that is moving in a new direction.
Types of Business Plans
There are three types of business plans which are to be created and implemented as per the business objectives of any start-up-
1. The Lean Business Plan-
Lean Business plans are an abbreviated structure of business plans who highlight the key business elements as there is not much information available in the early stages of the business. A Lean business plan focuses on factors such as business strategy, objectives, tools & equipment, budget estimation, and forecasts, but skips points such as previous history, management team, etc. If a business entity chooses to prepare a lean business plan, it should be ready to prepare a more detailed business plan if requested by any lender or investor.
2. One-page business plan-
A simple one-page format is outlining your business objective and goals within a single page only, and everything else which is important is provided in concise points which are easier to be interpreted and understood by anyone. A one-page business plan could be helpful for start-ups to easily summarize their concept, re-visit the general model without having to go through it whenever any revision is required, and refine the same when it comes to new ideas and schemes.
Likewise, it can also be used to introduce the start-up business to potential stakeholders to allow them to know about your business quickly through a comprehensive business document. This is generally preferred during the first meetings as it provides them with a general idea of the business model.
3. Traditional or Extensive Business Plan-
A traditional or extensive business plan is generally a full-fledged business plan which includes past performances as well as future goals and projections for a business. Such a plan is usually useful for outsiders (such as investors or for supporting loan applications) to offer comprehensive information about a business & its goals to be fulfilled in the future.
Advantages of preparing a Business Plan
Here are some of the reasons for considering preparing a business plan for your start-up
Outlining your short-term and long-term goals
Business plans do not only allow setting short-term or immediate business plans, but they also allow entrepreneurs to set their long terms. They outline the directions to be followed, the directions to be followed, business goals & aims, their expected outcomes, and other futuristic objectives, etc. for a business to grow. It also helps to brief recruits, management teams, and employees as you can share your business objectives, and above all keep yourself dedicated through every phase in the business venture without disrupting their flow.
Secure funds for your business
It’s no secret that businesses need operating capital to kick-start their production cycle, for which either entrepreneur needs to obtain loans from financial institutions or raise capital from investors which could be used for crucial purposes such as purchasing property or hiring manpower. However, it would be necessary for a start-up to have an up-to-date business plan for potential financiers highlighting the capital requirements that will prove to as written proof for the deed. Thus, the better the business plan the higher the chances of securing reliable suppliers for your start-up.
Identification of potential weaknesses
In case you are a first-time entrepreneur, there are high chances of making mistakes and encountering several pitfalls in your business venture, which is completely normal. Thus, having a business plan will allow you to think seriously about matters or if necessary revise them or improve them with modern tools and technology.
Understand your target market
A key portion of your business plan includes developing a keen understanding of how to conduct a thorough market analysis. For this, take into account factors such as industry, target market, and competitors. After which you could review your business plan carefully and make requisite changes in your business plan accordingly.
Prioritize high ROI strategies
The Return on investment is a crucial factor for any business. A business that doesn’t have the potential to generate as much cash as it incurs to run its daily operations has a higher chance to fail. With a startup business plan in place, the business strategies with the highest ROI will become clearer. It will give you more clarity regarding the matters you need to tackle first and prioritize the remaining tasks.
Accelerate financial health
Though business plans are not crystal balls, they can be helpful to forecast its financial health through planning, forecasting, execution, and reviewing. Having a business plan in place will help the business operations to run steadily and identify issues sooner. Cash flow projections can help you to find out whether the goals are worth achieving or need to be changed before it’s too late.
How to prepare an effective business plan for my start-up?
While it may not be necessary for you to follow any particular business plan outline or template, it may be necessary for you to include certain elements to make it more impressive. Here are some of the steps to be followed to create a strong, effective, and attractive business plan for the sure shot of success of your business plan-
Create an executive summary for your start-up
Firstly you need to add a short executive summary for your business which should describe briefly its goals & objectives, the business idea, the vision & mission behind its existence, etc. in other words, it should describe your business, its product or service, basic info about your company’s leadership employees, and its location. If you also plan to raise funds for your business, it should also include financial information and high-level growth plans. It is generally advised to keep the summary short & precise and in no case more than two pages.
Include Company description
Company description is the key element of the business plan and includes details that would help your business stand out apart from other businesses in the relevant industry. In this section, describe in detail the problems your business solves. List out the target consumers, organization, expert team, or businesses your company plans to serve, etc. The company description will be a place where you can explain your competitive advantages and strengths.
