How to Create a Business Plan Ini Patrick Notes

How to Create a Business Plan

Creating a business plan is essential when running a business. But with so many aspects to consider, you may wonder how to organize crucial information the right way.

We will explain how to make a business plan and the different types of plans you can adopt.

What is a Business Plan and What is its Purpose?

How to Create a Business Plan What is its Purpose?
Business Plan Models

A business plan is a document that explains a company’s goals and how to achieve them. It contains a detailed plan for the marketing, operational and financial areas of a company or an eCommerce store.

That said, it is essential to understand what the purpose of writing a business plan is. Here are the reasons why you should do this:

  • Define a business focus – writing down your goals and a detailed step-by-step guide on how to achieve them will help you focus on the actions necessary to pursue your purpose.
  • Secure funding – outside investors will look at your business plan to see your goals and understand how you want to make your business profitable.
  • Attract Talented Executives – As your company grows, you may want to recruit experienced executives who will lead the company even better. They will likely look at your business plan to determine if your company fits their style.

A business plan is often useful for new or small companies, but there are benefits to implementing it in large companies as well. A firm can also revisit its plan to see what goals have been achieved and create new goals for future development—or prepare to take the company in a new direction.

Four Types of Business Plans

Each business plan serves a different purpose. Some business plans seek to attract new investors, while others focus on short-term gains. Therefore, you must create a plan that matches your vision.

Check out the four types of business plans below, with detailed descriptions for each.

Standard Business Plan

A standard plan covers all areas of business. It serves both internal and external stakeholders, such as employees, potential investors, and suppliers. It’s the most versatile model, and that’s where it gets its name from.

We will discuss the elements of a standard business plan in greater depth later in this article. But generally speaking, it should contain the following:

  • Executive Summary – This is a high-level overview of your business. You can also treat the table of contents as a template for the complete business plan
  • Company description – provides information about the purpose of the company and its objectives. The company description usually follows the executive summary.
  • Market research – analyzes the consumer profiles of your target audiences, market potential and your competitors.
  • Organization and management team – introduces the team members, their individual competencies and their responsibilities in the organization.
  • Products and Services – describes the products and services offered and how they can compete in the market.
  • Operations plan – provides information about daily activities and how you will deliver your products and services to customers.
  • A marketing plan – specifies the marketing strategies you will use to promote products and services to customers.
  • Financial plan: – shows financial projections and assumptions for optimal performance of your company.
  • The appendix – contains additional information that supports the main idea of ​​the business plan.

Summary Initial Business Plan

The summarized business plan uses a simpler format to form your project. It is shorter than the standard plan as it only highlights your company’s essential strategies, milestones, and numbers.

This type of business plan is useful for monitoring the growth of a small company. You can use it to track your company’s performance based on your numbers and achievements. After that, it is possible to compare the results with the projections through a fiscal report.

It has four essential elements:

  • Guiding Principles – a brief description of the target market, the company’s identity and its objectives for the purpose of monitoring them.
  • Execution Strategy – Lists operational strategies such as plans for promotions, social media campaigns, and production planning.
  • Performance monitoring – defines which metrics will be used and the numbers you aim to achieve. This information can be delivered using KPIs and OKRs.
  • Key Numbers – Specifies basic financial planning, including sales projections, budget allocation, and expected cash flow.

There are several business plan templates available to help you create your own. One of the most famous templates is Alex Osterwalder’s Business Model Canvas, which maps your business on a single page with nine components.

Business Model Canvas - Ini Patrick Notes
Business Model Canvas

Executive Summary Business Plan

This business plan is made up of a single page. You will condense into it all the information normally found in a business plan. This project is called an executive summary.

It bears its resemblance to the abridged starter business plan, as both are expressed on just one page. Despite this, there are clear differences between the two.

First, an executive summary business plan uses structured, written summaries to explain your business. The initial plan skips this step and uses lists, tables or topics.

Second, the executive summary is primarily used to introduce a company to external parties—such as investors, banks, or potential partners. A summary starter plan, on the other hand, is best used to monitor internal growth.

Complete Business Plan

A comprehensive business plan typically seeks funding. That’s why this type of planning puts a lot of emphasis on the financial aspect of a company. Still, it retains other elements such as the executive summary, market opportunities, and product explanation.

