As an entrepreneur, you have to plan everything you do to succeed. Today, most entrepreneurs still ignore the significance of having a business plan before investing their money in any project. When you think of starting a software company, you cannot proceed without a well-written business plan.
This is important if you intend to compete favorably in the market. Note that a business should only enter a market to provide a solution to what most customers face or do not get from existing businesses. A well-structured business plan should outline the business mission, vision, objectives, and solutions.
When you look up to a software business, you need a concrete strategy and plan that will provide a foundation for your growth. This article highlights some of the essential tenets and parts of a business plan you should know. You will also learn why it’s necessary to have a business plan before you start your business.
Business Plan: What is it?
A software company business plan is a well-structured and written document that highlights the premise of your company, summarizing the financial objectives, goals, and all the details on how you intend to accomplish the goals and objectives of the business.
A business plan is simply a mirror of where you want your business to be in the coming years. It is a road map that explains what you want to do in the business and how you intend to do it. In most cases, a business plan will have the following parts:
- An executive summary
- Company description
- Market research
- Product and service description
- Operation and management structure
- Marketing plan
- Financial plan
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Why A Software Company Needs A Business Plan
1. It Can Help In Business Growth
When starting a software business or company, you may be short of ideas. It is not easy to tell whether your business will grow or not if you don’t have a plan to do it. With a business plan, you have a definitive guide on how to go through every stage that your business will be facing.
You will use a business plan to structure, run, and grow the business. A business plan helps you think in detail about how your business will run and achieve its goals.
2. Helps You Reach Milestones
As you move forward, you will need a marking scheme to determine if you are making progress. A business plan helps you take a step back and think of the objectives you set at the start of your company.
This way, you can make the right decisions based on the goals of your business. A plan will guide you on whether you need a loan to finance your business or not.
3. Helps You Get Funding For The Business
If you are looking for ways to fund your software company, a business plan is one way to start. Most investors will ask to review your business plan if they intend to invest in your business.
With a business plan, you can easily convince partners and get funding from financial institutions.
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Tips For Writing A Business Plan For A Software And Tech Company
Now that you know why it’s essential to have a business plan for your company, we can dive into the critical elements of a well-written business plan.
1. Executive Summary
This section of a business plan is the most critical for any startup that intends to grow. When poorly written or structured, the business may lack purpose and direction.
In most cases, business plans fail in this section because they are not captivating to the readers.
In this section, the business plan should hook prospective investors, employees, and partners. Your target investor may not have the time to read the other sections of the plan. Therefore, when you create a captivating and detailed executive summary, you may just win the deal in this section.
Make the executive summary concise and more compelling to the reader. Put down some points on what makes your business unique from others in the industry. You should also clarify how the business will be offering solutions in the software industry and how you plan to beat the stiff competition.
An executive summary should have the following key components:
- Target market: Who is your target customer, or simply who will benefit from the product you are offering?
- Business model: What new product are you bringing to the market? How will this product make you some money?
- Business opportunity: Is there a gap in the market that you intend to fill up? Why do customers need the product you are offering?
- Marketing strategy: How will customers learn about the product you are offering?
- Competition: Who are your competitors? What are other companies competing for the market share?
- Goal and objectives: How will this product you are offering transform the marketplace?
In most cases, if you want to create a compelling and excellent executive summary, you should write it last. Start with the other sections of the business plan, create, and finish with the executive summary. This way, you will capture all the key points in the executive summary.
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2. Company Summary
A company summary or headline statement is another vital part of a business plan. When you create a perfect company summary, you can capture the imagination of your prospective investors and partners. The summary also serves as a lead to your business plan.
When your structure a company summary, you should focus on the following:
- Giving your readers a simple overview of what your company specializes in. What does your company do or offer?
- Explain and communicate the value your company products and services offer to customers.
- Highlight some of the opportunities your company has in the marketplace
Here is an example of a company summary
My Foot is a fashion and design business that sells men’s footwear and clothing to men who need quality and affordable shoes but doesn’t get it from local stores.
