What is a business plan and why do I need one for my business?

What is a business plan and why do I need one for my business?

According to Holt. (2006), a business plan is a comprehensive set of guidelines for a new venture. In other words, it is a written document prepared by entrepreneurs which describes all the relevant external and internal elements involved in starting a new venture. It contains in details the existence of opportunities for a new business to exploit, high and low sides of the business, etc.

A business plan should contain information about how a business will be operated, who to do what, when and how everything will be done, etc.

To some people, they don’t need a business plan because they think it is for big entrepreneurs and people who have huge capitals. The simple truth is that you need a business plan for any startup you wish to establish.

In this article, we will be looking at some reasons why you need a business plan for your business, some attributes of a good business plan, the structure of a business plan, softwares to help write a business plan and then, a sample business plan.

Note: Not only startups need a business plan, already existing businesses also need business plans. Existing businesses need a business plan to show their current position, where the business wants to be in the future and what they need in other to get there.

Reasons why you need a business plan for your already existing business or your startup

For clarity, a startup is a business with little or no history.

Having said that, let us now look at the reasons why you need a business plan:

1. To keep focus: sometimes in business, the entrepreneur or management team tend to lose focus on what their goals and strategies are but with a detailed business plan, the management or entrepreneur will not be distracted from the goal. Once he looks at the document, the vision and mission of the business is brought alive and the passion is rekindled.

2. Evaluation of the chances of success and failure of a business: a business plan contains everything that is needed to determine whether a business is a viable one or not. If at the end of the day the solutions to the factors that might lead to the failure of the business are not proffered, the business is discarded because it might lead to wastage of time and resources.

3. As a tool to receive grants and loans from financial institutions: no investor or financial institution will just give you a huge amount of money for a business they are not sure will stand the test of time or is viable. Also, certain government grants and SME business funds are given out to people who really have a workable business plan with great potentials.

4. As an instructor: your business plan helps train you as an entrepreneur or a business manager to analyze, organize and make better decisions on how your business will be ran before starting.

5. Find answers to the 5 business Ws: your business plan not only helps in making sure you focus on the mission and vision of your business, it helps you find answers to the 5Ws of business. These five Ws are:

i. Who (answers the question of your market i.e. people that will patronize your business).

ii. When (this answers the question of how and when your business will operate)

            iii. What (what product or service will your business be selling)

iv Where (location of your business. Is the location going to be favorable? Is it located near      the source of raw materials or where the cost of running the business will be minimal?)

v. Why (what is the reason for which the business is established?). If these questions are answered correctly and sincerely, then your business might be on the right track but if not, you might have to think twice.

Many people fail to answer these questions and just jumps into a business only to fold up after a short while.

Attributes of a good business plan

In writing a business plan, it is important to note that in as much as you want to write what will work for you; you also need to write one that can win approvals from financial institutions. To do that, you must have these attributes of a good business plan at the back of your mind:

1. Simplicity and clarity: you might know all the grammar in the world and have a great command of the English language but you should bear in mind that investors, government agents, etc. are busy people and as such, you should ensure that your language is simply, and keep your sentences understandable. 

You should also strive to make use of tables, charts, etc. where necessary to make your points clear.

2. Concise but precise: because of the busy schedules of these investors as earlier stated, it is important that you remove all unnecessary details. Make sure you only include facts and lines that are necessary for the reader or the team.

3. Figure usage: make sure you use figures to back up your ideas and not only write words. This is because these investors, business men and bankers are highly numerate and like ideas backed up with figures. So to make sure your business plan is awesome, use figures where necessary.

4. make sure the business plan is feasible: some tend to exaggerate figures and other contents of their business plan which they themselves know cannot be realized. All procedures, figures, estimates you make in your business plan should model reality and not just be done anyhow. Make researches and find out the actual costs of materials and services before writing the plan so as to make it near reality.

The structure of a good business plan

A good business plan should be structured thus;

1.0  Executive summary: this is definitely the most critical aspect of your business plan as it is the first part of the plan to be seen by anyone going through the plan. Because of this, enough care should be taken in writing this part of the plan. It should be concise and should have the important highlights that an investor wants to see. It should contain the basic information about your business, products or services to be rendered or rendered (for an existing business), etc. For a sample executive summary, refer to the sample business plan attached at the end of this article.

2.0  Background

·  Introduction: a brief but concise background of the business should be stated in this portion of your business plan. Here, a description of the company, and other necessary information should be stated.

· Vision and mission statement

· Ownership: here, the ownership structure of the business should be stated. Is it registered? Who are the owners? Etc. these questions should be answered in this section of the plan.

·Legal status: any legal agreements made, or licenses should be mentioned in this part of the business plan.

·Location and facilities

·Production/services

·Production plan: the requirements for producing goods or rendering services should be stated clearly here with figures, targeted output, revenue, production process, quality control etc. It should be noted that the production process should not be discussed in details to avoid intellectual theft by the financial agent or investor; just a tip. 

You will get a clearer understanding of this when you download the sample business plan below.

·Business strategy

·Key factors: here, the factors that will either make or mare your business should be clearly stated in a view to convincing the investor or financial agent. Make sure you don’t exaggerate anything here. Keep it real and as precise as possible.

3.0  Market

·Nature and size: here, you state the type of people your business is targeting, how often they purchase similar goods or services or how much they need the said good or service, etc. The size here refers to the number of people in the target area that are in need of your product or service and have expressed interest in the product; not just anyone.

