Chapter 2: Writing a Business Plan
What is a business plan?
A business plan is a document that communicates the nature, scope and potential of your business idea to prospective investors, employees, business partners and mentors. It is also a valuable tool to help you clarify your own ideas and turn them into a realistic actionable plan.
Here’s the deal:
Carefully follow these steps below and you’ll have a clear, well-organized business plan.
I. Executive summary
What is it for?
The executive summary is a concise synopsis of your business plan. In just a few paragraphs, it provides readers with the essence of your plan and should create a positive impression that you have an attractive, viable and realistic business idea. The Summary allows investors to quickly read something first, to determine if they are interested in the plan as a whole.
How to write it:
- Summarize each section of your plan in a few sentences.
- Highlight the benefits of the product, the strength of your management team and your financial projections.
Although this is the first part of the plan, only write it once you have completed the other sections.
II. Company description
What is it for?
A Company Description is a more detailed summary of your plan. If the Executive Summary is a tight 60 second speech, the Company Description is a further elaboration on your product or service. It describes what separates you from your competition, how you will market and sell it, and ultimately be profitable. Remember though this is still an overview. In the coming sections you will have the opportunity to get into the detail of each business area.
It presents your plan in a structured way that demonstrates you have considered all aspects of turning an idea into a viable business.
How to write it:
- Briefly describe your product or service and the key benefits it offers to your customers.
- Briefly describe your competitive edge and how you will market and sell your product.
- Highlight the strength of your management team
Did you know?
It takes just 6 days to start a business in the US, compared to a whopping 38 days in China.
Source: Get Busy Media
III. Product or service description
What is it for?
This section of your Business Plan describes the product or service you plan to market:
- Features of the product
- Benefits and value to the customer
- Why it will be a success
This section also provides a brief description of costs for developing and delivering the product. These costs serve as the basis for a profitable pricing strategy.
How to write it:
- Describe the function of the product or service, explaining how customers will use it
- List the key features of the product that differentiate it from competitors’ offerings and explain how the features provide customers with important benefits
- Estimate costs for the product and show how they underpin your proposed wholesale and retail prices
IV. Competitive analysis
What is it for?
A competitive analysis describes the structure of the market and the key players you are up against. It identifies the strengths and weaknesses of competitors, compared with your offering.
The analysis provides a basis for positioning and promoting your product or service so it can overcome competitive barriers. It may also highlight niche opportunities competitors cannot match.
How to write it:
- List your main competitors and describe their relative position and share in the marketplace. Also briefly describe less direct competition. This will demonstrate your understanding of the market and willingness to take on all competition
- Describe the features, benefits and prices of competitors’ products and compare their strengths and weaknesses with your offering
- Explain how you will position your product to overcome competitive barriers and gain market share
Tip from an Expert
“The secret to all businesses, whether you’re a start-up or an established business, is to think backwards. What do I mean by this? I mean that instead of starting by thinking about your product first, you need to start by thinking about your customer first and what’s on their mind. By getting inside the mind of your customer and working your way back towards your product or service, you’ll be better positioned to meet their needs. If you can do that -think backwards- then you have the secret to success.”
–Jamie Turner, Author, International Speaker and CEO of 60 Second Marketer
V. Marketing and sales plan
What is it for?
- Describes how you will deliver your product and communicate with the marketplace to achieve your revenue targets
- Provides a profile of your buyer
- Explains your communication strategy for raising awareness and interest in the market
- Describes your sales model, such as direct or indirect, offline or online, etc.
How to write it:
- Create a demographic profile of your consumers or decision-makers you are targeting
- Communicate how you will deliver the product: direct to customers or indirectly through wholesalers or retailers
- Explain how you will use various online and offline marketing programs to drive prospects to your business
- Describe the sales strategy you will use to turn prospects into customers
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Create an integrated plan
VI. Management team
What is it for?
Providing a profile of your management team demonstrates you have people in place with the skills and experience to run an efficient, successful operation. In the early stages of the business, you may work with associates or contractors, rather than full-time employees. Describing the whole team shows you can cover all important aspects of the business.
How to write it:
- List the key people working in your business
- Describe their experience and key skills with brief biographies
- Describe the organizational structure to show responsibilities and reporting relationships
- Include a brief plan for future recruitment in line with the development of the business
VII. Financial projections
What is it for?
The financial projections aim to give investors confidence in the viability of the business in the short, medium and long term.
It sets out realistic assumptions about the costs of starting and running a small business. By forecasting revenues and corresponding costs, the projections will indicate the profits available to the business and the potential return to investors.
How to write it:
- Create a spreadsheet that sets out costs and revenue by month or quarter for 3 to 5 years. Download our financial projections template in our free members area.
- List your working assumptions and indicate why they are realistic.
- Show gross margins and provide an investor summary to indicate the return on investment and proposed distribution of funds.
Profit and loss statement
VIII. Describe the offer
What is it for?
Your prospective investors require a clear understanding of what you are offering to them in exchange for their investment. That is, they need to understand how many shares they will receive per dollar and what percentage of the company that represents.
How to write it:
- State the total number of shares currently outstanding in your business
- List current investors (including founders) and how many shares each owns
- Explain how many shares are additionally being offered in this plan and their cost per share
- Elaborate on how much total investment you are seeking and what the minimum investment is
- Describe the use of proceeds from the investment, that is how many dollars/percentage will be ear-marked for marketing, equipment, operations, etc.
- Explain what your exit strategy will be for getting the investor’s money back to them. This may include selling the business years down the road, going public or simply returning a share of profits and how you plan to do that.
Tips for writing a successful business plan
- 100 Tips to Writing A Killer Business Plan That Gets Funded – A killer business plan doesn’t simply explain who you are and what you do, it is actually a strategy to design your business.
- Gather the raw data and information you need to complete the sections above.
- Use the bizHUMM Business Plan Template which provides a standard structure with prompts to indicate the information you need to include in each section. You can download our business plan template in our free members area.
- If you are not confident about writing the document, you may consider hiring a professional business plan writer and provide the information needed to complete the plan.
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