29 Aug 10 Key Steps to Creating a Kickass Business Plan (2019 Guide)
You probably know that there is more to starting a business than you initially thought. With the giant puzzle that is a business, there are many pieces to put together. The synchronized coordination of incorporation and planning are just the start. Many entrepreneurs are either overloaded with information or confused on where to even get started. This post will give you a better understanding on a least one of the main parts: The Business Plan.
But first, what is a business plan? A business plan is a formal document that puts all of your ideas for the business together in a logical sequence. Think of it as a blueprint for the company. It’s the first step of any great business and a necessity if you are to succeed. It’s a realistic and workable plan that outlines various aspects of the business including industry performance, market stats, and the financial summary… among other items.
Many entrepreneurs only write business plans in university or only when they are seeking financing / startup capital. While this may be fruitful for those reasons, a business plan is so much more. It’s something to fall back on when in need and you have lost your way. Additionally, it can establish goals for the company as you grow. Yes, investors and bankers need a business plan to understand what you want to build, but more importantly it can be a guiding light.
While thoughts scribbled on a napkin can work as a business plan. It’s not ideal… not in the least. It’s a start though. To seriously write your business plan, there are several aspects you may need to research. Most of this information can be found online, however, be sure to check your local business chamber, associations, and library.
Things you need to think about may include: Business potential, strengths, weaknesses, opportunities, threats, legal, financial, market, incorporation, taxes, etc. You want to be able to give a complete picture of your business to an outside party. As well as how it will grow in the years to come. A framework if you will.
The following 10 steps can be used as a guideline when creating your business plan:
1. Executive Summary
This is one of the most critical aspects of your business plan. I have seen many companies come through Five23 whose plans were initially rejected by investors because the executive summary was poorly written. An executive summary can range from one paragraph to two pages. It is to include your entire business idea, information about the industry, market competition, management team, risks, financial projections (historical projections if you have them), and, most importantly, your implementation plan for the business. In the perfect scenario, the executive summary should be written last, after the entire business plan has been written. A summary of each section if you will.
2. Business / Company Overview
The first section of your business plan, this should start with an introduction and a brief business overview. It should include details on the history of the business (how you came up with the idea), the type of entity you are, your vision statement, objectives, capitalization schedule, objectives, and an outline of your financial proposal / funding requirements.
3. Products / Services
Section 3 explains to the reader of your business plan the products / services you are proposing to sell. Here you need to give detailed information about the product / service. The more detail the better. You need to define the features, benefits, value proposition (margin), competitive strategies (what makes you different), how and where your product / service will be produced / rendered.
4. Industry Overview
The industry overview section of the business plan demonstrates the viability of your business idea by discussing the size and growth of the industry. Five23 recommends our clients use the ‘funnel approach’ when writing this section of the business plan. Under the funnel approach, the industry overview follows a macro to micro direction. Starting first with the international industry, followed by country, region, city, then neighborhood. If there are any industry permissions or regulations, you can list them in this section. You may also discuss some of the numbers in this section such as total market size, client size, etc.
5. Marketing Strategy
The marketing section of the business plan is one of the most important sections of the business plan. Even if you have the best product / service in your industry, you need a plan on how to reach customers and where to find them. In this section you should describe your target market segment, competitors, and the key value proposition. You should also include what the pricing for your product / service will be and how it appeals to customers. You might also mention key factors such as recent industry trends, social media metrics, as well as upcoming conferences and events. Additionally, you need to define you tactics and how these items will affect sales and company growth. As with every section, the more information the better.
6. Operation Plan
An effective management team is the key to driving any business. From the initial concept to an exit, the team is the driving force. In this section you need to define who your team is, what they studied and what experience they have that can make the company a success. Here you can also define day-to-day operations to a five year plan. How the company will grow and in what direction. The human resource strategy and hiring plan should also be in this section.
7. Financial Plan
While this may be the least favorite part for the majority of entrepreneurs. It is by far the most vital to the company and business plan. This is the part venture capitalist and bankers will jump to first. It is also the number one reason these parties back out. If this section is not bulletproof, investors will walk away. The rest of the business plan may be perfect but if this section is 100% there will be no investment. Five23 cannot emphasize this enough.
This section should include any historical financial data you may have in terms of profit / loss, EBITDA, net assets and liabilities, etc. Here you also need to put your financial projections and any justification you may have for them. Projected cash flow and balance sheets are ideal on, at the least, a quarterly and yearly basis from present day to three years out (five years ideal).
If you need help with the ‘Financial Plan’ of your business plan, please contact Five23 here or via email at: contact@five23.io. We help companies from around the world create financial and business plans that entice investors and promote understanding.
8. Risk Analysis
While many business plans do not have this section, Five23 has determined it can lead to greater startup success in the first few years. The ‘Risk Analysis’ section will discuss the key risks the business is exposed to and how these risks can be mitigated. For example, if you are creating a business plan for a coffee shot and you assume you will have 100 customers a day, this section will determine the viability of that assumption and what to do if you exceed / fail to meet that goal. Let’s say only 85 customers come, will you make enough money to remain open? How long can you sustain at that 85 customer mark? What if you have 140 customers, do you have enough employees to handle that quantity? If not, how will you deal with the situation. Though it is not common, many investors / loan officers will appreciate this section and it may be a determining factor in receiving an investment / loan.
9. Implementation
A bit more common than the last section, the implementation of the business is often overlooked. Once the reader has read your entire business plan, the standard first question is, “How are you going to do this?”. This section defines that. Here you should discuss the company’s first milestones and how you are going to achieve them. Additionally, who is in charge of each milestone from your team and what skills do they have to see them accomplished. You should lay out at least five milestones here with clear paths to achieve them.
10. Third Party Analysis
A third party analysis of your business will help in the eyes of potential investors and bankers. Additionally, it gives you an opportunity to vet your business idea without the risk. Third party business reports can find faults in your ideas and identify golden opportunities. It can make sure your idea is worth pursuing and to what degree. Moreover, you may learn much more about the market, opportunity, and competitors than you might have thought possible. Here at Five23, we have helped companies from around the world talk with some of the largest investors and close funding rounds. From initial concept, to full-fledged Series E, we can help strengthen your argument from an unbiased position. Click here to learn more about what we offer startups. If you have any questions about our services, please feel free to contact us here or via email at: contact@five23.io.
On behalf of all of us here at Five23, we wish you the best in creating your business plan and your venture!