How to Create a Business Plan

05/05/2022 08:33:17 +0000
Coming up with an idea for a business is challenging. However, turning that idea into a successful business is another story.
First, you need to create a business plan to turn that idea into a successful business.

Entrepreneurs with a business plan have a nearly 130% greater chance of going beyond the initial startup phase. There's also a 200% increased chance of going from an idea to an actual new business. Without a business plan, creating a successful business is much more difficult.

This article discusses how to create a business plan. A business plan involves 10 steps or aspects, and If you follow all 10 steps, your chances of success increase drastically.
How to Create a Business Plan: Step by Step
Let's help you create a successful business with a simple 10-step plan.

1. Create an Executive Summary

Although this step appears first, it's actually a placeholder because your executive summary should incorporate the other nine steps into one concisely summarized outline.

Executive summaries are usually one page in length. It's a relatively simple yet concise overview of what your business will entail.
Several things should be included in this executive summary, for example, who the business is for, your solutions to current problems, what your product or service helps solve, and how you differ from the competitors.
Then, once you have completed the other nine steps, return to the executive summary.

2. Create a Company Description

The first real step is to create a company description containing three main elements: the mission statement, company history, and objectives. This should tell investors about your company's purpose and goals.

A mission statement should tell investors why your business exists; it concerns what you do and sell. It should be inspirational to make others believe in you and emotional to help captivate readers. This needs to be concise.

There are a few factors to describe the history of your company. For example, you should talk about the founding date, significant milestones, business locations, how many employees you have, the type of executive leadership, and your flagship services or products.

Your business objectives should be SMART objectives or goals. Smart is an acronym that stands for specific, measurable, achievable, realistic, and time-bound. If you focus on these five factors, your goals should more or less formulate themselves.

3. Market Research

Summarizing market research and business potential will help get potential investors on board. Investors need to know that your business will sell.

Describe your target demographic and include location, income, age, education, gender, hobbies, and profession. Investors do not want to invest in a business with a broad and nondescript target market: Market your business to a specific target audience.

This will enable you to roughly identify the size of your target market and consequently estimate the sales you can expect in the coming weeks and months. Investors want to know there is a target audience that will buy your products.
4. Competitive Analysis

Once you have done market research, your business plan should incorporate competitive research. This means you should learn everything there is to know about your competitors, which will give you an idea of what you should be doing. Moreover, it can identify what your competitors are not doing well, so you can then do it better.

Answer a few key questions about your competitors. This includes where they invest in advertising, the press coverage, how good their customer service is, pricing and sales strategies, etc. Also, pay attention to their ratings and reviews on third-party rating platforms.

Include these things in your business plan and how you will do things better. You should distinguish yourself from the competition, standing out from the rest. Investors do not want to invest in a business that is like 20 other businesses.

5. Your Services or Products

Remember, you want to make your products or services stand out from the competition, so you should focus on your business's products or services.

First, focus on your service or products and the various benefits. Then, identify unique features, how those features translate into benefits, the practical and emotional payoff for customers, and the individuality of your products.

Describe the production process—how the new product is created, where materials come from, where they're manufactured, how quality control is performed, how the supply chain works, and how daily operations are managed.

Within this section, discuss the life cycle of a product. This means the time between purchases, the down-sells and up-sells, and what research and development in the future will hold.

6. Marketing and Sales Strategy

A solid sales and marketing strategy is one of the most important aspects of any business plan. Of course, this is how you let the public know about your goods and services. Today, without effective marketing, people will never discover who you are. This is necessary to create a solid growth strategy.

Talk about your value proposition, existing customer segments, and ideal target markets. Next, you should add various components and discuss your launch plan to attract new business.
Then, cover growth tactics to expand your business. Finally, you should incorporate your retention strategies such as referral and customer loyalty programs.

Then, incorporate the kinds of promotion and advertising channels that you will use. This is also an excellent place to reinforce why your business is different from the rest and why it will excel.
7. Financial Aspect of the Business

The next step is to compile your business financial details. Of course, if your business is just starting, you're not going to have a comprehensive report or financial data. However, you still need to create a budget and financial plan that investors can examine.