·Target market

·Key competitors and players: state the names of other businesses that are your direct or indirect competitors. Also, remember to state their strengths and weaknesses. This will enable you know how to tackle them and stay on top of your game. If possible, an understanding of their winning strategy will enable you plan well in other to outsmart them.

·Service delivery

·Quality assurance

·Demand/Supply: here, you estimate the demand and supply of your product or service. The estimate should be a product of objective research and not just an unintelligent guess. Research about the market, and state how the research was carried out, why you think your product or service will sell, etc.

·Technology: what technologies will you employ in your business?  Are they simple or complex? Is it local or foreign? Is it expensive and does it require special skills? State the answers to these questions in this section.

·Competitive edge: having studied your competitors, what potentials does your business have? What new things are you bringing into the business that will ensure that you have a clear-cut edge over them? State them in this section.

4.0  Market plan

·Promotion and distribution strategy

·Alliance

·Market positioning

·Service delivery strategy

·SWOT analysis: SWOT is an acronym which stands for Strength, Weaknesses, Opportunities and Threats. In this section of your business plan, you should provide the strengths, weaknesses, opportunities and threats of your business in a bid to further convince the investors and also to give you a clearer view of how you would manage and operate your business.

5.0  Organization and management

·Organizational structure

·Shareholders and directors: list the already existing shareholders and directors of your business if any including yourself.

·Management team: list the possible positions in the organization that help or will help in managing your business.

·External support: is there or will there be any need to hire external support from time to time? If yes, state it here and also state how much they will be paid when called upon.

· Personnel plan: what types of skill are needed for the smooth running of the business? Who and who will be employed? State them here.

·Value and norms of the company: does or will your business adopt some norms and values? If yes, state it clearly here. An example of norms and values is “integrity”. Will your company abide by the rules and regulations guiding it?

6.0  Legal, regulatory, social and environmental issues

·Legal issues: will the business be registered or is it already registered? What form of business is it (sole proprietorship, cooperative or partnership)? What are the necessary business permits already granted by relevant authorities for your business? State all of them here if any.

·Regulatory issues

·Social issues: does your business affect the wider society economically or otherwise? Does it help in poverty reduction or increment?

·Environmental issues: what threats does your business pose to the environment where it is situated? How do you intend to solve this problem? Does your business conform to environmental laws and requirements, etc.?

7.0  financial plan

·Initial: state the amount you already have if any. If not, also state it clearly in this part of the plan.

·forecast of sales

·estimate of costs, working capital projection

·startup capital required

·proposed financial structure

·depreciation, loan repayment, and interest payment schedule

·projected profit and loss account, cash flow projection, projection balance sheet

·financial analysis

8.0  Risk analysis. Contingency plan and exit strategy

·Risk analysis and mitigants

·Contingency plan

·Exit plan: some investors would like to know what plans you have for a successful withdrawal from business peradventure the business doesn’t work out as planned. How do you intend to back out with minimal loss? How would their money be returned in case it happens? State all these here.

9.0  Other considerations, conclusion, and recommendation

·Economic justification

·Commercial viability

·Conclusions and recommendations

The rest would be better understood when you take a look at the sample business plan below.

Are there other means of writing a business plan?

While reading this post, some people might have concluded that they are not interested in this any longer. Their reasons might be that they don’t have the expertise or skill needed, might not be able to gather all these information and are not good in English. Don’t panic yet, there are still some ways out!

As technology advances, some programmers have come up with wonderful softwares that can help you write this business plan. The softwares are based on pre-programmed templates that just require some input fields which you will provide. The software then does every other thing like plotting necessary graphs, doing the required calculations, etc. 

Some of these softwares are free while some are premium, some are desktop applications while some have mobile versions and some are web-based applications.

Below are some of the softwares that can help you write your business plan

1. StratPad: This is a web-based software that helps business owners and anyone to create and share their business plans.

2. Enloop: this is an online business planning software that has some striking features that you might want to check out. These features include; auto write, financial forecasts, invite and share, charts, real-time scoring, report card, multi-currency support, PDF documents and ratio. You can try this application.

3. iPlanner.NET: this is an online collaboration tool that helps you create strategic business plan documents for your business. It works online and has lots of business plan samples, editable templates and builder. You can upload HTML pages, text files, images, PDF pages, excel spreadsheets and presentation files. The platform is not free as you are required to pay some token.

4. Liveplan: this software was developed by Palo Alto Software that helps create business plans for businesses and entrepreneurs on the go. This software has so many jaw-dropping features that you might also try out. 

Some of these features include; 500+ plan samples and examples, error-free financials, fill-in-the-blank planning, awesome dashboards, drag-and-drop forecasting, can be exported to PowerPoint, etc. It is a PC software and premium.

5. PowerplanPro: this is also an awesome business plan creation platform and contains some features like charts and graphs, auto generated notes and projections, plan assembly function, plan copy & copy to another account, auto-formatting business plan writer, etc.

Other include:

6. Innovation platform

7. Bizplan builder

8. Funnel plan

9. Xeraphic

A sample business plan

To drive home some of the points we made earlier, we drafted a sample business plan. The business plan is for dry cleaning business. Download the ebook through this link and enjoy.

Conclusion:

The ball is now on your court. Create a business plan today and set your business in the right path of success. Do you have any question or contribution about this topic? We would like to hear from you. Make use of the comment box below.

Do you need someone to write a business plan for you? Contact us today. Send an email to ikechukwuapeh@gmail.com and we will negotiate.

Thanks for your time.