This is a transcript of the informational video How to create a business plan in 12 Steps
A business plan provides an outline to the framework of your business, declares your visions and showcases the necessary steps to fulfil these visions. It also summarizes your business’ history and background and models your core values and mission.
Creating a business plan in 12 steps
1. Company description
The Company Description provides a snapshot of your business. It describes the vision and direction of the company, so potential lenders and partners can develop an accurate impression about who you are. It does not need to be a lengthy description, but it should be well-thought out to present your business as accurately as possible.
2. Mission statement
The Mission Statement articulates your business' purpose and the philosophy underlying it. It is essentially a simple statement that outlines the company's goals.
3. Business goals and objectives
The list of goals and objectives should be specific and attainable. Remember: Goals that are not specific, will probably not be achieved.
Examples of business goals may include: A percentage reduction in the overall budget costs, a percentage increase in market share, a percentage increase in revenue or even a percentage increase in customer satisfaction. The date by when the business aspires to achieve these goals should also be listed.
4. Products or services
In this section, you are expected to give a brief and accurate description of the products or services being offered and their benefits to customers or clients. Remember: Steer clear from the use of complicated industry jargon and explain what you’re offering in layman’s terms.
5. Target market
This is the part where you are expected to identify the different groups of customers to whom you intend to market your products or services. You are encouraged to make reference to the typical customer's behaviour, preferences and age/gender/income, and outline ways in which you intend to reach them.
In this section, instead of perceiving your business as 'a self-contained system', you are required to briefly describe the industry in which you operate and your position within it. Do not forget to outline who your competitors are and how your company compares to them. Moreover, do reflect upon the industry changes you foresee and how your business plans on taking advantage of them.
7. Business structure
This part sets up the hierarchy of the people involved in your business. It would be ideal for you to incorporate an organisational chart that maps out the professional relationships and relative positions within the company.
The individuals involved in the running of the business should be indicated, and a description of what each individual brings to the table needs to be included. In cases where a business has a board of directors, the name, expertise and position of each director should be listed. Moreover, information should also be provided on the role of external business support professionals or advisors (such as lawyers and accountants) that are engaged in your business.
8. Market research
Research is the foundation to marketing. Before you can sell something, you have to know who might buy it and what price they are willing to pay for it. To conduct market research, you must gather facts and opinions - in an orderly and objective manner - on your:
- industry and market environment - to understand factors external to your business
- customers - to develop an appropriate customer profile
- competitors - to develop a standard competitor profile
It is important not to confuse marketing with advertising, as the latter is only a single component of the whole marketing process. Marketing specifically refers to preparing a product for the marketplace; Advertising, on the other hand, is making your product and service known to an audience or marketplace. Advertising therefore uses the data and research collected by marketing strategies to best communicate the brand.
To help you develop a successful marketing strategy, you are encouraged to resort to the 4Ps of Marketing, that is, defining your marketing options in terms of price, product, promotion and place (i.e. the channel through which your product or service is being sold to customers).
Additionally, remember to include a sales forecast. You can start by preparing a month by month projection based on either past sales (if available), industry and market research as well as your drafted marketing plan. Then, align forecast assumptions either with your market research or past sales (Do not pull numbers out of thin air!). Finally, discuss how these sales will lead to company growth.
9. Funding request
This section is extremely relevant to those businesses who are seeking funding to sustain their venture. Whilst it is important to list your current and future (5-year timeframe) funding requirements, it is equally crucial to ensure that your financial projections match these same requirements. All possible credit sources will be on the lookout for inconsistencies and few, if any, will allow for corrections to be made once these inconsistencies are uncovered.
An explanation of revenue forecasts and the timeframe and methods through which the business expects to make a profit is therefore necessary and should include:
- a projected balance sheet: Providing a measure of your business' value at a particular point in time
- a cash flow projection: Outlining the amount of incoming and outgoing cash during a given period (usually monthly)
- a profit and loss projection: Measuring how the business' income performs over a specific timeframe (usually six months or one year)
- a break-even analysis: Indicating when your business will be able to cover all of its expenses and start making a profit
- a break-even point: Determining the quantity of products that your business has to sell per month, to be able to cover its costs
10. Optional appendices
This section can support you in highlighting your accomplishments by including relevant materials and/or information, such as: Brochures and advertising materials, Blueprints or plans, Maps, Copies of leases or contracts, any press coverage of the business, Industry or Marketing Studies and any other materials needed to support what you claim in your business plan.
11. Executive summary
As the name implies, the executive summary is a clear, concise snapshot of your business. Whilst this is the very last section that you will work on, it will become the very first section of your business plan. Therefore, it must not only be engaging, but should also provide solid evidence that your business will succeed.
Make sure that you include a short description on each of the sections presented above, BUT do not stop there. Supplement the summary with key information that is bound to capture the attention of potential investors. This may include the competitive advantage that your product/service has over others, your niche target group or even an outline of your financial requirements to fulfil company goals.
12. Final touches
Finally, remember to include a cover page and a table of contents.
Cover page: Even though we should not judge a book by its cover, let's face it, we do. Therefore, every business plan should have a professional-looking cover page that includes the name of the owner(s), the name of the business and the relevant contact information. The business logo can also be included (if available).
Table of contents: A table of contents brings organisation and structure to your business plan by listing key sections according to their corresponding order and location (page number).
Once compiled, assemble the sections of your business plan in a quality binder, in the following order:
- cover page
- executive summary
- table of contents
- company description
- market research
- product/service line
- marketing and sales strategies
- funding request
- financial projections
- appendices (if applicable)