How to Write a Business Plan
A business plan can help many new businesses get off the ground and overcome challenges. A successful business plan defines a company’s vision, sets goals, includes a unique selling proposition, determines its market, customers, and products, and develops a marketing strategy.
Despite having brilliant startup ideas, most businesses are not successful: About half of them fail during the first 5 years of existence. The reasons vary, ranging from poor customer service to poor management to inadequate product. Many of those issues, however, are preventable with a proper business plan.
A business plan is crucial for your success, as it helps you set concrete achievable goals.
Even if you don’t have all the answers, it’s okay because one of the main purposes of writing a business plan is to become aware of the things you haven’t thought about yet or simply don’t know. Don’t write your business plan because you know everything – write it to see what you need to figure out, and do it as soon as possible to organize yourself and your business.
The top five reasons startups fail are:
- No market need (42%)
- Ran out of cash (29%)
- Don’t have the right team (23%)
- Are out competed (19%)
- Pricing/cost issues (18%)
Businesses can overcome many of these challenges with a business plan.
7 Steps to Writing a Business Plan
- Define your vision
- Set goals and objectives
- Include a unique selling proposition
- Know your market
- Know your customer
- Know your product
- Develop a marketing strategy
1. Define Your Vision
This is a brief overview of your business – future or existing. It should include a business name, brief description of its structure, location, and what the business will actually do. It should also include your mission. Why do you do what you do?
Don’t dismiss the vision as something only suitable for pitch decks aimed at angel investors and VCs. The mission is important because it’s a driving force behind your business. It’s what all your business goals are leading toward.
Here you should also draft a chart of accountability: who is responsible for marketing and sales, operations, and finances.
2. Set Goals and Objectives
No business plan, no investment pitch, and no startup presentation can be complete without clearly defined goals. Both you and your investors need to know concrete stuff:
- Income that needs to be generated
- Profit margins
- Estimated sales (the number of products you will sell in 6 months, 1 year, etc.)
- Estimated number of customers (do your research on the target audience, age groups, their habits)
- Number of outlets
- Delivery methods
- Promotion channels
- Impact (number of customers you’ll have helped or how wide you will have spread your message)
- Product and company development strategy (to what extent you’ll have advanced your product or to what extent you’ll have built your company)
All these should be grouped into short-term goals to achieve within 12 months, or that what you should be working on right now; mid-term to achieve in 2 to 3 years, or where are you moving; and long-term goals, where you can think really big.
Don’t forget to set SMART goals: Specific, Measurable, Action-oriented, Realistic, and Time-defined.
You must know how many products you need to produce and sell and at what profit margin so as to get your desired revenue within a year. You must know what coverage and system of delivery will ensure those sales, and so on.
3. Include a Unique Selling Proposition
A selling proposition is the reason your business exists and the focus of the marketing strategy you will develop.
- Start by answering these questions:
- What are the problems your business will help solve?
- What results does your company create for customers?
- How does your company create those results?
- Whom does your company serve?
- Why should your customers choose you over your competition?
- How is your product different?
This can be anything that sets you apart from similar things on the market and has the potential to attract customers. Examples could include personalized customer service, extended warranty, or other extras, but you must have it and you must highlight it when you market your product.
Snapchat made the ephemeral nature of its content a selling point, and it grew faster than its competitors (until Instagram and Facebook cloned Snapchat’s Stories feature).
Google+ didn’t have anything unique to offer, so this social network never took off. Basically, its selling point was “It’s like Facebook, only better.” Their product was good but it didn’t have anything unique about it. Not a good plan.
Your business must offer a unique selling proposition.
4. Know Your Market
There are markets where many similar businesses provide identical services and still survive. I mean, how many beauty salons, petrol stations or paper help companies exist out there? That is because some marketplaces are big. Yet for each product, the market has its own unique features, opportunities, and caveats, so you should know it like the back of your hand.
First, research the demand. It should be more than supply, full stop. That should be established before you invest in your business. This is crucial because 42% of start-ups fail because they didn’t solve a market need.
Also, research the following:
- Size of the target market
- How many competitors there are
- Services competitors offer
- Competitor profit margins
- Current trends of the industry
Only when you have all the information, you will be able to benchmark, extrapolate, and manipulate those realities in your favor.
5. Know Your Customer
Model an ideal customer that your business intends to cater to, and know what they want. Don’t fall for the “make a great product and they’ll come” fallacy. Today, customers are spoiled for choice, so you have to fine-tune your targeting to carve a niche for yourself.
Research your potential customers with two focuses:
- Demographics (age, income, location, etc.): Find out where can you find your target group of customers (either online or offline). If you haven’t pinpointed where you will find them, you will probably have big problems marketing your product to them.
- Psychographics (interests, desires, pains, fears): Put yourself in their shoes, and think about what would make them choose you. When you’ve identified their motivations, you can focus on the important features that influence customer decisions and ignore the rest — you have only so much of your resources, time included, so don’t waste them.
When you detail a portrait of your target customer, you should be confident that such a group actually exists and that you know where to find them.
6. Know Your Product
Whether your product is a physical object, a digital creation, or a service, you should determine three different facets of it:
- Your actual product: What you create
- Result that product brings: What you really sell
- Impact of the product: How the life of your clients is different because of this result
For example, your actual product is a shampoo — a perfumed goo in a jar. What your customer wants and what you sell is a clean scalp and shiny hair. Yet the impact is that your client feels better about himself or herself and feels more attractive and confident.
Another important point: You may sell dozens of products, but for your business plan, it’s better to choose one. Zeroing in on one product and centering your marketing message on it helps you to focus and to achieve better results. For example, McDonald’s sells 145 items but structures marketing around its signature Big Mac.
7. Develop a Marketing Strategy
A marketing strategy is the map of steps you will take to promote your product, including:
- How your product will look
- What your product will cost
- How you will distribute your product
- The ways you can promote your product
- Which media you will use for your product
Plan for every eventuality and be very specific, so you can easily navigate through each point of the sales funnel:
- Visibility: How customers will learn about you
- Lead generation: How you will establish contact with people who have discovered your brand
- Conversion strategy: How you will turn leads into paying customers
A nebulous marketing strategy or a gaping lack of it is the primary reason why investors turn down start-ups. Big ideas peppered with Silicon Valley lingo such as “traction” and “pivoting” but without concrete steps do not impress them. Your firm belief that your product is the best thing since sliced bread is only any good when coupled with a sound marketing strategy. Otherwise, it’s empty seasoning without any meat.
Write a Successful Business Plan
Most investors and entrepreneurs agree on one thing: You shouldn’t write a business plan unless you know why and what you are trying to achieve with it. Your business plan provides direction and focus, but you should take the first step. Unless you do the actual work, even the most brilliant and thought-through business plan will not bring customers to you.
Never give up, even if while drafting your business plan you’ve discovered that your idea won’t work. You have learned something. You now know what is important and where to focus. Transform your initial idea into something more viable, or go and find another one.