What is a business plan?
Investopedia defines a business plan as a written document that describes in detail how a business — usually a startup — defines its objectives and how it will achieve its goals. A business plan lays out a composed roadmap for a firm from a marketing, financial, and operational standpoint.
Why you need a business plan?
A business plan is needed:
- To create an action plan for what is needed to be done
- To better understand your industry, customers, and competitors
- To determine your financial needs
- To determine the risk factors
- To position your brand
- To reposition your business to deal with changing conditions
- To judge the success of your business
How to write a business plan?
Following is a basic structure to draft your business plan, and it is best for all kinds of businesses.
Begin your draft with the name of your company, its contact details, information about the team, and the date of its inauguration.
Include the following elements in your draft as a next step:
Start with a brief introduction which provides an overview of the company and tells the reader about the reason for its starting. It demonstrates to your reader that you know how to translate an idea into a business. The sections to include in this portion of the plan include:
- Background (how you got into this business, how the company got started)
- Mission statement (a short inspiring statement of why your organization exists—what it does)
- Products and services
- Current status (e.g., do you have a prototype, have you sold any products/services yet, do you have a physical location or a website, etc.)
- Legal status and ownership (including the legal form of your company such as partnership, LLC, etc.)
- Key partnerships (if any) with other firms or organizations
Common mistake: Do not write about yourself; describe the attributes of your company.
Describe the industry you are entering and the area of the economy in which you are competing. Sections you could include in this portion of the plan include:
- Industry size in Rupees/ dollars (or the currency of your country)
- Industry structure (number of competitors, technologies used, how intensely firms compete, etc.)
- Nature of participants (strategies used by each firm, size, and market share of each firm, region/nation/global market reach of each firm, etc.)
- Key success factors (what strengths make each competitor successful)
- Industry trends (is the industry growing fast or slow or declining in sales*, are there changes in technology, changes in what customers want or need, and so on)
- Long-term prospects
Market Analysis (understanding your potential segments)
The market analysis breaks the industry into segments and focuses on the specific segment (or target market) to which the firm will try to appeal. The sections to include in this part of the plan include:
- Who is your customer? (e.g. age, income, geographic location, specific habits/hobbies/interests, etc.)
- How many of them are there?
- Where will you find them?
- What are they doing/buying currently?
Financial Analysis and Projections
In this part of the plan, write how much money you need and where you plan to get it from, how much money you will make, and what it will cost to run your business. This section covers the basic logic of how profit is generated in business and how many units of a business product or service must be sold for the business to “break-even” and start generating profit. Try to be realistic and include financial projections for three different scenarios:
- Worst case
- Best case
- Most likely case
The marketing plan focuses on how the business will market and sell its products or services. The sections to cover in this portion of the plan include:
- Overall marketing strategy
- 4Ps (product, price, promotion place/distribution)
- The company’s sales process or cycle (e.g., does your firm provide after-sale support or engage in other sales-related activities that are part of the sales cycle)
- Specific sales tactics (do you use a sales force who call on customers, do you price below competitors or offer sales at certain times, etc.)
Product (or Service) Design and Development Plan
If you’re developing a completely new product or service, you need to include a section in your business plan that focuses on the status of your development efforts. The sections to add in this portion of the plan include:
- Development status and tasks (explain where you are in the development of your product or service, such as whether you have a working prototype, if you’re commencing mass production, etc.)
- Challenges and risks (acknowledge if there are any major challenges or risks such as a product design will work or not, competing firms working on somewhat similar ideas might beat you to the market, a competitor who might cut prices and lose money for a time to keep you from launching and succeeding with your business and so on)
- Intellectual property (patents, licenses, and other protections for your intellectual property if you can get them and where your firm is in the development or establishment of these)
The operations plan outlines how your business will run and how your products will manufacture. The sections to highlight in this portion of the plan include:
- A general approach to operations
- Business location – identify where your business will locate, why that location is a great one, the costs of it (which will include in your finances), and so on
Management Team and Company Structure
Many investors and others who read business plans look first at the executive summary and then go directly to the management team section to assess the strength of the people starting the firm. The sections to compile in this portion of the plan include:
- Management team (focus on the skills, knowledge, and experience that each team member brings to the venture)
- Board of directors, the board of advisors, company structure
Note: You can include an organizational chart that is a graphic representation of how authority and responsibility will distribute within the company.
Prepare a schedule that shows the main events required to launch the business. The schedule should be in the format of milestones critical to the business’ success.
It is a short overview of the entire business plan. It provides a busy reader with a summary of the new venture and why it will succeed. Write it last but include it in the beginning!
*Visit Pakistan Stock Market’s website to carry out this research.