Posted by Deepshikha Shukla
February 21, 2021 | 6-minute read (1126 words)
Creating a strong business plan is one of the necessary steps when launching a startup. A business plan is an initial map that a company uses to determine its growth trajectory and includes details that will allow such entities as funding organizations, banks and potential partners to see the founder’s vision. Here's the step-by-step, comprehensive guide to creating a great business plan for your company.
Step 1: Pick a Business Plan Format
There are two common types of business plan format, traditional and lean startup. Traditional business plans use a standard structure and include details of each section. However, lean startup business plans focus on summarizing only the most vital points. A lean startup plan contains only essential elements, such as what you plan to do, how you plan to do it, and how you will succeed. It includes information about your company’s value proposition, resources, partnerships, infrastructure, customers and finances.
Step 2: Start with Executive Summary
Start your business plan with a clear and compelling statement about the unique value your company brings to the market. An executive summary is a brief outline of your company's objectives and goals that includes:
- Your mission and vision statement
- Description of your products and services
- Information about key company leaders, their experiences, educational backgrounds, and skills
- Your financial information
- Your growth plans
Step 3: Include Company Description
Your company description can include:
- The problems your business solves
- Your industry and business type
- Your company’s strengths
- The legal structure of your organization
- An organizational chart to lay out who's responsible for which aspects of the business
Step 4: Elaborate Your Market and its Opportunities
You can detail market opportunities for your business by answering the following questions:
- What is your target market? Is it growing, stable, or in decline?
- Is the overall industry growing, stable, or in decline?
- Is demand for your products and services rising or falling?
- Who are your customers, and what are their spending habits?
- What do your customers need, and why will they purchase your products and services?
- How will you provide service and support to your customers?
Step 5: Evaluate Your Competition
The competition analysis section includes your competitive advantages that can make your business a success. You can find your competitors' marketing strategies by tracking their news, public relations, blogs, social media posts, and their reviews and recommendations. Your competition analysis can include:
- Strategies for pricing your products and services competitively
- The strengths and weaknesses of your competition
- Information about your potential competitors and their marketing strategies to reach customers
- Details of your competitors' products, services, quality, pricing and advertising campaigns. Also, what makes your products or services different as compared to the offerings from other competitors
Step 6: Explain Your Service or Product Line
Your product or service section explains the nature of your product or service, its uses, and its value. It may also include the following information:
- How your products or services will benefit your customers
- Patents, copyrights, and trademarks you own or have applied
- Products or services in development or market
- Required time to manufacture or assemble products using components provided by others
- Details of research and development performed for your service or product
- The development process of your products and services
- Products and services you deliver and what you need to have to provide them to customers
Step 7: Describe Marketing and Sales Strategies
Your marketing and sales strategy should evolve and change to fit your unique needs. A good marketing plan can result in higher sales and profits. Your goal in this section is to
- Determine how you can best reach potential customers
- Describe how you'll attract and retain customers
- Brief how you’ll make a sale
- Define skills your marketing and sales representatives should have to promote your products or services.
- Outline a marketing plan that highlights the advantages you offer to customers
- Define your distribution strategy to distribute products to other companies or suppliers
- Create a budget for your sales and marketing efforts
- Determine if your marketing efforts are successful
- Set up public relations activities to market your business.
Step 8: Outline Funding Requirements
Here you can outline your complete funding requirements to pitch investors, such as:
- Details of funds you'll need over the next five years
- The type of funding you want to raise, the terms you'd like to apply, and the time required to repay.
- How you'll use your funds for buying equipment or materials, paying salaries or specific bills until revenue increases.
- How your company will make money through multiple revenue streams
Step 9: Create Financial Projections
Financial projections help investors or lenders evaluate a company's potential for success. If a business seeks outside funding, providing comprehensive financial reports and analysis is critical. Most business plans include the following three reports or forecasts:
Balance Sheet: Describes the company cash position, including assets, liabilities, shareholders, and earnings. It indicates the financial health of a business.
Profit and Loss Statement: Such statements show whether a company will be profitable during a given period.
Cash Flow Statement: It projects revenue required to cover all fixed and variable expenses. It shows when, under specific conditions, a business can expect to become profitable.
The above projections can provide you with a financial outlook for the next five years.
Step 10: List Customer Segments
A business plan helps you analyze and evaluate your customer demographics, buying cycles, and willingness to adopt new products and services. You can include the following information in this section.
- Who are your target customers?
- Customers’ pain points and ways to solve them
- Purchasing ability of your potential customers
- List of consumers, organizations, or businesses your company plans to serve
- Products, services, and equipment you need to run your business
- Ways to engage and interact with your customers
- List any resource you’ll leverage to create value for your customers, such as staff, capital, or intellectual property.
Step 11: Detail Operation Strategies
Your business plan should detail strategies for managing, staffing, manufacturing and all other day-to-day operations. The operations section of your business plan may include:
- Infrastructure, facilities, equipment, and supplies you need
- Initial staff requirements
- Ways to establish relationships with other businesses and customers
- Steps you'll take if the company initially does not perform up to expectations or grows rapidly
- Production and service methods
- Ways to ship and deliver
- Environmental or health regulations
- Strategies for recruiting, training and retaining staff
- Company policies and practices
Use your appendix to provide supporting documents, such as credit histories, product pictures, letters of reference, legal agreements, permits, and other contracts. Here you can inform about the businesses or services you’ll work with to run your business, such as suppliers, manufacturers and subcontractors.