A complete business plan must contain the following financial information:

  • Current Financials – describes the recent financial performance of a company. They need to be fully transparent, as investors and lenders want to see a complete picture of the business.
  • Financial reporting projections – estimates future sales, expenses and cash flow. This information is often essential for new businesses that do not yet have revenues to demonstrate.
  • Borrowing Requirements – A detailed description of the financing needed and future borrowing requirements. You may need to explain why you need a certain amount of money based on your financial projections.
  • Spending planning – an explanation of how you will spend your funds. Investors and lenders will assess whether you have a good spending plan that can yield profits and give you a good chance of paying them back.
  • Loan Repayment Plans – details your repayment plans for any current or future loans.

9 Elements of a Standard Business Plan

Each company may choose a different approach to the standard business plan structure, but you should at least include these points when creating your plan.

1. Executive Summary

This part comes at the beginning, right after the cover page, and should bring together all the essential information of the business plan in one or two pages.

Writing a good executive summary is essential, as this is often the part that will create new opportunities or kill them. Investors and executives review the executive summary to decide whether they should look deeper into the business plan or simply stop reading.

We recommend that you include the following information in your executive summary:

Company Overview

The first topic is the product or service that your company will offer. Briefly explain what your products are and whether you will manufacture them or outsource their production to suppliers.

If you’re offering services, describe how they can improve people’s quality of life, and how big your market is.

Market Opportunities and Competitors

In this section, you summarize the market analysis for your business.

Write who your target market is specifically. For example, if you sell bread, explain in which area or economy class you will be selling it. After all, this will influence your price and the costs to promote your products.

It is also recommended that you address market volume in detail, as this will delineate your potential sales amount.

Look for competitors in your market. If other companies are targeting the same industry as yours, explain the key differences that will make you stand out from the rest.

Financial Projections

With financial projections, the most important thing is to explain the revenue sources and pricing structure briefly. Also show your planned sales, expenses and income numbers to get an overview of your projected financial performance.

You can also mention the capital needed and how you will finance your business. If you are looking for external funding, this is the time to explain how much funding you need and how you plan to return that money in the future, whether in company capitalization or cash.

Milestones and Growth Projections

The final element of an executive summary is your vision for the future when your company has grown. If your business plan is for an established company, show the milestones the company has already reached.

The projection for future growth includes opening new branches, acquiring a certain amount of new customers, and so on. A small business owner can use this to monitor their company’s growth.

2. Company Description

Your company’s purpose can be outlined using your company’s mission and vision. The vision should address your ambition for your company—what you want it to be. Meanwhile, the mission reflects what you will do to achieve that goal.

These statements are useful for keeping company members aligned and operating towards a common purpose. They also play a key role in strategic planning, as they will define the strategy adopted to achieve the company’s ambitions.

The next step is to establish your business goals. These are a set of achievements that you want to achieve within a certain period. You can set goals for companies in general or break them down into departments such as marketing, finance, or operational goals.

When setting a goal, use the SMART framework to help you track your progress:

  • Specific – Keep each objective narrow for more focused planning.
  • Measurable – Set the metrics that will determine your progress and achievements.
  • Attainable – you must be able to achieve the objective based on facts and figures.
  • Relevant – each objective must be aligned with the company’s vision and mission.
  • Time-Based – Set a time frame by which you want to achieve the goal.

For example, a consulting firm might set a goal of gaining 50 clients in the first quarter of operation. The SMART aspects of this objective can be broken down as follows:

  • Specific – it is clear they are looking for 50 customers.
  • Measurable – they can track the number of customers gained.
  • Achievable – 50 new customers in a quarter is not an overly ambitious target.
  • Relevant – Winning new clients is important for the growth of a consulting firm.
  • Temporal – They should reach their goal by the end of the first trimester.

3. Market Analysis

Market analysis is a critical part of a business plan template. In this process, you will be able to gather information about your customers and their behaviour, as well as details about your competitors. This will help lay a foundation for your business strategies.

Define the Target Market

The first step is to determine the market in which you want to position your company. This will help you to better understand the characteristics of the market, facilitating the development of a suitable marketing campaign, as well as the development of relevant products.

To determine your target market, try to find who your potential customers are. They can be specified using several factors:

  • Geographic location – Decide the area where you want to operate based on the scope of your business operations.
  • Age Group – This is the ideal method if you are selling products designed for a specific age, such as alcohol, business attire and toys.
  • Income level – this factor determines the demographics that will fit into the price range of your products. Keep in mind that income level can also be affected by geographic and demographic characteristics such as age and gender.

For a business-to-business (B2B) company, you can define who your potential customers are by geographic location, industries, company profiles, and relevance.

Market Volume and Trends

When defining the size of your market, you can research the number of potential customers you have. This way, you will have a better idea of ​​the market value for your niche.

Additionally, discover the latest trends in that market. For example, you can examine whether the increase or decrease in demand for your products is related to an increase in migration to your operational area.

