You have decided to pack your bags and travel for a few months, so you have to plan carefully. You must specify the time and financial constraints, and length of stay in each area. Likewise, there must be careful planning, a written document announcing your plans, for any businesses you want to start. It doesn’t matter if you want to sell flowers or establish large factories. When you write your business plan as an entrepreneur, you create a chance for yourself. An opportunity to tell your story to yourself and your investors. As an entrepreneur, you tell everyone what your goal is in starting this business and which steps you need to take to achieve that goal. In fact, a business plan is a three-to-five-year plan that shows the path a business must take to achieve its annual goals.
Table of Contents
What is a business plan?
There are several reasons to write a business plan. Writing a business plan isn’t just for entrepreneurs willing to guarantee the budgets for starting or developing their businesses. A business plan can help you:
• make your business strategy clear.
• specify potential barriers.
• make the right decisions about what you need to do to get the most out of your resources.
• evaluate the sustainability of your developmental plans or ideas before starting a business.
At the beginning of the journey, you may have heard a lot of words like, business plan, business model, business model canvas, and you feel confused. But your solution is to be aware of these issues. By reading the articles on these topics, you will become acquainted with each of them and their differences, their applications and disadvantages. Therefore, you can choose the best option and develop your business by studying. Retiba’s suggestion to you is to do your research in this area thoroughly, and get to know the basics well. That’s why we suggest you read an article on business model analysis.
No matter what your reason is for writing a business plan, you need to know that it is essential to write it. It is your task to perceive it as an assignment that must be done. When you start a business, your daily to-do list is a long list of tasks to do, such as taking pictures of products, producing and campaigning, and opening a social media account.
Not all businesses are initiated with a formal business plan, but many business founders are aware of the value of spending time looking back and researching about their idea and the market they are about to enter. The founders of a business understand the importance of an operational plan. A business plan is a document about a business, its products and services and how to make money in this business now (or in the future), management and recruitment manner, how to finance, an operational model and many other details which are the prerequisites for business success.
Why to write a business plan?
Investors pay attention to business plans to evaluate the feasibility of the business before it is funded and to they achieve the market evaluation. That’s why business plans are usually associated with taking loans and raising capital, but, even if you don’t need funding, there are other interesting reasons you should pay attention to while writing a business plan.
Writing a business plan is a valuable way to clarify your ideas and can help you understand the scope of your business as well as the amount of time, money and resources you need to get started.
Evaluation of ideas
If you have a few different ideas in mind, having a business plan for each of these ideas will help you spend your time and energy on the ideas that have the best chance of success.
To write a business plan, you need to do research about your competitors and ideal customers – this information will help you make strategic decisions.
Attract human resources
Your business plan is one of the easiest ways to communicate your vision to new and empowered people and can gain their trust in your business, especially if you are in the early stages of your growth.
If you decide to approach other companies for collaboration, they will find it much easier to see if your business will be a good choice for them through a close review of your vision, audience, and growth strategy – especially if they are a head of you on the growth path.
Business plans determine your position in relation to other competitors and determine your strengths and weaknesses in the field of competition. By focusing on these issues, you can gain a competitive advantage over your competitors or create a competitive advantage that competitors lack.
If you are looking for a structured way to organize your thoughts and ideas and you want to give those ideas to people who can have a great impact on your success, a business plan will be a brilliant starting point for you. Here are some of the entrepreneurs who gave the following answers when asked how useful it was to write a business plan for their businesses:
‘We’ve experienced marketing before, but we did not have much experience in other issues required to start an e-commerce business, such as business operations, finance, manufacturing, and technology,’ says Jordan Barnett of the Kapow Meggings Institute. ‘Writing a business plan enabled us to identify the unknowns and, in the simplest manner, it helped us enhance our skills.
What is the difference between a business strategy, a business model and a business plan?
How to write a business plan
Here are some key points that can be useful for writing your business plan.
Identify your audience
If you know who is going to read your plan – even if you have written it for yourself to make your ideas clear – then you can adjust the language and level of details of your business plan based on these potential readers. This will help you make sure that the most relevant information is considered and that you will know when to remove those parts that are not very effective.
