Table of contents:-
- What is a Business Plan?
- Who is in charge of writing a Business Plan?
- How to write a business plan?
- What are the advantages and disadvantages of writing a Business Plan?
- What is the skeleton of a business plan?
What is a Business Plan?
A business plan is a document that outlines the strategies and objectives which a startup or organization wants to achieve and how they plan to achieve it.
In simple words, a business plan is a written copy of what the business idea is, what financial model it will adapt, what will be the product or service, who will be the target audience, what are their marketing strategies, etc. It is especially helpful in the initial stages of establishing your enterprise.
Business plan is extremely important for the investment process. A detailed plan is crucial to attract stakeholders, venture capitalists, and investors or angel investors in order to pitch your business idea.
In such a case, your business plan becomes your way of convincing them to invest their resources in your plan because it is worth it.
Who is in charge of writing a Business Plan?
Starting a business or coming up with a business plan isn’t a science or learned through a degree. Some businesses develop through trial and error processes while others are drafted from the head to toe.
Hence, if we are talking about a particular person who is ‘responsible’ to write a business plan, the answer is No. Similarly, there is no need for a long, lengthy business plan that needs to be written with each plan elaborated.
Irrespective of all this, there are still some conditions in which a business increases its chances of becoming successful by drafting a business plan. Such conditions are as follows:
- For tech startups, a business plan can prove to be a medium to gain long-term funding especially when there is no trading history.
- When the market is new, untested or volatile, a business plan can come handy and serve as a document to fall back upon especially to tackle the uncertainties and unclarity.
- If you have an awesome business idea and haven’t given it much thought or put it on paper, drafting a business plan can be a good option for you. Writing a business plan can help you to carefully structure your thoughts and evaluate them through different angles in order to spot risks.
How to write a business plan?
First and foremost, when you are writing a business plan, you need to identify the problem that your business will aim to solve and the purpose your business serves.
Once that is sorted, you need to consider who you are trying to attract with it, what kind of customers, and why. Following are some additional key points to consider while drafting your business plan:
- Note down how you are planning to secure your funding whether it is through private investors, bank loans, etc.
- Write about your business history, how did the concept come into being, and what kind of products or services you are trying to sell.
- Make sure you are transparent with your investors and do not keep any information from them. Do not exaggerate or bluff about your experience and skills. Gaining trust is crucial.
- Explain the details about your product or service in layman’s terms. Avoid jargon as much as possible so that you do not confuse the reader.
- Focus on the strengths of the business, the problem it aims to solve, and the evidence you have to prove the same.
- It is crucial to understand the market you are penetrating, conduct competitor analysis and know who your competitors are, learn about your competitive advantage, and find your unique selling proposition (USP).
- Last but not least, make sure that your business plan is not too lengthy. Instead keep it as short and precise as possible. Your aim through the business plan is to deliver crucial information so that the reader can make a decision.
What are the advantages and disadvantages of writing a Business Plan?
If you are still confused about whether or not you should dedicate your time and make a business plan, here are a few advantages and disadvantages of a business plan to help you make this decision.
Advantages of a Business Plan
- A business plan can be your golden document to secure funding for your business. At the beginning, funding is extremely crucial especially for tech and SaaS startups.
- The strategic focus of your business is not lost after the first stage. You can read about scope creep and understand how a business tends to diverge from its goal from time to time which could lead to stagnancy. In such a case, it is important to understand the success factors in a business and plan exactly to serve the purpose.
- Having a business plan on paper invites other passionate people on board. When you have no trading history, it is difficult to get people on board. However, if you have a plan, it convinces potential investors that you are sure about what you are doing.
Disadvantages of a Business Plan
- A business plan can hamper you from looking forward. This means that it is possible you depend too much on your plan without considering other external factors such as market conditions, trends, etc. Such a dependency can lead you to make mistakes and miss potential golden opportunities just because they were not in the plan.
- Analyzing performance can become time consuming. A business plan and make you dwell on your past mistakes by focusing on the goals and objectives that you were not able to achieve. Such an analysis of past performance could lead to wastage of time and resources without focusing on how to move forward with strength.
- Constant change makes a business plan outdated as soon as it’s written. We know that the world is ever-changing at a fast pace and hence, it is very likely that your business plan loses its relevance by the time you are ready to launch. A great alternative to the business plan is a strategic project roadmap. This is because a business plan has a lot of important details such as the mission statement which are less likely to change either way. Moreover, a roadmap can help to pave the most adaptable and actionable path ahead.
What is the skeleton of a business plan?
Since you are still reading, I am sure you’ll want to know what the skeleton of a Business Plan looks like.
Bear in mind that it can be a little frustrating because there is a lot of critical thinking involved and there is no hard-fast rule for a business plan. However, the best approach is to look at other business plan templates and write yours in a way that makes sense to any layman.
Here is what a Business plan constitutes of:
- Overview: In this section, you provide an overview of your business concept and summarize its execution.
- Detailed Description: In this section, you will describe the kind of product or service you are offering, what the unique selling point is, and how valuable your business is.
- Target audience: In this section, you will explain about your market segmentation, the target market, their key traits, etc. which is backed up by user research.
- Marketing strategy: Once you know your target audience well, you will need to document how you will reach them through a marketing strategy. Often, a marketing strategy is defined within the marketing plan, where primary establishment and engagement strategies are explained in detail. However, as a subsection in a business plan, it need not be as detailed as a market plan.
- Core team: This section will talk about your people and the team who is behind the whole development process. If you don’t have a team yet, you will need to put forward how team members will be selected, what candidates are right for you, and the timeline for the same. This section is incredibly important to procure external investments such as passion and enthusiasm.
- Financial Predictions: Remember that investors are mainly about the finances because no one wants to invest in a loss making company. Hence, your financial sedition is going to be scrutinized a lot more than anything else. Therefore, it is important to be thorough with the same. Make sure you talk about how much money you need to get started and how you plan to keep the money rolling in. make sure that your cash flow forecast is realistic and achievable since that will help to keep your business floating for the first few years.
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A business plan consists of the overview of your business idea, detailed descriptions about your product or service and its unique selling proposition, your target audience, your marketing strategy, the core team and how to hire it, and the financial model or predictions.
Business plan helps you pitch your business idea to potential investors and secure funding. When your business is on the brink of losing focus after a few initial years, a business plan helps you to stay on track. Lastly, it invites other potential employees, partners, or investors to invest their resources in your business.
A business plan expires fast because of the constantly evolving world we live in. It is not dependable in the long run because of its ignorance towards changing marketing conditions. It can obstruct you from looking forward to external factors and golden opportunities since it compels you to focus on the plan creating dependency.