How to Write a Winning Business Plan
1. Why write a business plan?
You might start writing a business plan because you’ve been told that’s what you should do. Or your motivation might be to please the bank, a potential investor or someone else. All valid reasons, but none of them is the right one. The real reason for preparing a business plan is to develop a thorough and detailed knowledge of your business and all its
Writing a winning business plan is not easy, you need to be very honest and thoughtful about all aspects of your business, how it operates and your competition.
The insights you gain from this process will hold you in good stead as your business grows and matures. You will be better prepared to handle all the issues that will emerge on your journey.
2. Use different versions for specific audiences
A well thought out business plan becomes an invaluable document which can be adapted to many purposes. I suggest different versions to meet the different emphasis and information needs of different audiences:
- lenders are interested in cash flow and an assurance that loans can be repaid;
- investors need confidence that the business can grow significantly and they will receive a high return;
- the marketing plan provides useful direction to advertising agencies, PR firms and others responsible for ensuring a consistent image; and
- employees and management need to remain focused and working towards a common goal.
3. Vision & business opportunity
Just what is it you propose doing? Investors in particular need a clear statement of the business opportunity you are pursuing and why it is so exciting. Be clear about why are you doing it and what you expect to get out of it, and what others will get.
You have to be able to annunciate where you are going – it makes it a hell of a lot easier to others with you if they know where they are headed, and with everyone pulling in the same direction, you’ve got a lot more horsepower than if they are all pulling in different directions.
Don’t be afraid to think big – small ambition achieves small results! Be realistic though – if it just doesn’t make sense very few will want to join you.
4. Business personality
Every business has a personality, just as every person has one. Think about what you want your business personality to be, and how your customers, suppliers and employees think about the business.
This includes concepts such as broad market positioning and business values. Aspects of your personality should permeate throughout the plan, as this is often the unseen glue that holds everything together. Watch for any inconsistencies.
A good place to start this is to look at your own personality – have a frank discussion with people close to you about how you are seen. This may not be completely comfortable but will generate powerful insights about how best to run your business.
5. Competitive advantage & sustainability
There many aspects to this, but the fundamental element of each is “why should customers buy our product or service?”
Every business no matter how big or how small attracts customers for one reason or another – price, convenience, location, product features or benefits, personality, ego and so on. The more you understand about why it is that customers do business with you, the better able you are to entice more of them to you. It helps you promote the business, build systems and management disciplines that reinforce these reasons and build stronger loyalty.
Be brutally honest with yourself about comparing your products or services with those of your competition and about how well they fill customer’s needs.
Advantage can come from a number of different sources, amongst them being technology, the business model, a new way of doing things or size. It’s also important that you can demonstrate how you can keep this advantage and not let others over-ride it or match it.
Note that all business strategies can be classified as being one of three types – cost (pricing power, typically a result of size but can be alternate product form), differentiation (product features and benefits) or focus (appealing to a specific niche in the wider market).
Investors in particular are looking for a unique source of competitive advantage which can be leveraged up into a much larger business – this is how their investment will generate the returns they seek.
6. Research
Your plans have to be based on realty not perception. Often business owners don’t truly understand the reasoning behind customers buying their product or service. What is the basic need being met, and what other ways can this be met? For instance a bus company doesn’t only compete with other bus companies, it competes with all forms of transport from trains, planes, cars, bicycles, walking and not taking the trip at all.
You should have a solid understanding of how big the potential market is and whether it is a mature market or one with plenty of growth left. You should know what segments or niches exist, and which ones you compete in, together with what share of the market you have.
Ideally you should have detailed knowledge of all of your direct competitors and their strengths and weaknesses. The first aim of the game is to beat them, and the more you know about them, the better off you will be.
You also need to have a sound understanding of the indirect competitive forces that shape your trading environment. This includes the relative power of both buyers and suppliers in framing pricing or market activity, the potential for new entrants and the likely future impact of technology or product development to alter the way the market operates.
7. Marketing plans
Marketing covers more than just sales and advertising. You need to demonstrate how you will compete and be more successful than others.
You should provide detail on your product strategies – including things such as features and benefits, how these target selected niches, your new product development schedules and so on.
What is your pricing strategy – high end exclusive, middle of the road, value, low budget, are you full service or bare bones? How often and when will you discount, and why?
How are you going to promote the business and who to? What mix of advertising, public relations, and direct sales will you use to stimulate interest or create desire. What internet or e-business strategies will you adopt?
What sales distribution strategy are you adopting? – product licensing, franchising, distribution network, direct sales and so on.