Competitor and Environment Analysis

Once you’ve identified your target market, it’s time to explore your competitors, as well as your position in relation to them.

Focus on your direct competitors — companies that sell similar products or target the same demographic. Once you’ve listed all your competitors, try to compare your company to theirs, identifying your strengths and weaknesses.

You can use the SWOT technique —Strengths, Weaknesses, Opportunities, and Threats—to present your assessment.

Strengths and weaknesses represent your internal condition in relation to your competitors. For example, you might list as a strength having technology that allows you to produce goods more efficiently.

On the other hand, if your competitors have a more experienced HR team, you could list this as a weakness of yours.

Then analyze the market environment—what opportunities you can exploit and whether there are any threats that need to be mitigated. Opportunities could be favourable government regulations or a positive market trend. Threats can take the form of new competitors in the market.

These evaluations will be useful for the creation of marketing strategies and for the strategic planning of the company in general.

4. Organization and Management Team

In this section, you need to introduce the people behind the business idea, as well as each member’s role and responsibilities. Also, point out how you organize everyone towards achieving your business goals.

Create a short biography of each team member and highlight their experiences. If you’re starting a small business, don’t worry about gaps in the management team. It is better to have a person who works according to their expertise than to just hire someone for hire.

This practice can indicate the maturity of your business plan and open up more opportunities for the right person to join your team.

Don’t force yourself to define the management team using titles like chief executive, chief marketing officer, and chief financial officer. It’s tempting to have job titles like that, but maybe that’s not the most effective way to run a startup.

Once you have divided team member responsibilities, prepare an explanation of your organizational structure, if applicable. The organization chart itself can even be placed in the appendix, but you will still need to define the management flow from top to bottom.

Feel free to choose a vertical or horizontal structure, as well as to determine the roles in your company. What matters is that it supports the operations of the business in the pursuit of achieving its goals.

5. Products and Services

This is the section where you explain what products and services you offer.

Explain how the products and services will satisfy the needs of your target market. You can also include features and benefits, but don’t delve too deeply into the technical specs — you can leave them in the appendix. Also, avoid using technical terms so that the section is easily understood by the reader.

Another vital aspect you need to address is what makes your products and services stand out from the competition. If you produce a good with resources superior to your competitors, detail them in this section.

Alternatively, you can sell similar products at a more competitive price. Explore how you manage to sell them so cheaply. For example, if you made the production process more efficient, or if you source raw materials from cheaper suppliers.

6. Operations Plan

This section contains a detailed analysis of your company’s methods of operation, including how products and services are delivered to customers.

You can describe the equipment used to run the business, the detailed operational flow and legal requirements.

Facilities Management

First, specify the facilities you need to run your business—this includes the equipment you already have and any equipment you will purchase. Don’t forget to mention how you’re going to buy everything. For example, if you are going to rent equipment or buy your materials.

Don’t forget to justify why such facilities are important and why you will acquire them in a certain way. For example, if you are going to buy expensive equipment that is vital for your production because there is no company that rents that type of machine.

Daily Operations

Talk about how you carry out day-to-day activities, such as production methods or service delivery — such as inventory control, supply chain management, and facility maintenance.

If you source products from suppliers, be sure to explain the order processing and product delivery process.

For a company that takes care of production, the business plan also needs to detail production methods. Explain where you get the raw materials, how you turn them into goods, and how the delivery takes place.

Also mention the time interval from the acquisition of raw material to the end of production. This will indicate that your production process was well planned.

In addition, it is necessary to mention the daily maintenance tasks of the premises. If you have a restaurant, you will need to clean the kitchen and dining area every day to maintain hygiene and quality standards.

Legal Requirements

If the region where you operate requires a license, here is the place to present it. Define how your operation has managed to comply with all necessary legislation in your industry, including environmental and health regulations.

7. Marketing and Sales Strategy

In this step, you need to develop a marketing plan to promote your business to customers.

Positioning

Product positioning is the process of developing a public perception of your product or service. This is especially important if you have a lot of similar products circulating in your target market.

Customers will compare your products to competitors and look for differentiators. Your goal is to make your product stand out from the competition by making an association that will be linked to your brand.

Common examples of placement are buzzwords like “affordable”“reliable”“durable” and “simple”. You can choose any feature that fits your product and company goals.

Price

After defining your product’s position in the market, it’s time to develop a pricing model.

There are two fundamental rules that you must follow. First, you need to cover the costs of delivering the product to the customer. Second, the price must be suitable for the chosen market.

There are three approaches to determining the ideal price.

