How to write a business plan? Step-by-step writing instructions
How to write a business plan? This question is often asked by most people who are thinking of starting their own business, starting a startup, or finding an investor. Everyone understands that the answer to the question “how to draw up a business plan competently and correctly?” is an integral part of the successful activities of the company and enterprise. A completed business plan should present a complete picture of your business, from analysis to development prospects.
Business plan is a document that answers all questions related to your business and gives a comprehensive picture of the company's performance in the long and short term and can be edited along with changes in current plans and strategies.
Such outstanding personalities in the field of management and marketing as Brian Tracy, Stephen Covey, John Maxwell and many others believe that most people come up with dozens of ideas every day. However, not every idea develops into a successful business idea. In order for a business idea to become feasible, it is necessary to answer the question “how to competently draw up a business plan?” How is a business plan written? It is possible to draw up a business plan correctly if you study each section in detail:
- Introduction or summary of the project;
- Description of goods and services;
- Market analysis and marketing strategy;
- Production plan;
- Organizational plan;
- Financial plan and budgeting;
- Expected results, risk assessment and development prospects.
How to create a business plan yourself and what is needed for this?
Before drawing up a business plan, you must first assess the current situation and work with the information. One of the recognized technologies for preliminary analysis before drawing up a business plan, especially for small businesses, is SWOT analysis, which structures all the information.
What is SWOT analysis and how is it used in a business plan? SWOT analysis is needed in order to assess the company’s internal and external resources, creating an objective picture for the business plan and consists of the following components:
- Strengths– the strengths of a product or service, which, for example, may include low cost of production, high professionalism of employees, an innovative component of the product, attractive packaging of the product or a high level of service provision to the company, etc.
- Weakness– weaknesses, these include factors such as the lack of own retail premises, low brand awareness among potential buyers, etc.
- Opportunities– business opportunities involve factors such as the introduction of new materials and technologies for the production of the company’s product, obtaining additional financing for the project, etc.
- Threats– threats, for business these can be criteria such as the economic and political situation in a country or region, characteristics of the mentality of consumers, the level of technology development in the territory of doing business, etc.
How to make a business plan more informative?
Before filling out the sections in detail, collect as much additional information as possible on the topic of your future project. You need to do an industry analysis, study ways to promote your products/services, and understand which companies are your competitors in the market. Also estimate the size of tax deductions for your company and the resources of the future project, for example, monetary, intellectual, temporary, personnel, and so on.
All this will help you understand how to write a business plan effectively and not search for material for its sections along the way. You will save a significant amount of time and get good results.
How to write a business plan yourself, step-by-step instructions
1. Introductory part of the project summary
In the water part of the project summary, you need to make a positive impression on investors and give a general description of the business plan as a whole, so the following points should be addressed in this section:
- direction of the company's activities;
- target markets and the company’s place in them;
- profitability and return on investment;
- personnel and responsible persons;
- planned quantitative and qualitative indicators as a result of work by period.
2. Description of goods and services
In this section, you need to describe what products and services you plan to sell and understand the profile of your client or target audience. To do this, you can take photos and videos of your line of products and services. Conduct a market analysis to determine the availability of similar products or services in your target market and describe the pricing model. Try to answer the question “can you compete with existing companies in your segment?” After such an analysis, you will have a clear idea of who you are producing your products for, as well as understand the features of your product.
3. Market analysis and marketing strategy
In order to understand in what conditions your company will operate and which competitors can be identified in your environment, you need to prescribe your marketing strategy as accurately as possible. The strategy includes an analysis of the market environment, competitors and your strategy for promoting a product in current conditions to the end consumer. Studying promotion methods and tools will allow you to competently draw up a business plan and promote your products on the market. After all this, be sure to draw up a rough sales plan by quarter to understand how much revenue and net profit your business can potentially generate.
4. Production plan
You can skip this section if your company is going to provide services or sell goods, that is, engage in trade. If your company plans to engage in production, then you need to understand how much production capacity you will need to implement production, and in what sequence the equipment will be installed and prepared for operation. Assess the expected dynamics of increasing production over time and the logistics of the necessary materials and raw materials. Draw up a production process diagram to see the overall picture of your activities.
5. Organizational plan
In this section, you need to reflect your actions to organize your business, broken down into specific steps with deadlines for each stage, the person responsible and the expected results.
6. Financial plan or budgeting
In this part of the business plan, you create a detailed estimate and plan the company's budget. Typically, a company has one-time and recurring costs. One-time costs include the purchase of equipment or premises, advertising signage, and so on. Periodic costs include consumables, raw materials, rent, utilities, wages, and purchase of goods.
7. Expected results, risk assessment and development prospects.
You can consider several options for the development of events regarding your business, assess the risks and development prospects. Based on the expected financial indicators, analyze the business plan and try to evaluate your project. If you were an investor and were offered to invest money in such a venture based on this business plan, would you agree?
What does an investor pay attention to when choosing a project?
First, financial performance is important to commercial investors. For small business projects, this is the payback period, return on investment, return on sales, and break-even level. While for large business projects it is also necessary to add indicators such as NPV (net present value)*, IRR (internal rate of return)**, PI (return on investment index)***, risk level, profitability and asset turnover. For government projects, it is important to talk about the social significance of the business, the benefits of products, the impact on the development of target industries and regions, and so on.
Secondly, an investment plan that considers the following issues is important for the investor:
- how much money is needed to implement the project?
- how much money does the author of the project invest?
- How much money does the investor invest?
- Do you need a bank loan?
Thirdly, the investor pays attention to the flow of money under the project (Cash Flow) or ODDS - cash flow statement, which is the final summary report of the business plan and shows the movement of all cash flows of the company for all types of activities for each period. This is a document that shows whether there are cash gaps, how much money each of the project participants receives, how the company’s operating, investment and financial activities are reflected in the company’s finances.
Of course, the main document that an investor pays attention to is the business plan of the project, so it is necessary to approach its preparation competently and professionally. Business Platform specialists will help you prepare a high-quality business plan, as well as organize a meeting with a potential investor. You can get acquainted with the services in more detail.
* NPV (Net Present Value of the project, rub.) - shows the amount of discounted cash that the investor expects to receive from the project, after the income pays off its initial investment costs and periodic expenses associated with the implementation of the project.
** PI (Return on Investment Index, %) - an indicator of investment efficiency, which is the ratio of discounted income to the amount of investment capital.
*** IRR (Internal rate of return, %) is the rate of return (barrier rate, discount rate) at which the net present value of the project is zero, or it is the discount rate at which the discounted income from the project is equal to investment costs. The internal rate of return determines the maximum acceptable discount rate at which funds can be invested without any losses for the owner.