8. Risk & contingency planning
Risk is a part of every business. Don’t ignore it or gloss over it when preparing your plan. Recognise it and address it – where possible develop strategies to adopt should certain circumstances eventuate.
Expect the unexpected. Some people say it’s not worth planning because things don’t often work out the way they’ve planned. The whole point is to be prepared, so that when things change, you are ready for it because you have the depth of knowledge to support a change in direction.
9. People
Does your team have the leadership, skills and experience required? Investors look to a proven track record of success in building a business – it’s a different set of expertise4 than managing a steady state enterprise. Investors invest in people as much if not more than they invest in product, ideas or business models.
How committed are your people and how will you keep them and reward them?
10. Financial plans
Many businesses fail because they are undercapitalized or because they are poor money managers. Note that a budget is not a plan. It is important to be realistic whilst erring on the side of conservatism.
Make sure that the numbers add up and are consistent with all aspects of the plan – they should come from the plan, not be prepared as a separate exercise.
Include a Cash Flow statement as well as Profit & Loss and Balance Sheets. Be clear about how much funding you need, when you need it and what the money will be spent on.
11. Exit
If you are looking for investors, they will want an exit point to allow them to realize the gains they make on their investment. Dividend streams are rarely sufficient enticement to investors, who want heir capital back. Be clear about the exit event – public listing or trade sale are the 2 most common, but there may be a share buy-back provision as well.
12. Attention to detail
Make the plan concise – most potential investors will read the executive summary and skim the rest. A 200 page monster simply won’t be read. You need the detail to support your statements, but this is best done at an investor presentation.
13. Review (get a 2nd or 3rd opinion)
The most experienced entrepreneur can still benefit from a different point of view. Even if you’re the only person involved in your business, find someone who can study your plan objectively and point out possible weaknesses you might have missed.
14. Implementation Plan
It is said that a poor plan executed well is superior to an excellent plan poorly executed. The key to successful planning is to think through all aspects of your business and how you will compete most effectively.
The key to real success is action – the planning process should give you the knowledge to react to changing circumstances and be more savvy than your competitors, but this knowledge is worth little if you don’t get on with it!
15. Plan Contents
- Exec Summary (1 page)
- Business Description or Company Overview (1-2 pages)
- Products & services (1-2 pages)
- Marketing & Industry Analysis (2 -3 pages)
- Marketing Plan (3 – 4 pages)
- Operational Plan (1-2 pages)
- Management (1-2 pages)
- Financial Plan (1 – 3 pages)
- Capital & Cost Analysis (1 page)
- Appendices (15 – 20 pages)
- 5 year Profit & Loss forecasts
- 5 year Balance Sheet forecasts
- 5 year Cash Flow forecasts (monthly & quarterly)
- Resumes of founders & key personnel
Written by David Shelton Principal of Transition Capital.
Transition Capital assists emerging high growth businesses to raise the capital needed to fund growth. It also provides management support to develop more effective and powerful enterprises.
David can be contacted on davids@transitioncapital.com.au
Question about business plan
Over 60% of small businesses fail due to a lack of planning and execution of a business plan.?Over 60% of small businesses fail due to a lack of planning and execution of a business plan. When businesses are so small it is rare to have an HR manager, because of that training and follow-up is non-existent. Who would be accountable and how could management implement a training routine to make it beneficial and cost effective?
- Business
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18 Responses
I know its a lot of info, but I have prepared the following to help people make the right decisions when starting their own business. Good luck, Its great to work for yourself.
The 12 Most Common Mistakes New Entrepreneurs Make & How to Avoid Them
A large number of people who start their own business do not realize how much work and
time will be involved. They fail to carry out any primary research and as a result become
quickly overwhelmed.
Perhaps the first question to ask yourself then is whether you are in fact ready to start your
own business. Do you have an entrepreneurial mindset? Are you committed to spend all the
time you need to succeed? And are you ready to take massive action?
At first, you will have to wear many different hats; you will be the CEO, the general
manager, the accountant, the salesperson, the computer technician, the secretary, the
receptionist. You must therefore prepare yourself because there will be days when you are
disappointed, depressed, or frustrated. You have to realize that success will not happen
overnight. And it may take a year or two before you achieve your expected results.
To avoid these disappointments, here are The 12 Most Common Mistakes New
Entrepreneurs Make & How to Avoid Them:
Mistake # 1 – Failure to spend enough time researching the business idea
to see if it's viable
Numbers of new entrepreneurs have often failed because they were not truly interested in
the business; they were more interested in making money. It is important to start
something that you really like, because you will be spending a lot of time on it.
