How to Write a Business Plan

By JoAnne Berg on 21 April 2011 (Updated 27 April 2011) 1 comment
Photo: shironosov

“It's not the plan that is important, it's the planning.” – Dr. Graeme Edwards

Going through the process of writing a well thought out business plan is one of the most important things that you can do to ensure the success of your business.

Unfortunately, many business owners find this process to be difficult and confusing, in part because they are focused on the end product and not on the process of getting there. It’s a journey, not a destination!

I’ve found that it is helpful to break the planning process down into separate topics, and then look at how they fit together in the overall plan. It’s also a good idea to think of yourself as an investor in your business (which, of course, you are) and review what you come up with from that point of view.

Here are the planning topics that I believe are important, presented in the order in which you should approach them.

The Problem and the Opportunity

There has to be a current problem (need) and the solution your business is providing.

  • Who is the customer? What is their problem?
  • What is your solution?
  • Why is it better than other solutions on the market?
  • What’s the market opportunity?

Business Model

Your business model is how the business turns an idea into money. A typical example of a business model is “the razor and the razor blade.” Razor companies sell razors inexpensively, because what they really want to sell you are the razor blades now and in the future.

  • What is your unique business model?
  • What makes it special? Why are you different from the competition?
  • Do you have intellectual property that gives you an advantage?

Competitive Market Analysis

Good market research is the key to a solid business plan.

  • Who are your competitors?
  • What do they do better than you do?
  • How will your business be able to take a piece of their market?
  • In this section you will also need to address the market pricing of your product.

Marketing and Sales Strategy

Be specific — design a detailed plan that can be put into action easily and according to your budget.

  • How do you plan to market your product or service?
  • How will you get the word out and create demand?
  • How will you turn a prospect into a customer?
  • If that doesn’t work, what else will you try?

Operational Strategy

Describe how you are going to execute your business model and deliver your product or service.

  • How will you run this business on a day-to-day basis? Who will do what?
  • What operational metrics will you track to ensure that your plan is working out?
  • Clearly address the risks of the business, and how you will deal with them when they arise.
  • Don’t forget the external risks that you don’t have control over (interest rates, the economy, etc).

The Team

Your people are your most important asset!

  • Include short bios including relevant industry experience in the body of the plan. Include your outside advisors as well as employees.
  • Detailed resumes go in the appendix.
  • Include an organizational chart.

Timeline

Successful execution of a plan often depends on timing.

  • Be specific about when you will be executing the various pieces of the plan. You need this for the financial projections as well.

Financial Goals and Projections

A good plan includes 3 to 5 years of financial projections. If you do not have a strong financial background, it’s a good idea to get professional assistance with this part of the plan — it’s really important that it be done properly.

  • Include projected income statements, balance sheets, and statements of cash flow.
  • The projections should include expected investor returns and/or clearly show the repayment of anticipated loans. Include the money you have put into the business in these calculations.
  • The results of the projections should make financial sense in relation to the earlier parts of the plan.

The Executive Summary

This should be a one page synopsis of all of the above. This should be written last, but be presented at the front of the published plan.

  • Why this business? Why Now?
  • Why should an investor (including YOU) put time and money into this venture?
  • Include brief financial highlights.

With these parts in place, you’ll have a great roadmap to follow as you manage your business, as well as a document that can be used to obtain financing or investment, communicate with employees, and continue planning for the future.

But most importantly, what you learn through the process of putting the plan together about yourself, your team, your idea, your competition, and your business strategy can make all the difference between success and failure. It’s one of the best investments of time and effort that you can make.

5
Average: 5 (1 vote)
Your rating: None
ShareThis

comments

1 discussion

Add New Comment

CAPTCHA
This test helps prevent automated spam submissions.
Guest's picture

I agree that the team is the most important element. Investors don't bet on ideas or products. They bet on people, and their ability to execute.

Financial projections are nice, but any good finance guy (your own, or for hire) can build a plan that makes the company cash-flow positive after a year or two. Investors always take these projections with a grain of salt. Most of the business plans I've seen as an advisor to start-ups are over-optimistic.