Having a specific goal
If your goal is to get your business funded in exchange for working on a written plan, you need to work harder and devise a complete plan.
Invest in the time you spend on researching
There are parts of your business plan that will be shaped primarily by your ideas and vision, but some of the most basic information you need to consider in this plan requires independent research. For example, you need to spend time knowing who you are going to sell your product to, where your product is in demand, and who else is selling products or services similar to yours.
Write your business plan briefly and practically
No matter whom you write your business plan for, your business plan should be brief and legible – usually no more than 15 to 20 pages. If you have other documents that you think are valuable to your audience and your goals, add these documents as attachments to your business plan.
Maintain a consistent tone, style and language
The best way is that just one person write the business plan or spend more time editing your business plan before it is delivered.
Ten elements that your business plan must have:
Start writing your business plan with a structured title and key details about what you bring to each section of the plan. This is the first and best step you can take. Since these elements are the most essential parts of the business plan, and considering them is the most important step in the process of writing a business plan, we have compiled a list. You can use the items of this list in your business plan and overcome the fear of facing a blank page.
Here is the essential elements of a business plan:
1. Executive summary
2. Brief business definition
3. Market analysis
4. SWOT analysis
5. Competition analysis
6. Products and services definition
7. Customer segmentation
8. Marketing planning
9. Logistics planning and human resources
10. Financial planning
You can also start with a business plan template and use this template to get acquainted with the structure of your plan. Now that you have the right template, it’s time to complete it. We will investigate each section of this template so that you can make your plan step by step.
A good executive summary is one of the most significant parts of your business plan – it’s the last part to be written, but after the business plan is written, it’s at the top of the list. The purpose of the executive summary is to summarize everything that happens and provide a quick overview of the business for those, such as investors, who need it quickly. This will make them interested in reading a startup business plan. The executive summary is just a summary of the important content and therefore emphasizes the key points that you should reveal while writing your plan.
If you’re writing a business plan just for the sake of your planning goals, you should bear in mind that the executive summary must not be more than a page. This limited space can certainly make the compression of all this important information a bit troublesome, but it’s not impossible. Here’s what your business plan summary should include:
• Business concept: What does your business do?
• Business objectives and outlook: What does your business want to do?
• Product history and its distinction: What do you sell and why is it distinguished from others?
• Target market: What is your plan to attract customers?
• Current financial situation: How is your income now?
• Predicted financial situation: How do you predict income?
• Financial condition: How much money do you need?
• Team: Who is involved in this business?
2. Brief Business Definition
This part of your business plan should answer two basic questions: Who are you and what have you decided to do? Answering these questions will be a preliminary to answering others:
• Why have you entered this business?
• Why you are different?
• Which decisions have you made for yourself?
• Why are you a good investment choice?
Clarifying these details is a great idea, even if you’re the only one reading the details. This is a good opportunity to put some of the more tangible aspects of your business on paper, such as principles, ideas, and other important factors related to your business.
Here are some components to consider:
• The structure of your business (are you an individual business unit or a joint-stock company or a non-joint stock company or a mixed or other type?)
• The nature of your business (what are you selling?)
• Your industry or market
• Vision, mission and values of your business
• Business goals (both short-term and long-term)
• Your team, including key players and their salaries
Some of these points are very objective and specific, but the definition of some of these points needs further consideration, especially when it comes to the vision, mission, and values of your business. This is where you need to investigate deep and answer the following questions:
• Why is your business there?
• What do you hope to achieve?
• What do you symbolize?
Think about all the people you are responsible for defining your values, including owners, employees, suppliers, customers, and investors. When you make a list, your core values should gradually emerge. If you know your values, you can write your mission statement. Your mission statement should convincingly explain why your business exists and should not be longer than one sentence.
For example, the mission statement of an Internet-based business might be ‘doing better e-commerce of selling computer devices in Iran’. The mission statement is what lies behind everything we do, and it is so clear that it needs no further explanation.
