New Entrepreneurs: How to Write the Perfect Business Plan
Learning to write the perfect business plan no doubt will brighten the future of your company and put a smile on your face every time your bank account fills up with large amounts of money. So why don’t we get down to the bare bones of what’s needed for a business plan? That way, you can get your business up and running sooner.
Executive Summary (3–4 pages)
Before starting out, make sure the potential investor gets a glimpse of what to expect in the next pages. This is sole reason for having the executive summary. As an abstract of your projections and the targets you strive to achieve with the business plan, be sure to include:
- a short intro about your company (a question to keep in mind: what is __company__?)
- the products or services you’re offering
- the structure of your capital
- your general idea and mission
- the management
- your advantages of your business and your competitors
- a conclusion, including financial projections over the next 3–5 years
It’s highly suggested to write the executive summary last. Because after you cover all other parts of your business plan, you can clearly pinpoint your end goal and main ideas. Not to mention, it’s easier to wrap things up after the fine details are already laid out. We’ll use Pamperzhou Day Spa to highlight the sections for the rest of this article.
Company summary and management (3 pages)
What the investor wants to know is everything about your company’s summary and management right on a silver platter, so that they get the idea of the organizational structure. Is the company a partnership? A joint venture? Does it have shareholders? These kinds of questions help them decide whether their capital is worth investing and figure out how many times the gained profit is separated among each owner. As an example of the vital categories you should write under this section, this is what it should entail:
Business ownership and legal details (person or corporation, names)
- Company structure (who are the officers — give positions only — of the company?)
- Operations overview (What departments will handle which tasks?)
- Business location (Where is your main office? Marketing office, if any? Showroom?)
Business Offering (1–2 pages)
This is where you explain all the products or services your business will supply on the market. Show investors where the source of your profit will come from and tell them where their money would be invested into. If you highlight the best qualities of your products or services and the chances for its success on the market and explain the life cycle of the payments, it will make the investor better understand how the products or services will “behave” on the market and if it meets to the expectations and needs of the customers.
This part of the business plan is by far the most important one, because the profit and success of the whole company heavily depends on this. Understandably, a creditor wants to see if the business offering will give the company enough money to pay the loan just like how an investor would want to check the profits those products or services will provide. Going back to the example of Pamperzhou Day Spa, here’s their business offering:
“Pamperzhou Day Spa offers therapeutic massage services, body treatments, facials and anti-aging treatments. Services are provided by licensed therapists and aestheticians who are independently contracted and paid on a commission basis. The upside of the commissioned employee is that there is very little overhead without sales; employees only make money when the business makes money.
We also offer a full retail line that complements the services menu. Products included are high-end cosmetics, creams, candles, and other beauty products. These high-end items tend to retail at a minimum of $20-$25 per item and have 50% markup, or higher.”
Marketing Plan and Analysis (2–3 pages)
Everything is garbage if you don’t present the market analysis right. Show that you’re serious about your business and that you’ve done intense research on the market and your potential target group of customers. What you should include is your company’s expected performance in that industry and provide information on your competitors. Be sure you state your strengths, weaknesses, opportunities, and threats, as these are crucial components to determine whether your business is worth investing in or not. To help you with that, here’s some questions to cover in this phase:
- Industry Performance (Is the demand high? Are the prices for similar products or services stable?)
- Competitor Analysis (Who are your direct competitors? What are their locations? Who are your indirect competitors?)
- SWOT Analysis (Strengths? Weaknesses? Opportunities? Threats?)
Consider Pamperzhou Day Spa’s market analysis.
Strategy and Implementation (2–3 pages)
Details are the key to every business plan and this is the part where you can finally spill the numbers out to your investor or creditor. Include:
- # of expected sales
- costs (including the ones for promotion)
- demographic information about the target group
- age of target group
- buying capacity
- 1–2 graphs
- effect of the sales
Take a look at Pamperzhou Day Spa’s strategy and implementation.
Financial Projections (3–4 pages)
You definitely need your accounting department on this one. Here, you provide the balance sheet, income statement, and cash flow which is basically every cent your company is worth. What’s important to investors is whether their investment will be justified, whether you’re capable of returning the loan and the interest at the given date.
Some other crucial numbers include the business ratios and sales projections as well as the calculations of the return on investment (ROI), which shows how much money your company has at a certain time and how much time is required for them to earn the benefits of the investment in it. As numbers play the main role rather than words, let me present you an example of financial statements.
In the end, the undeniable importance of the business plan is proven through surveys, as these show statistically how many businesses succeed with and without a business plan.
As presented by SmallBizTrends, 36% of businesses have secured a loan and investment capital for their business plans, while 64% have grown their businesses opposite of the 18% that have secured a loan and investment capital without a business plan. Yet, only 43% have grown their businesses without it.
More often than not, most entrepreneurs get too excited to share their ideas with investors and don’t realize how important it is to get an investment. But if you stick with the plan, your chances of getting an investment are much higher.
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Originally published at Rabbut.