Having a business idea is just one of the first steps to starting an enterprise. When you have an idea, it takes a lot to transform it into a business. You have to put your ideas down on paper and evaluate them. Of course, everyone can have a great business idea. However, turning the idea into a business takes another step.
Before you can start renting a business premise, seeking legal advice, and forming an LLC, you have to put your business ideas on paper.
Most businesses don’t make it to the second year because of failing to plan. A business idea is what your enterprise will need as a guideline to what it should do. Here we explain what you need to create a business plan and how you can create one that suits your business.
What Makes a Good Startup Business Plan?
What are the main contents of a well-written business plan? The ideal business plan should have the following parts:
- An executive summary of the business
- Company description
- Market research
- A description of the products and services offered
- Operational and management structure
- Sales and marketing strategy
- Financial plan
Coming up with a business plan should not be an option for you. You can think you have a great idea for your business, but you don’t look professional when you don’t put it down on paper. You are also more likely to forget your plans if you don’t have somewhere to keep referring to.
Steps To Creating a Startup Business Plan
These are the steps you should follow when creating a business plan for your startup.
Step 1: Write a General Description Of Your Business
The first step to creating a business plan is to write a general description of the business. When you write a description of the business, you can summarise your business’s vision, mission, and objectives.
Here you write a vision that will direct your business and help you to focus on more important things. Here is what you should talk about when describing the business:
- Type of business: What type of business are you starting? Are you starting retail, industrial, manufacturing, construction, or another type of business? You should be able to describe what your business will be dealing with or selling.
- The legal organisation of the business: You should discuss how your business will be organised. For instance, you can register as an LLC if you want your business to be a separate entity from your personal interests. A corporation is also another alternative you can go for if you want to separate personal and business liabilities.
- Location of the business: Where is your business located? You can describe the facility you will be using for your business and the geographical address. Also, don’t forget to include the layout and square footage of your business.
If you are starting this business at home, you should also specify the space you will allocate for the business. Specify also if you will be paying for the rent and whether the space is rented or fully purchased.
- Business licence and permits: You can also include all the information on local ordinaries and legal formalities for your business. Outline all the permits and licenses that your business needs to obtain to run legally.
- Employees and management: Who are the winners and managers of this business? You should describe the management of the business and the expected number of employees you will need to run the business effectively.
Step 2: Define The Products And Services You Will Be Offering
In your business plan, you should define what products and services your business will be offering. Have a general description of each product your will be offering and the pricing structure of each of them. You can also specify if you intend to have different prices for each market.
It is also vital to indicate if you will be the main producer of these products and services or you’ll be buying in bulk from suppliers and selling as a retailer.
Focus more on describing the business in detail, including:
- Giving a general description of every service you are offering and how you intend to perform it.
- The pricing structure of every product and service you will be providing.
Step 3: State Your Sales And Marketing Strategy
If you are starting a business in a more crowded market, you should look for a way to market your products to boost sales. Your business plan should indicate how you intend to achieve this. Start by describing your target market. In this description, you should include:
- A simple illustration of the population you will be selling to in terms of demographics, numbers, age, deduction level, sex, and income information. You need this information to come up with a product that suits your target customers.
- A clear description of who your target customer is. In terms of their buying behaviour, attitude, characteristics. Have a complete description of your customers.
- Have a description of the buying behaviour of your customers.
Step 4: Describe Your Competition
Your competition is anyone or any business trying to offer solutions to your customer’s pain points. A business plan should include market research to compare its features against competitors using the SWOT analysis.
It would help if you also described who your competitors are when drafting a business plan. Create a simple description of the competition your products and services will face in the target market. In the report, you should include:
- Who are your top three competitors? Specify their characteristics
- The number of your competitors in the market. How many are they?
- What are the differences between you and your competitors?
- How can you emphasize the difference between your products and those of your competitors?
Every business faces competition, whether it is direct or indirect. At times, your business may be dealing with indirect competition, where the customers are finding alternative solutions to their problems from a completely different product or service.
You should know your ideal competitors in the market and design a way to beat them, gain a competitive advantage, or cope with the competition.
Step 5: Define Operations And Management Structure
The management and operation section of the business plan should explain how your business will be working. It should entail the technology you will be using, the logistics and other nuts and bolts.
Ideally, you may skip this section in your business plan depending on the type of business you are starting.
In this section, you should explain the following:
- Product sourcing: If your business is sourcing products from vendors, you have to specify all the details of the products and where the products will be coming from. How will the product or service be delivered to you, and how will you provide them to the final consumer.
- Technology used: If you are a techno company, you should define your technology and its selling points. Describe how your technology is different from those already in the market. Note that you should not give the secrets of your business in the plan.
Step 6: Explain Your Financial Plan
What comes last in your business plan is the financial plan. This section is probably one of the most daunting for most entrepreneurs.
If you want to create a solid financial plan for your business, you should have some accounting and finance knowledge. A business degree is an added advantage. There are tools and resources that you can use to structure your business financial plan.
In your business plan, you should have a sales and revenue forecast for the first 12 months. You also need to specify the annual projections for the next 3-5 years.
Some of the details your financial plan should include are the following:
- Sales forecast: this is a brief illustration of how you intend to sell your products and services in the coming years. Your sales forecast should also include the Cost of Goods Sold (COGS). For a product company, the COGS will be the cost of acquiring the raw materials.
- Personnel plan: This should include the details of how you intend to pay your employees. You can have a list of all your employees, their positions, and how you intend to pay them. Also, include the employee burden, including costs like insurance, payroll taxes, and other costs that come with having a payroll in your business.
- Income statement: This should include your profit and loss account, which shows whether you are making profits in your business or not. The income statement should include all the expenses related to running the business. A complete income statement should include sales, COGS, gross margin, operating expenses, operating income, total expenses, and net profit.
When making a financial plan for your business, you should also take care of the cash flow statements, balance sheet, and use of funds. If you plan to get money to invest in your business from partners, you should indicate how you intend to use the money.
Any business that looks forward to growing should not lack a proper business plan. Drafting a business plan should not be that difficult if you have a framework to follow. In this article, you can get the basic details of what you will need when drafting or writing your first business plan.