Your assignment Spend all the time you need working on your business plan, which should
include: your mission statement, your business strategy, research on your target market
(demographics), industry analysis (size, economics, trends, success factors, challenges,
etc.), your marketing plan, your financial projections and sales.
Mistake # 2 – Failure to determine whether the business actually adds
value
The most sustainable businesses, those that withstand the test of time, provide value by
performing a service that people need.
Your assignment Make sure your products or services provide value and benefit to your
clients. Be ready to solve any business problems that your clients may have.
Mistake # 3 – Failure to gain a complete and total understanding of the
business
Every business has drivers; hot buttons and key levers. What drivers exist in your business?
Many business leaders, executives and management consultants would say that success
largely depends on attention to detail.
Your assignment Understand all the aspects of your business, and of particular importance,
know how to present them in an easy and simple manner.
Mistake # 4 – Failure to describe the business in only one or two sentences
No doubt youve experienced the entrepreneur whose business is so technical or complex
that he cannot explain the concept in plain English. Or, it takes 20 minutes to convey the purpose of the business. What value or benefits does your business offer?
Your assignment Have an efficient 15 to 60 second elevator pitch that introduces you, your
business mission, focuses on the benefits you provide and makes you and your business
memorable.
Mistake # 5 – Failure to conduct the primary research
There are many great ideas you can latch on to, but the key in business is to make sure the
ideathe central theme or mission of your business venturecan attract customers and
generate sales and profits. A great idea in and of itself is not enough to start a business.
Your assignment Take the time to gain experience, study the business, understand what
makes the business work (how to serve the customers and generate profits) and what leads
to losses.
Mistake # 6 – Failure to contact professionals who can help you get started
Numbers of new entrepreneurs ask their friends and family for advice when starting a new
business. The problem is that they often ask people who have never started a business; so
in reality, these people are not in a position to offer sound advice.
Your assignment Get a mentor or two. Surround yourself with experts who possess skills
and expertise that you lack. Team up with professionals who can complement your
strengths and cover for your weaknesses.
Mistake # 7 Failure by underestimating financial requirements
Do you know how much capital you need to start your business? Do you know the market,
did you calculate your cost, did you project your sales, do you know the number of clients
you need? Do you know how long it will take before you get your first benefits or before you
will run out of money?
Your assignment Invest the time to work on ALL aspects, especially the major ones, of your
business before you start.
Mistake # 8 – Failure to make marketing a priority
Many new entrepreneurs start their business without determining their target, niche and
demography first and as a result have failed to attract any clients. Marketing should be one
of your top priorities. Devising a marketing plan will help you determine how to promote
your products or services and create a system that will generate more clients for your
business.
Your assignment Dedicate a good portion of your time and energy to working on and
implementing your marketing plan. Set up a meeting with yourself once a week to work on
your marketing plan and whatever happens never cancel this meeting; it is essential for
your business.
Mistake # 9 Failure by under-budgeting the marketing costs
Today the world is overcrowded with businesses and probably a number of those in your
market perform essentially the same functions as you do. This means that you have to
differentiate yourself from them by making your business stand out. Publicity is essential to your livelihood; otherwise you will not attract any customers.
Your assignment Make sure you have a strategy that puts the word out there. Provide
adequate publicity, business cards and marketing materials that project a professional
image. Dont try to save money on these; they are reflecting your business. A cheap
business card or flyer will not make a professional impact.
Mistake # 10 – Failure to focus on the business
Many new entrepreneurs are energetic and enthusiastic people (which is essential to
success), but they can also be overly optimistic and pursue too many targets and directions
at once. This typically results in mediocre results. Define your business mission as succinctly
and narrowly as possible. When you move in too many directions at once, especially in the
early days of your business, you are likely to fail to execute anything correctly; so you end
up working on the business instead of in the business. In other words, you will spend all
your time operating each task on your own. You wont have the time to sit back, and decide
on the best way to develop your own marketing plan, create new products, or improve your
services.
Your assignment Know you goals. Put them in writing. Make sure they are realistic, specific
and measurable and that you set yourself a deadline to achieve them.
Mistake # 11 – Failure by over-marketing
Once you have developed your product or service and have perfected your offering, you
may think that your offering is the best in your marketplace. But unfortunately, to be
efficient you cant sell to everyone. You need to select a specific target market and stick to
it. By doing this you will have a more efficient message and will more likely achieve success
much sooner.
Your assignment Carefully determine your niche, your demography, your ideal clients,
where they go, what they read, what their hobbies are, etc. Once you have a full
understanding of your clients profile you will then have a full understanding of how and
where to find more of them.