Now write your vision statement or business statement skillfully. Unlike your mission statement, your vision statement can be longer than one sentence; however, try to include a maximum of three sentences. The best vision statements are the shortest. Ultimately, it should include short-term and long-term goals. Short-term goals usually have to be achieved within a year, while one to five years is a good time to achieve long-term goals.
3. Market analysis
It is no exaggeration to say that your market can contribute to your success or failure. Choose the right market for your products. A market full of customers who you know well and need your product. Only then, you will have a chance to succeed. If you choose the wrong market or the right market at the wrong time, then you will realize that you have to struggle for every sale and you will face a lot of problems. Market analysis is a key part of your business plan, whether your goal is preparing the business plan for other people to read or not.
The business plan should include:
• After estimating the market for your products, how big do you think your market is?
• An analysis of your business position in the market
• A competitive vision of your business in the target market
How big is your potential market?
The potential market is based on the assumption that how many people can potentially buy your product. While it’s exciting to look at some of the top sales figures, you need to use as much independent data as possible to determine the credibility of your market. Since this process can be a daunting process, here are some general tips to help you get started:
• Consider your ideal customer profile. If consumers are from the third millennium or younger generations, you must first find national and government data and statistics about the size of this group. You should consider predicted changes in the number of people in your target age group over the next few years.
• Conduct some research on the industry-related trends in your business market: If your products are for the retired, try to find data that shows how many people will retire in the next five years. Also find any information about the consumption patterns of this group of people. If you are selling fitness equipment, you can check the club membership process, the general health and fitness of your target audience or the entire population of the province or city. Finally, get the information that, based on predictions, whether your business market is prone to growth or stagnation over the next few years.
• Make educated guesses: You can never have access to comprehensive and complete information about the size of the entire market. Your goal is to make your estimates based on the most available information and try to have the most accurate guesses.
Some of the resources that can be used for market data include census governmental agencies, industry associations, academic research, and news sources that cover your industry and business market.
4. SWOT analysis
SWOT Analysis examines the strengths, weaknesses, opportunities, and threats facing businesses. What are the best issues related your business? In what areas are you not very good? Which market or industrial swaps can you take advantage of and turn them into opportunities? Are there any external factors that threaten your success? By doing this analysis, you will immediately notice the positive and negative internal and external factors affecting your business.
5. Competition analysis
While competing, there are three general factors you can use to differentiate your business from other businesses:
• Cost Leadership: You need to have the capacity to maximize profits by offering lower prices than most of your competitors so that you can maximize profits.
• Distinction: Your product or service will offer something different from current cost leaders in your industry and it will make you shine because you are unique.
• Segmentation: You can focus on a very specific market, or so-called target market segment, and attract a smaller segment of customers before entering a larger market.
To understand which of the above factors is best for you, you need to know your business as well as your competitive perspectives. You are always in competition with the market, even with an innovative product, so a brief review of the competition in the business plan is very important. If you’re entering a stable market, make a list of a few businesses that you think are your direct competitors and figure out how you can differentiate your products and businesses from theirs.
For example, if you are selling jewelry, your competitive distinction, despite the large number of fierce competitors, can be donating a percentage of profits to a charitable foundation. If you are entering a market where you can’t easily identify your direct competitors, go for your indirect competitors. For example, if you are selling new and innovative pieces of kitchen utensils, you can easily say that because your product is new, then you are not competitive. Find out which methods your potential customers are currently using to solve the problem that can be addressed by using your product.
6. products and services Definition
If your products or services aren’t the most important part of your business, they’re one of the most important parts. Consider a part that provides interested readers with a summary of key details about these products and services. If you want to sell a large number of products, you can mention more general information about each of your production lines. If you only want to sell a limited number of products, provide more detailed information about each of these products.
7. Customer segmentation
Analyzing your ideal customers, also known as your target market, will definitely be the backbone of your marketing plan. You need to think about your ideal customers when making your strategic decisions. That’s why it’s important to keep a close eye on who your customers are in order to understand and incorporate them into your business plan. For an overview of your ideal customers, it’s a good idea to check out some of the general and specific demographic specifications. Customer segmentation usually includes:
• Where do your customers live?
