How To Make an Excellent Business Plan
Business plan is the backbone of every industry- micro, small, medium and large. To ensure success, every business plan has to be based on bare facts rather than imaginary projections and erroneous understanding of prevailing market conditions. An excellent business plan helps everyone- owner and employees as well as associates and customers.
Golden rule of a business plan
The golden rule while drawing an excellent business plan is procuring all required data. American academic and professor emeritus at Harvard Business School, William A. Sahlman says a great business plan is the one drawn by answering several pertinent questions.
Sahlman, explains, these questions are based on four vital elements of business: the people, the opportunity, context and possibilities of reward and risk.
Word from Harvard
“What’s wrong with most business plans? The answer is relatively straightforward. Most waste too much ink on numbers and devote too little to the information that really matters to intelligent investors.
As every seasoned investor knows, financial projections for a new company – especially detailed, month-by-month projections that stretch out for more than a year – are an act of imagination.
An entrepreneurial venture faces far too many unknowns to predict revenues, let alone profits. Moreover, few if any entrepreneurs correctly anticipate how much capital and time will be required to accomplish their objectives.
Typically, they are wildly optimistic, padding their projections. Investors know about the padding effect and therefore discount the figures in business plans,”
William A. Shalman, in his widely acclaimed article titled ‘How to write a great business plan.’
Regardless of your geographic location, following these basics is essential for every business plan- traditional or start-up. The guidelines we provide are accepted worldwide for making an excellent business plan.
However, some variations may occur, depending upon your geographic location.
Guard Your Business Plan
As a general rule, business plans must be printed on business stationery. This lends it credence and accords it the status of an official document. A business plan is confidential document. Hence, you need to take extra precautions to ensure it is not accessed by unauthorized persons. A business plan or any of its components, if leaked inadvertently or deliberately, can have disastrous effects on your
Business Plan Formats
Broadly speaking, there are three main formats for drawing a business plan.
- Traditional Business Plan.
- Start-Up Business Plan.
- Expansion & New Project Business Plan.
You can either select the traditional business plan, start-up business plan or Expansion and New Project Business Plan, according to requirements.
Traditional Business Plan
A traditional plan is best suited for existing businesses. Traditional business plans generally carry lots of details including vision and mission, history, past financial performance, product or service profiles, customer portfolio, details about staffing and future recruitment as well as projected growth in terms of clientele and revenue. It also takes into account prevailing market conditions. Projections are based on various considerations including political and economic scenarios as well as existing and anticipated competition.
Owners seeking funding for expansion of business or new projects can draw a traditional business plan. Here we provide some guidelines to make an excellent business plan. Some of these elements are common to all- Traditional, Start-Up and Expansion & New Projects business plans.
Vision and Mission Statements
These are two distinct and separate statements. In the vision statement on a business plan, outline what objectives the company wants to achieve over length of time. A vision statement should be written with clear perspective of other elements mentioned below. The mission statement also has to be sober and state why your company is in that particular business. Be very realistic in writing the vision and mission statements. These are the first lines that anyone within your company, business associate, financer or investor would read.
The first step to make an excellent business plan is by writing a detailed profile of your company, regardless whether it is an existing business, start-up, expansion or new business. Begin by writing a proper vision and mission statement. Give detailed information about products and services the business is offering or plans to launch. Include your personal educational qualifications, experience and expertise in the particular field of business. Existing businesses as well as companies looking for expansion or opening new projects can add details about the leadership team.
Figures, for obvious reasons, speak louder than words. Extant businesses and those looking for expansion or new projects should include verifiable financial data. This includes funding sources, assets, liabilities, taxes and other statutory charges, salaries as well as profits. Include brief details about your financials.
As investor, you would definitely have sufficient knowledge about the market and the position of your business. Further, every business will keep itself informed about the latest market scenarios, happenings, government policies and other details that directly impact a business. Writing these while making an excellent business plan also helps you review your company performance. Additionally, for those seeking investments and funding, it creates a good impression among prospective financers.
You can include projected growth and revenue for the running and upcoming financial year. Base your financial projections upon competitive advantages that your company has over rivals.
Details projected growth and methods you will use are vital for those seeking funding or external investment. All financial projections are to include anticipated expenses, expected Return on Investment (ROI), incidental expenditure, taxes and other charges. These are to be reflected against projected profits for the current and forthcoming financial years. If you have astute knowledge about the market scenario, you may include projections for three to five years. The US-based Small Business Administration recommends small business plans to include balance sheets, and cash flow statements for the last three to five years. It also asks small business plan writers to include details of loans and collaterals.
Include details about number of employees and their specific roles in the organization. This is where William A. Sahlman’s question about people becomes pertinent. Having a good team and mentioning it on a business plan also helps attract funding, if needed. If you are a start-up or looking to launch new project or expand your business, inform your financers about who will lead and key management figures. Provide their details such as education and previous experience, role they are expected to play in your business.
A new business plan has to include all documents or details about legal compliance. This includes licenses procured from the government and other authorities such as registration, tax certificates, memberships of trade bodies, environmental clearances if applicable and others. Legal compliance is something that financers look for before investing into any new business, project or expansion plans.
Describe in-depth the nature of products or services you offer. Include details about how and where these products are manufactured or the system used to provide services. Add notes about salient features of your products or services. Mention explicitly how your product or service helps clients. Businesses developing new products and services can also include their anticipated launches.
For new business plans, giving in-depth information about business offerings is something that can create a good brand image and attract funding, if required.
For small business plans and new business plans, including a proper marketing and sales strategy is inevitable. Indeed, this is the very backbone of the business. Unlike business plans of large companies, small business plans and new business plans do not have well defined marketing and sales strategies. This puts you at severe disadvantage when seeking funding. Indeed, start-up business plans also need to include a proper marketing and sales strategy. Here, you can discuss steps taken to promote your products and services, effectiveness of these measures, promotional campaigns, adapting current marketing and sales strategies for future and challenges faced.
Advertising, website and Social Media
Obviously, most companies nowadays have a website. Highlight features of your website such as online forms it provides for business enquiries, customer care, product and service offerings, company news and other relevant information. Every business needs advertising. With social media emerging as preferred media for customer outreach, millions of companies rely upon Facebook, Twitter, WhatsApp, Instagram, Pinterest and LinkedIn. A plan for extant businesses can include details about how much the company spends on advertising. Give details about where you advertise- newspapers, TV and radio, digital media. Provide detail any blogs you own or those where your company, its products or services feature.
Thanks for reading HOW TO MAKE AN EXCELLENT BUSINESS PLAN.
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