  • Cost-plus price: set the price by determining the upfront costs and then adding the profit margin.
  • Market-Based Pricing: Analyze the market and see what prices your competitors offer. You can position yourself in the entry market or at the top of the line, depending on your positioning.
  • Savings-Based Pricing: Pricing is determined by the savings you are offering customers. For example, if you sell a product that can save you $10 in expenses, you might charge $8 for it.

Promotion

Nowadays, you have several options to advertise your products and services. The media range from traditional advertising channels like billboards and magazine ads to digital channels like social media platforms.

Evaluate your customers’ profiles to determine which marketing channels you should use. Each target audience has its own preferences, so consider this when choosing the platform where you will advertise your business.

Next, create a sales promotion plan to convince your customers to buy your products. Clearances are considered a short-term strategy that doesn’t increase customer loyalty, but it can still increase sales.

Check out some sales promotion plans you can try:

  • Product Trial – Offer a free trial for your customers to try your products. This method is particularly popular with software companies.
  • Bundles – Sell products combined in bundles for a reduced price compared to buying them separately
  • Discounts – Offer a price reduction to customers who are re-buying or on holiday.
  • Limited Time Products – Launch products that are only available for a short time. This strategy exploits the sense of urgency and scarcity to attract sales.

Sales Channel

A sales channel is the way you will deliver your product or service to the market so that customers can buy or hire you.

In general, sales channels can be divided into two categories: direct and indirect.

How to Create a Business Plan - INI Patrick notes
Sales Channel

A direct sales channel is when your company sells products directly to customers. This can be done through personal sales, branded retail stores, or company eCommerce websites.

An indirect sales channel, on the other hand, is when you use intermediaries like a retailer or an online marketplace to sell your products.

Your ideal sales channel depends on the type of products you sell and your target audience. For example, if you sell a commodity to a broader market, you may want to have multiple sales channels. After all, they help you reach more customers and still profit from sales.

8. Financial Planning

Creating a financial plan is considered one of the scariest parts of writing a business plan. A company’s financial projections show its viability and areas where it can improve.

A financial plan usually brings the company’s projection for the first 12 months, along with annual projections for the next three to five years. If the company is already established, this section should also include recent financial statements.

There are several points you should include in this part of your business plan.

  • Balance sheet – an overview of the health of the business. It lists the company’s assets, liabilities and equity.
  • Sales projection – a general expectation of how many sales you can make. You can also include Cost of Goods Sold (COGS) to get an idea of ​​how much gross profit you make from each product category.
  • Income Statement – ​​This statement will show whether your company will make a profit or make a loss. The income statement takes the numbers from the sales projection and puts them together with the other cats of running the business.
  • Cash flow statement – ​​not to be confused with the income statement. The cash flow statement records the inflow and outflow of your cash. Its purpose is to show when money passes through your company. It also helps you plan for future spending as you can project how much money you will have at any given time.
  • Breakeven Analysis – For a new business, breakeven analysis will show the sales needed to become profitable, considering both variable and fixed costs. It also helps the company to set a goal for sales performance.

Predicting your financial future requires some guesswork. Work on deductions to assess under what circumstances your company can follow these projections. For example, you can assume that the market trend will continue for years to come.

9. Appendix

This section contains some additional information to clarify or emphasize the earlier elements of the business plan.

You can include additional data such as:

  • organization charts
  • Product or installation documentation
  • Market research information
  • Additional financial projections
  • legal agreements

Practical Tips to Transform Your Model into a Real Business Plan

Producing a business plan template can be challenging for an entrepreneur. Here are some tips to help you write a business plan, whether for a small or large company:

  • Be realistic – offer a logical action plan and financial projections to achieve your goals. Don’t forget to be honest about your resources and capabilities.
  • Be clear – focus on delivering the most important information. Write concisely and avoid stuffing, as investors won’t want to read an overly long business plan.
  • Use tables and graphs – present data using tables and graphs for easier interpretation.
  • Content over form – don’t overthink formatting. You can even experiment with the presentation of the business plan, but only if you are already sure that it has all the essential information.
  • Know your audience – you may want to adjust your tone and style depending on your audience and the industry you operate in. Feel free to work creatively with your formatting to grab the reader’s attention, but don’t forget to prioritize the value of your content.

Conclusion

Having a business plan is crucial when you are developing your business. It creates a frame of reference for your operation and acts as a guideline for the team. Also, it can help you attract investors.

There are several types of business plans, so choose the one that best aligns with your vision. As long as you deliver all the important information and include the essentials, your business plan will help you achieve your goals.

Now that you’ve learned how to create a business plan, it’s time to actually create your business plan. Good luck!

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.