A business plan can be seen as both an entrepreneur’s business ‘resume’ and its growth strategy. Since investors and venture capitalists usually want to consider investing based on a business plan, a business enterprise should document its business objectives and directions. Business plans perform the following managerial functions for a business enterprise:-
- It assists the entrepreneur crystallises and direct their business ideas
- It can help the entrepreneur set goals and objectives, strategies and control measures.
- It can act as a means of attracting any form of funding for the business.
- It can convince capitalists and other investors that the entrepreneur has isolated some beneficial growth business opportunities in all aspects possible.
A business enterprise with a business plan is substantially focused in terms of environment, goals, policies and strategies. Generally, a business plan shows the firm’s purpose, philosophy, plan of action expected challenges and the route to future success, growth and development. A business plan can be described as a road map, a statement of strategy. In this article you will learn how to write a business plan.
Reasons For Business Plan
Here are reasons why you need a business plan:
- According to statistics, entrepreneurs or companies who complete a business plan 2.5x as likely to get funded than those who don’t.
- For selling the interests of the entrepreneurs and other stakeholders to the relevant interest parties ( eg. Finance houses, venture capitalists)
- To obtain bank funding
- To obtain investment finance
- To seal a joint venture arrangement (strategic alliance)
- To obtain business contracts.
- To attract major human resource/personnel
- To tie up mergers and acquisitions
- To encourage and direct enterprises management team
Keep reading to learn how to write a business plan. Writing a business plan is same whether you are in Nigeria, Ghana, South Africa, India, United States or anywhere.
Format of a Business Plan
When writing a business plan, the best and most advisable format is as follow.
Table of contents
This enables the reader to quickly find the exact information being sought.
These summaries the entire business plan and is expected to cover the following major issues:
- Situation analysis
- The company background – very brief
- The product/service offered
- The potential market
- A three or five-year financial summary (profit/loss account and balance sheet)
- The management team
- The financing policies and strategies.
This describes the company’s background and historical account of the company as well as its prospect. Example:-
- When the company was founded
- The company’s product – whether protected by a trademark, copyright or patent right, etc.
- Product viability – how good is the product
- Markets penetrated
- How much already invested and what is projected to be invested.
This informs the stakeholders how the entrepreneur wants to capture its potential market segments in terms of:
- Product/service, pricing, distribution etc
- Advertising policies and strategies.
Management ownership structure
This section introduces the people financing the business
This section focuses on the strengths and weaknesses of competitors
Financial statements and projections
This aspect deals on projected cash flows, financial forecasts, balance sheet.
This section contains details that cannot conveniently contain in the main plan, such as organisation chart, extended market information, ‘resume’ of key personnel
How to write a business plan
Follow these steps to write a good business plan:
1. Carry out proper Market Research
Research your market to identify their needs and want and analyse your product, to be sure your products satisfy the needs and want of the market. Therefore to write a good business plan, you must understand your company, your market, your product, your competition and the business environment very well.
2. Determine the objective the business wants to achieve
Objectives represent a statement of what an organisation is trying to achieve. They are the results expected from the planned business activities. Objectives should be quantifiable, mutually consistent, realistic and related to a specific time scale.
These are concerned with what products or services are to be sold in which markets in what quantities or values and when. Example:
- To achieve a total sales revenue of N800,000.00 in 2009 representing a 10% increase in 2008 figures”.
- To expand the number of regional representatives to 30
- To aim for an average selling price of product C ₦150 per unit.
- Expand sales from current ₦500m to ₦ 600m, i.e. about 20% of the previous year sales
3. Fashion a profile of your company
Your company profile includes the background history of the company, the industry within which it is operating, the range of products or services it offers, the market/s it has captured, the resources in terms of manpower, investment profile, property acquired, how it is going to solve its problems and what are the business unique selling propositions. The profile when created should on the business “About Page”, for every visitor to see.
4. Formalise all aspects of your business
Financiers are anxious to see their investment increase, and therefore they want to know everything about your business. To help your financiers have all the information concerning your business, make everything formal, from your purchases, expenses, cash forecasts, and indeed the strategy you have put in place to generate revenue.
5. Have a marketing strategy
Marketing strategy represents the overall thrust of a company’s business activities. The business manager now outlines the broad marketing strategy or ‘game plan’ that should be used to accomplish the marketing objectives. It may be in the following form:-
- Products – bringing new products in the market
- Entering new territories with existing and new products
- Strategy to cut market share from competitors.
- Price – using skimming or penetration pricing strategy
- Distribution outlets – to be established in Ibadan and PH
- Sales outlets – expanding to supermarkets
- Advertising – using social media, besides
- Sales promotion – introducing new forms of sales promotion.
- Marketing research – undertake market research that will enable you to penetrate the market further.
6. Projected Profit and Loss Statement and balance sheet
Action plans allow the product manager to build a supporting budget. On the revenue side, the budget shows the forecasted sales volume in units and the average price, and sales revenue. On the expense side, it shows the cost of production, physical distribution, and marketing
Once the business plan is being implemented, how can its progress be monitored and controlled? This calls for standards against which results can be measured, and contingency plans for modifying marketing programmes if results do not match expectations.
- Standards of performance stem from the objectives set for the marketing plan. This is why it is important to make these objectives specific as possible stating both quantities and a time scale.
- Measuring results may not be as simple as it looks. Example, what if the marketing objective is to take a 10% market share in the first year? There is a need to set up a method to measure market share during the year. This involves making assumptions about the size of the total market and its likely growth rate during the period of the plan so that we can estimate our share of the whole market.
- Contingency plans are needed to cope with significant variances from the plan. If results are a long way short of the standards anticipated, how long, do we wait before making changes and what kind of changes are envisaged?
8. Show you are dedicated to the business.
Whether your business plan is for you alone or you share with your bankers or other financiers, you must exhibit some seriousness in the plan since it is the document that will attract investors to your business. You can show your passion and dedication by acknowledging the errors made previously and how you are going to correct it. You can show how you are going to improve revenue in markets that did not accept your products previously or territories sales has not been encouraging.