How to write a business plan?

What is a business plan?

So let’s start with the basics, what is a business plan anyway? The broadest definition is that a business plan is a strategic document that outlines a company’s goals, strategies for achieving them, and the time frame for their achievement.

Basically, it is a tool that enables companies to think strategically about their business, it’s vision and mission and outline the actions required to grow and develop further. It equips you with the necessary information about your competitive environment, your advantages and disadvantages compared to the competition, and translates your goals into actionable insights.

Why do you need a business plan?

As Antoine de Saint-Exupery famously said “A goal without a plan is just a wish.” The same goes for your business. A business plan is crucial in developing your business even though there are companies that do not believe in business planning or think that business plans are mostly for large companies that have the resources to draft such complex documents.

So, why should a traditional business such as a brick and mortar store, or a small business with a few or no employees need a business plan since they already know what they want? The answer is straightforward - to know where they are going and how they are going to get there.

A business plan is necessary for enterprises regardless of size:

For startups and small businesses business plans are vital for securing funding from investors, banks or venture capitalists, as well as planning future development
For established companies business plans aid in strategic planning, guiding long-term operations and achieving business goals, as well as raising awareness about the company’s plans in the future

How to make a business plan?

We would first like to demystify some of the most common misconceptions of business plans and say that it does not need to be a fancy document filled with amazing charts and graphs, but that it should be quite simple and easy to read. It is also not necessary to include all technical product specifications and details but only the core features necessary for the understanding of the business model and strategy.

You should also include the necessary stakeholders in the creation of the business plan, i.e. the technical team, business development representatives, sales team, management, marketing etc. This is not needed on a constant basis but they should each

Although there are some elements that are included in every traditional business plan, you can always adjust the specified format to your needs. Meaning you can shorten it to include additional elements should you deem it necessary, but always bearing in mind that the most important thing in writing a business plan is to adapt it to it’s intended readers.

Key elements of a business plan?

For example, if you are writing a business plan for venture capital investors, they will certainly need to see some financial projections based on sound market data. Outside investors will also rarely know your target market as well as you do, and it is vital that they learn about the market potential of your solution. That is why you should take the time and really elaborate on the purpose of your product and how it meets the needs of your target customers instead of focusing on some other aspect.

On the other hand, if you are simply making a document for your company’s internal use, where the target audience already knows the market profoundly, feel free to use a more complex vocabulary and delve deeper into the core components of your product development plans since that is what the internal stakeholders of your company will need to know.

In any case, the key elements of a business plan are:

Executive summary: This is the part that summarizes the most important information from the entire business plan. It introduces the company, it’s organization and key personnel, as well as describes the business, market and the strategy to reach and retain the customers. Finally, the summary usually provides a visual overview of the financial plans and projections in a chart form. Draft this part last and make sure to be concise. We know you want to put as much information in it as possible, but include only the information most relevant to the intended reader.
Organizational structure: This section outlines the company's organizational structure, highlights key personnel and roles as well as the roles and responsibilities of executives, the management team and departmental structures. If you are planning to grow your team and hire additional staff, this part will describe which positions you will hire and the reasoning behind it. Make sure to be clear about this and also have a fixed, but realistic budget in mind and include contingencies. A common mistake is planning the appointment of additional staff without the approved budget from the management team. This can lead to setbacks when implementing the business plan and inefficiencies due to mismatched team skills.
Products and services: In many ways this is the key part of your business plan. It describes the products/services that your company offers or plans to introduce to the market. It is vital that you present the problems that your product or service solves on the market. Be sure to include details on pricing, product lifespan, and unique consumer benefits in the description as well as production and manufacturing processes, relevant patents, proprietary technology, and research and development (R&D) information. This can all serve to provide a better understanding of your product or service to the reader.
Market analysis: Explain the current state of the industry and the competition. Detail where the company fits in the market, the types of customers it plans to target, and how it plans to capture market share from competitors. It is very rare that your product or service does not have competitors so you should not shy away from mentioning your competitors. The key point, especially when drafting the business plan for potential investors, is to present why your company has a chance to beat the competition and get a significant market share and what this would mean for your company.
SWOT analysis: Even though it is usually included in market analysis or the product and services description, I find it most useful to include it after all chapters have been concluded. In this way you can truly provide an overview of your strengths, weaknesses, opportunities and threats. Bear in mind that the former two (the SW part) are internal and fall within the zone of your influence, while the latter two (the OT part) are external and represent forces which you cannot influence but to which you will probably have to react. An often mistake that we see is clients not identifying the external factors that can have a significant impact on their business, both as an opportunity as well as a threat.
Marketing strategy: The marketing strategy serves to explain how exactly you will reach the part of the market you have projected in the market analysis and capitalise on your strengths and opportunities. You should outline the company's plans to attract and retain customers, including projected advertising and marketing campaigns. Describe the distribution channels that will be used to deliver products or services to consumers. It is important to include projected customer acquisition costs as well customer lifetime value in this section to support the projections and plans you will make in the next section.
Financial plans and projections: For many businesses this is the most complex part since it includes financial planning and modelling. While this is true for established businesses and larger organisations, which should include financial statements, balance sheets, and other relevant financial information, it is not necessarily so for startups and new or less complex businesses. These kinds of organizations should provide financial targets and estimates for the first few years as well as include any funding requests. Do not be afraid to “dumb it down” and start with the basics - revenues and expenses and then expand each category. Make sure to be realistic with projections regarding the future product development timelines and costs.

Tips and tricks

Write your business plan with your intended reader in mind - always think about your target audience and include the information relevant to them, especially in the executive summary
Include the relevant stakeholders early and often - We can not stress enough how important inclusion and dialog is in business planning and how many problems it can prevent
Do not be afraid to deviate from the proposed layout in order to include important information
Circumstances and markets change - update your business plan with new information frequently (at least once every six months)
Be realistic and honest - wishful thinking when setting deadlines and financial goals will get you nowhere and will only put pressure on your team to achieve the unrealistic goals you set in the plan