This should include your budget, the cost to produce goods, the price at which you will sell goods, profit margins, overhead costs, the profit outlook, etc.

If you have an existing business, you should be on a better footing if it's been going fairly well. Therefore, you should include profit and loss statements, income statements, balance sheets, and cash flow statements.

In addition, discuss your net income, the ratio of liquidity to debt repayment, and how often you collect on your invoices. The best-case scenario is if you can provide at least three years of financial reporting.
One of the biggest mistakes beginner entrepreneurs make is underestimating business costs which will create problems for your business over the long run.

8. Company Management and Organization

As they say, a chain is only as strong as its weakest link. This is an excellent analogy for creating a business that is well organized and has solid management.
Your business will succeed if you have a good management team running it.
Therefore, it's important to describe who your company management consists of and how your company is organized.
Talk about particular people, their qualifications, and what roles they will be performing.

You should also identify management roles you need to fill and identify other functions you still need for your company to grow and how much it will cost to hire these new experts.

Moreover, you will likely need an accountant, a bookkeeper, and an attorney, which should be factored into your business plan and costs. These costs, particularly for the lawyers and accountants, should be included in the business plan.

9. Your Funding Needs

You are creating a business plan because you are looking for more money. Therefore, you need to outline exactly how much money you are looking for.

Be realistic in terms of your requirements. It is best to pinpoint a precise number or the amount you are looking for. However, if you don't know this, you can always provide a range.

Since you have a new business, you're not going to have a good track record of generating profits. Therefore, to get new investors on board, you may be forced to sell equity—shares or ownership in the company to get people to invest.
Consider that equity owners often expect to have a voice in the business and may be paid a profit or dividend. They will want to know if they have the option to sell their ownership to others.

If you plan to borrow money from creditors, this is something else you will need to include in the business plan. You will have to include exactly how much you plan to borrow, the interest rate, and when you plan to have it paid back.

10. Appendix with Official Documents

The final part of this business plan will be an appendix with any and all official documents. These will be documents that will help potential investors decide whether to invest in your business.

These documents should be designed so that investors can conduct their own due diligence. In addition, they should provide background context about you and your employees.

Other things to include are local permits, legal documents, and deeds. Also, include any certifications that you or your management teams have.
Finally, include business registries and professional licenses that pertain to your legal structure.

Industry associations and memberships, intellectual property and patents, and federal or state identification codes or numbers should also be included. Other things include customer purchase orders and key customer contracts.
Tips to Creating a Solid Business Plan
Read it over once you have incorporated all 10 aspects into your business plan. An investor needs an attractive business plan. It will likely end up in the garbage if it doesn't look good or read well. Follow these tips to create the best business plan.

• You want your business plan divided into very specific and distinct sections. Investors need to be able to quickly find critical details they are looking for.

• Your business plan should not be overly lengthy. It needs to be precise and to the point. A business plan should be no longer than 20 pages.

• Many forget perhaps one of the most critical aspects—to proofread. Errors in your business plan will not instill confidence in your business.

• List every cost that your business will incur.

• Your business plan should look professional. This means it should have an excellent layout, be branded well, and have decent bookbinding or printing. It needs to look the part.
Final Thoughts
Remember that entrepreneurs with a good business plan have up to a 200% greater chance of turning an idea into a business. Therefore, it is essential you follow all 10 of the steps discussed. If you do this, you will have a great business plan that will likely attract investors.
About the Host
Sophie Howard is the founder of Aspiring Entrepreneurs, a community designed to help people develop the skills and confidence to build a business and a life that serves them. Sophie began online in 2013 with an Amazon firm, which she sold for more than $1 million in 2015.

Sophie has lectured on stages all around the world, encouraging and teaching other ambitious entrepreneurs. She has established instructional programs educating thousands of students how to sell online, in addition to releasing over 1000 products.

Sophie has also written a book titled "Aspiring Entrepreneurs: A Guide to Finding Your Best Path to Financial Freedom."
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