Are you a small business owner opening your doors for the first time? Or maybe you’re newly self-employed, giving the gig lifestyle a go. Regardless of the type of business you operate, having a comprehensive business plan is a must-have, especially if you’re a startup looking for backing.
A lot of research goes into crafting a business plan. Use the questions below to help you create a strategic plan for your new business.
Why Are You Creating a Business Plan?
To start off, define the audience for your business plan. Who is your audience? Is it a forum of angel investors? Is it your local bank’s venture funding department? Determining your audience helps you ascertain the language to use to propose your ideas. It also guides the content of your business plan.
Drafting Your Business Plan
There are six key steps involved in creating a sound business plan. Be sure not to skimp on the legwork. Your business plan will force you to think objectively about your endeavor.
These are the key steps to create a business plan:
- Do your research on your industry and concept
- Create a mission statement
- Identify your target market
- Communicate your strategy
- Create a marketing plan
- Compile your business financials
Do Your Research
What companies are your competitors? Research begins with identifying other companies that currently occupy the territory you’re looking to enter. If you’re starting out, the idea of carving out enough time to learn about every potential competitor you have may sound overwhelming, but it can be kind of fun. If you’re a seasoned pro who’s been in business for a while, it’ll be cake – you know your competitors like you know your office desk drawers.
If you’re a newbie, start by asking these questions after you’ve identified your most significant competitor:
- How do they spend their money?
- What kind of press coverage do they get?
- How excellent is their customer service?
- What are their sales strategies?
As you analyze your competitors, you may uncover aspects of your plans that could be better. At the same time, this is your opportunity to illustrate what sets you apart – why is your home business unique? What makes you different from your competitors? And if your idea truly is novel, be prepared to explain the issue you see your business solving.
If your business doesn’t have any exact-match competition, change up your search to find other companies that provide a similar product or service. In business, sometimes the lines are fuzzy – does the non-competing company offer products similar enough to yours that, after you release your product, there’s a strong probability they could venture into your space?
If you’re presenting your research in front of a panel of investors, distinguishing your product from its competitors is one of the most critical pieces of your business plan. If you haven’t done your homework, those investors can see right through you. However, if you have done the legwork, your business plan and proposal serves its purpose well.
For inclusion within your written business plan, create a table or spreadsheet listing your competitors. Your business is listed last, on the right. This is known as a competitor analysis table, and placing your information on the right-hand side is standard practice.
Create a Mission Statement
You might wonder why you wouldn’t do this first. Well, without the above research, it’s pretty tough to write your company mission statement. What if you do it wrong? When you visited your competitor’s websites, you probably took a look at their About Us page, or their Mission and Values statements. If you didn’t, take a look.
Your business’ mission statement identifies the goals you have for your company and outlines the strategy, or strategies, that you can adopt for achieving them. This statement can prove extremely useful when you start crafting a business plan.
Techniques for Crafting a Mission Statement
To craft your mission statement, explain how your company functions by answering these questions.
How do you:
- Source materials?
- Find customers?
- Manage your daily operations?
- Create your products?
- Plan to sell them?
- Find and keep customers or clients?
- Make money?
Basically, what does your everyday look like? Not all business owners know these answers. It may take a bit of experimenting to find out exactly what works to bring about the type of revenue you seek.
If you create consumer products, explain your method of sourcing your materials and what’s entailed within your manufacturing process. Do you sell directly to your customers, or do you have middle-men? If you provide services, explain what, and how, you plan to deliver.
Additional Tips for Creating a Mission Statement
Include concise language in your statement. General statements do not paint a clear picture of what you are trying to accomplish. When your goals aren’t clearly defined, it’s hard for employees and team members to work towards a common purpose. You should also include an inspiring and powerful message to encourage team members to work towards your company vision.
Over time, your company’s goals and values may change, so your mission statement may change often. Review it often to make sure your mission matches your company purpose. A statement that doesn’t match your core values can undermine your marketing efforts and credibility with employees.
Identify Your Target Market
The next portion of your business plan outlines your ideal customer. Your perfect customer is generally described using such demographic information as:
- Type of personality
- Level of income
You can even narrow your scope by adding such demographics as:
- Level of education
- Type of employment
- Location of residence
- Interests and hobbies
By describing your target market with such specificity, you illustrate your knowledge of your chosen field and that you know your product or service well enough that you know exactly who’d make a perfect hand-in-glove fit with your business.
If your target market is too broad, this can be a red light for investors. Say your product is perfect for people who drive a car. If you list “anyone who drives” as your target market, you might be laughed out of the board room. If you further narrow your market to “people between the ages of 40 and 50 who drive a car”, investors are more likely to lend an ear.
Create a Marketing Plan
Your choice of marketing style can mean the difference between selling so much that your products are on back-order, or aisles so quiet all you hear are crickets. Your marketing plan is a critical piece of your business plan. With effective marketing that’s got a dedicated yet adaptive budget, there’s not much you can’t do.
This section explains your marketing strategy and how you plan on executing it. You can cover topics such as:
- Why customers will come to you
- How you plan on developing a customer loyalty program
- Where you plan to advertise, such as social media ads, traditional print, television, YouTube videos, etc.
You can also use this section of your business plan to reiterate your strengths and what differentiates you from the competition.
Compile Your Business Financials
The last section of the perfect business plan includes key financial statements, growth goals, and marketing and sales requirements. In it, you can expound on your current financial status and your financial projections for future revenue.
If you’re just starting out, your business may not have any financial statements yet, but you’ll still need to prepare a proposed budget. If your company has been around for a while and you’re seeking investors, some of the financials you should include are:
- Income statements
- Profit and Loss statements
- Balance sheets
- Cash flow statements
Other figures that can be included are:
- How much of your revenue you retain as your net income
- The ratio of liquidity to debt repayment ability
- How often you collect on your invoices each year
The best self-employed advice you can get is to include financial projections as part of your solid business plan. These numbers tell potential investors if your business is profitable enough to repay a loan – and if they can expect to see a return on their investments.
In this section, give at least three years’ worth of sales and expense reports, as well as projected profits going forward should you secure the financing you’re seeking. It’s imperative that your figures are accurate, so don’t provide any projections before going over your past statements with a fine-toothed comb.
The Bottom Line
Securing financing for your startup or long-running company is simplified with a knock-out business plan. Higher sales and better marketing aren’t the only ways to put more cash in your pocket.