• What is their age range?
• What is their level of education?
• What are some of their common behavioral patterns?
• How do they spend their free time?
• Which technologies do they normally use?
• How much is their income?
These pieces of information can be different depending on what you are selling. For example, a student’s interests, buying habits, and sensitivity to the price of a product are very different from those of a 50-year-old wealthy executive manager. Your business plan and decisions will be very different depending on who your ideal customer is.
8. Marketing planning
Identifying your ideal customers immediately makes it possible to write a marketing plan. Your plan should include a summary of your current decisions and future strategies. The marketing plan should focus on how well your business ideas, products, and services suit your ideal customers. For example, if you decide to invest heavily in advertising on Instagram, it’s a good idea to find out if Instagram is an important platform for your audience. Most marketing plans include information on four key topics. How accurately you need to explain each of these issues depends on the type of business and the audience of your business plan.
• Price: How much does it cost to buy your products / services and why have you made such a decision?
• Products / Services: What do you intend to sell and how do you differentiate this product / service from other products on the market?
• Promotion: How do you deliver your products to your ideal customers and introduce them to the market?
• Location: Where will you sell your products?
For most of these topics, you can use the comprehensive article entitled Commercialization on Retiba website.
9. Logistics planning and human resources
This part of the business plan is an essential part, and it usually includes the following issues:.
• Suppliers: Where should you get the raw materials you need to produce or where are your products manufactured?
• Production: Manufacturing, manufacturing, wholesale or drop-shipping of the product, which one do you do? How long does it take your products to be produced and delivered to you? How do you manage the busy business season or the unexpected increase in demand?
• Bases: Where will you and your teammates work? Are you planning to have a physical retail space? If so, where?
• Equipment: What tools and technologies do you need to start and launch your own business? Equipment includes everything from a computer to light bulbs and everything else you need.
• Transportation and delivery to the customer: Do you manage all the duties of delivering the goods to the customers’ doorstep or will you use a third party as your partner in the field of delivering the goods to the customers?
• Inventory: How many goods do you have in stock and where are you going to store them?
• Human resources: What kind of workforce and at what cost will you use to improve your business? What are their required specialties? What is the method of their recruitment? Are they employed full-time or part-time? Is it a project-based employment? Do you need to consider issues such as your staff insurance?
10. Financial Planning
No matter how great your idea is, the important issue is whether your business, regardless of the effort, time and money you spend, can survive on the basis of financial feasibility or has reached the end of its life cycle. The level of details you need to consider in your financial plan depends on your audience and goals, but you usually need to consider three important perspectives in your financial planning: income statement, balance sheet, and cash flow statement.
Your income statement is designed so that you or the reader of your business plan can track your income and expenses over a period of time. With the help of these two types of information, investors can see the most important profitability or profit and loss trends that your business has experienced over a period of time.
Your balance sheet shows how much capital you have in your business. On the one hand, you can list all your business assets, i.e. what you own. On the other hand, you can list all your debts, that is, what you have borrowed.
Cash flow statement
The cash flow statement is similar to your income statement, with one important difference: The cash flow statement will be reviewed after the income has been collected and the expenses have been paid. When the cash you earn is more than the cash you spend, your cash flow will be positive. When a scenario is contrary to the aforementioned scenario, your cash flow will be negative.
Your cash flow statement will help you understand when cash is scarce and when you are likely to have a surplus. In what cases will you need a supplementary plan to finance your business? Cash flow statement will be especially useful in identifying problems or modifying and improving a negative cash flow.
The final word
An effective business plan will help you identify the next steps in your business and make the necessary predictions about the next stages in your business growth. Even if you never intend to attract investors, a business plan will contribute to identifying the gaps in your plan before they become problematic. Whether you need a business plan for a new business or write a business plan for your next growth and development, you can use the comprehensive guide and information provided in this article to write a proper business plan. In this article, you will be fully acquainted with the definition of business strategy and its difference with the business plan and business model.