Creating a business plan is an exciting part of establishing a new company, or changing the direction of an existing one. Yet it’s also one of the most fluid and misdirected documents a company will ever produce. Ask any established entrepreneur, and they’ll tell you that their business has expanded in ways they could hardly have imagined when it was first devised. Proposed markets turn out to be uneconomic, marketing campaigns rapidly evolve, and supposedly niche services end up dominating day-to-day operations.
So why is creating a business plan so important? Quite simply, because it sets out the intended direction of travel. And while events (and market forces) might steer such a plan off its course, it’s crucial to have an intended series of objectives for growth, development, and finance. Without this, how can anyone say if a firm has succeeded, or met its goals? Why would any self-respecting financial institution lend money to a company with no idea which markets it’s targeting, or what its annual turnover is likely to be? Indeed, why should other people support a business owner displaying no drive or ambition?
A business plan is vital for establishing trust, attracting investment and convincing a skeptical public you mean business – quite literally. As such, it needs to contain a number of elements. Ten of the most important of these are outlined below. We’ve assumed the company in question will be primarily based online, but we haven’t focused on industry-specific elements. For instance, a drop shipping ecommerce platform will require warehouse storage, where goods can be held between arrival and dispatch.
1. An understanding of the existing market.
Anyone evaluating a business plan expects to see evidence of market familiarity. Being able to succinctly summarize product/price/place/promotion analysis suggests you understand the existing market and know how to compete in it. Avoid writing an essay about how the industry has evolved or the history of competitor brands, unless their growth arcs are likely to be matched by your own enterprise.
2. An intention to improve on what’s already out there.
If your firm doesn’t have a USP, it’s unlikely to succeed. So how (or why) will your company rise above its rivals? Have you learned lessons from working with competitors in the past, or did bad customer service inspire you to become a disruptor? Can you undercut competitors on price, or does your expertise mean you’re ideally placed to offer something better?
3. A profile of your background.
Point 2 segues into a concise summary of your own experience, selling your vision. If you spent kindergarten selling sweets to other kids, and now you want to open an online candy store, outline your lifelong love of sweet treats. Talk about previous jobs and passions, the people who’ve inspired you and the knowledge you’ll bring to this business.
4. A sense of humor.
That doesn’t mean creating a business plan full of jokes, sarcasm or multiple exclamation marks. Instead, try to include puns or plays on words. People who get the jokes will feel included, while those who don’t will be oblivious. Humor is very endearing, and making your business plan more amusing (a) keeps people reading, and (b) makes you seem more relatable, and therefore investable.
5. An executive summary.
One place where humor isn’t welcome is the single-page executive summary. In today’s attention-starved times, this could well be the only thing a potential investor or business partner looks at. Make it punchy and concise, and explain in short sentences what your business will do and why you think it’ll succeed. Position this vital section immediately after the contents page, and use the company name in every paragraph to reinforce brand awareness.
6. Five-year projections.
To live up to its name, a business plan must look into the future. Predicting turnover in 2022-23 might seem impossible here in late 2018, but it’s what you need to do. Be realistic about growth prospects, analyzing economic forecasts and the growth levels of companies in your sector. Studying rivals will give you a useful steer on how to project gross margins and cash flow. Ensure these figures remain consistent throughout the business plan.
7. A series of goals.
Alongside financial matters, identify where your business should be by 2023. These targets typically cover anything from turnover or market share to staffing levels or client numbers. Don’t pluck numbers out of thin air – explain why each objective is achievable, and what you’ll do to meet it. Give anyone reading the document a glimpse into the future, outlining how and why you’re going to meet each goal.
8. Marketing, advertising, and PR objectives.
Long-term planning inevitably involves the holy trinity of promotional tools, so outline which platforms you’ll be using to reach specific demographics. Perhaps your industry is heavily driven by social media activity; if so, identify the key platforms, and set achievable engagement targets. What proportion of turnover will be directed towards advertising, and where are your prospective customers likely to be found?
9. Graphics and subheadings.
A strange inclusion on a list like this, you may think? Not really. Attention spans are dwindling, and a lengthy slab of text is off-putting. Represent numerical information in charts, graphs, and tables, to break up each page. Subheadings also help, as do bulleted or numbered lists. Photographs and screen grabs are useful for both illustrative and aesthetic purposes.
Building on the last point, a business plan should be short and sweet. This isn’t the place for monologues or rants about low industry standards. Ensure every sentence has a purpose, and re-read the document with the aim of removing superfluous copy. It’s harder to write a concise business plan than a long one, but the document will be more readable and valuable once it’s edited down. Avoid industry jargon wherever possible – accountants or investors might not understand it.
It’s advisable to get second and third opinions on your business plan before signing it off. Ask close friends and relatives for their thoughts, and act on their suggestions – don’t get huffy, or claim you know better. If loved ones identify flaws or inconsistencies, industry experts will spot them too, with potentially more serious consequences. Younger entrepreneurs may wish to seek out a local mentor or business plan advisor. Constructive criticism is always beneficial at this stage since a flawed business plan suggests a flawed undertaking. Finally, don’t assume creating a business plan means the finished document is set in stone – like the business itself, it’s meant to evolve over time and be refined through experience.
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