On this page, you will learn how to write a good business plan, what business plan is all about, the benefits of a business plan, etc. In needs of a business plan format? Read on to learn more…
What is a Business Plan?
A Business Plan is a play book used by entrepreneurs for the creation and management of their businesses with rapt attention to:
– Marketing plan describing match of products and strategy to current and future Markets.
– Operational plans.
– Financial plan assessing all revenues, costs and financial requirement and sources.
This serves as an Owner’s manual for the business. This should be less than 20 pages because Business Angels or Venture Capitalist might not have the time to read through the pages.
BENEFITS OF WRITING A BUSINESS PLAN
- It helps in detailing how the company will materialize from the idea to maturity.
- It explains the size of the market and the competitors in that environment.
- It helps to have a feasibility study of a new business in a critical way.
- It identifies new opportunities so that an entrepreneur would not make any mistakes.
- It develops production, administrative and marketing plans.
- It develops production, administrative and marketing plans.
- It analyzes budgets and cash flow projections.
- It helps to make profitability forecast for the investor(s)
- It helps to know the amount of the start-up capital needed.
- It attracts management team and employee(s)
TIPS IN WRITING A BUSINESS PLAN
A business plan has three sections:
Section One is to describe the management team and marketing mix of the business.
Section two for financial (cash flow projections).
Section three for additional information.
Although business plans and presentations tend to cover the same topics, there’s no standard format.
The only idea is to check the format for the type of business you want to write on. Executive Summary should be written last after the Business Plan has been written and it should be on the first page.
- Section One
This should be clear enough, concise and it must not have unwanted information i.e. straight to the point. Bullets, headlines, and graphs should be used to make it readable.
- Section Two
This describes the outcome of the business plans numerically (in numbers) and this should be based on actual facts.
- Section three
It contains additional information to back up the first two sections.
NB: It is advisable for the owner of the business plan to participate in the write-up process even when he/she is hiring someone to do it.
THINGS TO AVOID WHEN WRITING YOUR BUSINESS PLAN
- Unconfirmed assumptions
The assumption should be one that can be explained. When question(s) pops out from an investor(s).
- Invalid financial statistics
This will bring doubt to the business abilities.
- Submitting uneven copy
This will depict how unserious the business owner and management team are.
- Lack of specific plans
Important details should be included on the general statements of the management process.
- Too much “building of castle”
Too many unrealistic ideas will make the business plan to get turn down.
CONTENTS OF A BUSINESS PLAN
The Cover sheet must have Business Name, Address, Phone number and Email address.
Section One: The Business (Management and Marketing Mix).
Section Two: Financial (Cash flow) projections.
Section Three: Additional Information(documents).
1. EXECUTIVE STATEMENT
– The mission statement.
– History of the business.
– Names of founders and function they carried out.
– Business location.
– Facilities descriptions.
– Products manufactured/Services rendered.
– Banking and investment relationships.
– Summary of the company growth including financial highlights.
– Summary of Management’s future plans.
2. COMPANY’S DESCRIPTION
– What type of business is it?
– What is the business status; start-up, expansion or take over.
– What is the form of business- sole proprietorship, partnership, corporation or limited liability company.
– What are your products?
– Who will be your customers?
This describes the kind of product you are offering. This will include the product details, products benefits.
-What products will you sell?
-What are the attribute and advantage of your product?
-What position do you want to have?
-What makes your project stand out?
4. MARKET ANALYSIS
This helps on the basis of the marketing plan and to justify forecast sales.
-Who patronizes your products?
-What is the size of your market?
-What is the industry outlook?
5.ORGANIZATION AND MANAGEMENT
Managerial problems are the leading cause of business failures. If your
business is going to outsource for employees list their professional
-What is the business management experience of the managerial team?
-What are the functional areas?
-What will salaries be?
-What are the available managements resources outside the company?
6. MARKETING SALES STRATEGY
The marketing plan should highlight the product, pricing, and promotional strategies.
-What are you selling?
-Who wants to buy the thing you sell?
-How to reach your target clients?
7. FUNDING REQUEST
This is important whether you want a loan from a business angel,
venture capitalist or you want to make use of your seed capital.
-What is the total investment required?
-How will the loan be used?
-When will the loan be repaid?
This is so important because of the following reasons-
I. It shows the profit potential of the business with the assumption.
II. It shows capital and how much to be spent.
TIPS IN FINANCIAL PROJECTIONS
- Evaluate any startup expenses: Money needed to start the business such as: legal fees, licenses and initial marketing costs.
- Describe your credit and sales policies.
- Evaluate monthly sales for at least one year: Consider how-start-up, marketing and seasonal factors affect sales.
- Describe the amount of account needed to support sales forecast: This is expenses in number of days’ sales.
- Evaluate obligation for income taxes and balance sheet.
- Define each unit of your source and calculate the selling price and direct cost per unit: Estimate cost of sales and calculate gross profit as a percentage of the selling price.
- Evaluate and list out fixed expenses by month for at least a year.
STARTUP EXPENSES AND CAPITALIZATION
It is advisable to get full details of the business so that you can estimate your expenses correctly. You can explain your research and how you arrived at your forecasts of expenses. Give sources, amounts and terms of proposed loan, how much will each people in your business contribute and the percentage ownership.
This consists of a 12-month profit and loss projection, a four-year profit and loss projection(optional), cash flow projection, a balance sheet and break even calculation. All these helps to evaluate the company’s future financially. The financial being created will give a deep inner view of what the business will entail.
12 MONTH PROFIT AND LOSS PROJECTION
This is good because it forecasts sales, cost of goods sold, expenses and profit by month for a year. This is the center piece of the structured plan. Invovles numbers. This will show whether the business will be a success or not. it should be supported by narrative explanation. Research and assumptions should be carefully noted because this help to keep the entrepreneur in check. Sales predictions in the market plan will come between the first 12 months
4 YEAR PROFIT AND LOSS PROJECTION
This is for those looking for venture capitalist to invest in their business because someone that want to invest huge amount of money would like to see beyond the first year projection. Giving a 12 month cash projection won’t go well with them. because they will see you as one that is not serious. This is the heart beat of Financial statement that stands to give concrete evidence.
PROJECTED CASH FLOW
It is the heart of the business. While cash flow is the blood of the business. The cash flow shows you whether your working capital is adequate. If not your business will hang in the balance. When an entrepreneur runs out of cash it could be so fruastrating that can lead to the fall of the business. which might kill the dreams of the entrepreneur.
It is financial reports which any business needs for reporting financial management. It shows what item of value the company possess be it Assets or liabilities. In a startup firm, it is good to have much assets so that when the company go bankrupt they will be able to use their asset – equipment, machineries and facilities to pay their debt.
BREAK EVEN ANALYSIS
This predicts the sales volume at a given price, needed to recover final costs.
Break even sales= fixed costs
NB: Personal financial statement, Startup expenses and Capitalization, Financial plan, Projected cash flow, Balance sheet and Break even analysis can be done using a spread sheet.
This include: History financial statements, tax, resumes, references letter, personal financial statements, letter of intent, purchase orders, contracts, articles from magazines, listing of asset, business blue print or plans, company’s brochure, industry studies of the business.etc.