Market and Competitive Analysis-
In addition to researching your target market, you may need to conduct a competitive analysis for your business as well. As there will be no reason for your target customers to switch their brands if it’s the same as any existing company product. So, how are you going to separate yourself from the crowd? Once you figure out your target customers it will be easier for you to churn out your brand differentiation strategy.
The brand differentiation strategy for your start-up could involve the prices or quality of the products. In case the prices are considerably lower, that could be your niche in the industry and vice-versa. For instance, you are planning to enter the clothing industry. Hence, your competitors will depend on the target market. If you intend to sell a shirt worth Rs. 500 you won’t be competing brands selling shirts worth Rs. 3000/- or more. Competitive analysis should be ledby your start-ups along with the identification of your target audience.
While market & competitive analysis may help your business to give tough competition to your business rivalries, it also helps you to understand consumer preferences and an opportunity to assess whether the business organization is capable to build a sustainable business in the market.
Operational Structure of the Business
Under this section, you will be identifying the legal structure of your business, and state whether it is a limited company, a sole proprietorship firm, or an LLP. Next, lay out the organizational chart for the person who is in charge of the start-up business, including their experience & expertise in the relevant field. Here you will try to show how the unique experience of each person will be helpful to contribute to the success of the start-up. You may also consider including resumes and CVs of all the key members of your team.
Description of Products/Services-
Next, you need to include a section in your business plan that summarizes the description of goods or services to be developed, offer and sell to the customers by your start-up. Try to explain how your business offerings stand out among the competition, and the comfort/convenience it promises to offer to the customer. Further, you could also include other information such as the product pricing, shelf life, the process of manufacturing used, anyproprietary technology, or if there are any plans for intellectual property, like copyright or patent filings. If you are doing any research & development for the product/services, also explain the products in detail.
Preparation of Budgets
Preparing budgets and their execution is one of the key importance for any organization. Thus, it is advisable to include a section describing budgets for each business function such as marketing, hiring staff, manufacturing, or any other important purpose.
Financial Projections-
Irrespective of whether your business is an early-stage start-up or an established business, it is crucial to make a financial analysis of the current state of the business and make projections for the coming years. Thus, create financial projections based on the costs inflows and outflows in the current financial year for the next year through accounting software on either a quarterly or yearly basis.
In case your business is already established, you could include documents such asprevious and forecasted income statements, balance sheets,capital expenditure budgets, and cash flow statements for the past 3-5 years. In this section, your goal will be to convince the reader that the business is stable and will be a financial success. Always make sure to clearly explain your projections, and match them with the funding requests. To make it more impressive, try to use graphs &charts to describe the financial story of your business.
Marketing and Sales Strategies
Though there is no single way to approach any marketing strategy, this section should include a description of how the start-up plans to attract its customers, undertake sales, how to retain loyal customers and the research and development activities conducted by your start-up here.
The business organization may also mention any other related information such as marketing or promotional tactics This section could be referred to while making financial projections, to ensure to meticulously describe your complete marketing and sales strategies.
Raising Capital for Business-
If you are planning to raise business investments or send a loan application to any bank or financial institution, there should be a particular section dedicated to outlining your funding requirements, where you could clearly explain how much funding you’ll need over the next five years and what you’ll use it for.
Also, specify your preference for the type of financing you would prefer to raise finances or the terms you’d like applied, and the length of time your request will cover. It should also mention the purpose of raising funds which could be anywhere between the purchase of equipment or materials, paying salaries, or covering specific bills until revenue increases. Further, this section should also include a description of your future strategic financial plans, like paying off debt or selling your business.
Appendix
Use the appendix section to provide any additional or supporting documents or other materials as specially requested. Some of the items commonly included in this section are credit histories, resumes, product pictures, letters of reference, licenses, permits, patents, legal documents, and other contracts.
Conclusion
Launching a startup of your own is exciting, and it is obvious to get caught up in the moment that rushes you to other things. But, if you want to find a path for yourself for success, you will need to take a step back and plan things. As having a business plan in place will increase your chances of securing an investment and increase thechances of your potential growth rate. However, writing down a business plan needs a lot of time in research and discussions among founders or business partners. Thus, you must focus on its core principles and identify things that are best for its effective management and functioning. Also, investors & business sponsors would like to have a detailed understanding of your business functions in the right tone and format in your business plan. While it may not necessarily guarantee success, it can help in reducing the chances of rejections you may encounter to raise capital in the future.