A business summary should state the company name, type of business, product or service offered, target customer, solution, and completion. Once you create a business plan, you can come up with an excellent company summary.
3. Market Research
Yes, you have a great business idea, but not everyone is likely to buy from it. Even with a good idea, you still need to research the market and determine if your idea is saleable; learn more about your competitors and customers.
When doing market research, you should:
- Identify target market: Your business is going nowhere if you don’t have a viable market for the product or service you are offering. You want to find out if the product or service you are offering is needed in the market. Get a sense of the Total Addressable Market (TAM) to determine the potential revenue your business is likely to generate.
- Segment your market: You can group your target customers according to their age group, gender, geographic location, and behavior.
- Competitor analysis: You should conduct a thorough competitor analysis to help you determine the key differentiations between your competition and your company. Some questions you can ask yourself: How to improve the existing products and solutions in the market, why people should choose your product, and why people are not buying the existing product.
When you think of the existing products and flaws in the market, you can easily identify opportunities for your business and start a business that offers ideal solutions to target customers.
4. Product And Service Description
When drafting your business plan, you should link what you are offering and what your customers are looking for in the market. This way you can easily prove that there are people who are willing and able to buy your product.
- Research existing problems in the marketplace: What problems are most customers facing? Are there solutions to these problems? Ask some of your potential customers about the problems they are facing in the market. Seek honest answers from your customers and come up with a problem. Do this research before coming up with a product.
- Custom the product to the existing problem: Once you have a list of problems, you can now trim it to focus on those related to your product. Explain to the customers how your product will offer solutions to the problems they are facing. For instance, if most people believe that the existing solutions are expensive, you can describe how you intend to come with an affordable product that offers the same quality.
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5. Operation And Management Structure
The fifth stage in creating a business plan for your company is delving into the human resource in your company. While investors will focus more on the idea of the business, they also want to invest in the team as much.
Your team should therefore consist of experts whose skills complement each other. For example, a tech or software company can have a programmer, a coder, a graphic designer, and sales professional. You should highlight the merits of each employee and the value they add to the business.
Lastly, you should create an organizational chart for your team and employees. It should define how your business will be organized. For a startup, it could just be you and the other partners that invest in your business.
When you create a graphic organizational chart, you simply visualize the kind of structure you want your business to have as it grows.
6. Sales And Marketing Plan
Sales and marketing is other elements you should include in your business plan. Outline some of the strategies you want to use in marketing and selling your products and services.
Sales channels are all the mediums that enable customers to purchase your products, while a market channel is what you intend to use in promoting your business. If you intend to use a direct sales channel like an e-commerce store, you should not hesitate to explain it in your business plan.
In the business plan, you should explain how you intend to attract customers and acquire leads. In most cases, you should focus on these activities;
- Develop and launch a website, if possible, an online store where customers can shop in the comfort of their homes.
- Have a strategy to drive traffic to the website from organic search and social media platforms.
- Come up with a PPC strategy that can aid in getting instant online exposure for essential products you are offering.
- Adopt email marketing by first building an email subscriber list.
You can choose a marketing strategy that will help you to nurture existing customers and make them loyal to your business. The marketing section for the business plan should account for factors like market risks, goals, and budget.
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7. Financial Plan
A complete business plan should highlight the company budget and sales goals. This is probably one of the most challenging parts of any business plan. It is not that easy drafting this section if you lack accounting and financial planning skills.
It is also challenging to create a financial plan if you don’t have a cash flow report, balance sheets, and stable income.
Your business plan should include all the details on how you will generate income, what costs you expect to incur in the future, significant expenses, salary demands, and financial milestones.
Most startups don’t make it to the second year of business for lack of a business plan. When you create a business plan, it should outline some of the challenges you expect to encounter in the industry and how you will cope with them.
An effective business plan should cover the seven key elements we have explained here. Always keep all the details in your business plan to the right perspective, research widely, and make your business plan concise and on-point. With these tips you should be ready to make that move – start your software company now.