Mistake # 12 – Failure to follow-up with clients
Many new entrepreneurs are often so desperate to constantly find new clients that they
neglect the clients they already have and in fact end up losing business. Statistics show that
it takes seven more interactions to secure a new client than to sell more to a repeated
client. So develop and maintain a useful and organized follow-up system to offer new
services to your clients and dont let them slip away.
Your assignment Constantly and consistently communicate with your current clients.
Start a newsletter, offer special sales, create new products to upsell, join affiliate programs
if you dont have your own products. People who have already bought from you will
appreciate it when you recommend other products. Statistics show that up to one out of
three clients will take advantage of this new offer. It is essential to build a very, very special relationship with your clients. They are your best audience.
10 steps to start new business:
- What is your business plan
2- what is your financial backing
3- Rent or own the building
4- regulations and licencing – taxes and insurance
5- equipment ? computers, machines, etc
6- do you understand your customers wants and needs- how will you meet those wants/needs
7- location location, will the area sustain your business- is their room to grow?
8- advertising plan: to whom, where, what, when, how, cost
9- hours of operation – will you be open when your customers want/need you
10-Taxes- how much will you be paying?
The heck with going to a lawyer…that's $500 you'll never see again. First you can get a provisional patent from the US Patent and Trade Office http://uspto.gov It will cost $200 and protect you for a year.
As far as non disclosure statements go, any successful VC will laugh at you if you ask him/her to sign. Why? VC and angel money is so tight they see hundreds if not thousands of proposals a year. Why would they bother stealing your idea if there are so many to chose from? I've been to the MIT VC forum where people like you and me get 5 minutes to pitch our idea to a panel of VCs. Again, they hear hundreds in a day. Even if your idea is great they wouldn't have the time to develop it if you worry about it being stolen. The typical VC is in involved in 10 – 15 companies and they are so busy managing so many other companies, believe me, they won't bother with yours..
Thanks for the support my friend!
Take care,
Alan Toaca
Hey Alan! Your new channel is great. I like your videos a lot. And I think they deserve 100 stars as always! I saw 3 negative points on some comments here and then I gave 3 positive points against them, because I think it is not fair to give negative points to someone who make an excelent work like you do. 100 stars!
Thanks for the support!
Take care,
Alan Toaca
Thanks for the support!
Take care,
Alan Toaca
nice info here man
This same scenario is occurring with brother in-law as I type this. His parents have owned their company for over 30 years, and while it is marginally successful, it's outdated and needs to be improved.
A couple of things to consider:
1. The business plan. This is definitely a positive thing to do! If your parents think it's necessary, then write one without them and then show it to them when you're done. They may be amazed at what they see. Do the legwork to show you're serious and dedicated to they business they built.
2. You're on the right track with regards to automating everything. I currently have a client who won't set up online banking because he doesn't "trust" computers. It's common for people to be fearful or nervous around computers and software applications if they're unused to using them. You can start small, Excel Spreadsheets to list inventories, work schedules, etc., Word Documents to type letters. Show them how easy it is use once they can learn it and gradually build up to more "sophisticated software" like Quickbooks or something similar (if this is needed). Point out to them that they had the knowledge and wherewithall to grow and build their business, and that learning a computer is nothing compared to that.
Working with family can be tough because they're family. You're their child and they may have a hard time seeing past that. Start small, prove yourself and your ideas, and show they what can accomplished. Above all, empower them, show them how this (your changes) will improve their professional lives. Key word is "show", don't just talk about it, do it, and show them the results.
Good luck!
Thanks for the support!
Take care,
Alan Toaca
Thanks for the support!
Take care,
Alan Toaca
you can download business plans off the net that are appropriate for the business, they need to be thorough, informative and more information the better, l did one years ago for the bank which had surveys, everything you can think of and was told it was the best business plan the bank manager had ever seen,
I hope you already have your business idea. If you don't, it sounds like you have the cart in front of the horse.
The best way to get a loan is to have your business already created and actually selling some service or product. If you can show there is demand for what you are providing, and you are able to make a modest profit at it, you are much more likely to get a loan. You can then tailor your business plan / loan application to show how investing in certain equipment, space, workers, etc… will allow you to grow the business more and make larger profits.
In this market, no one is going to loan you money, unless you have already proven experience making money running this type of business.
sometimes colleges give you a writing prompt to guide your essay.
when i wrote my essay i used a question that reveled how and what i thought about but not necessarily my life story.
its very difficult to write about yourself without sounding like a narcissist or rambling on and on about everything significant thing you've ever done.
i say talk about the paper and how your participation has positive impacted your life or something like that.
Keep it coming
I think you have a good idea since a party supply store is more about selling the plates, balloons & decorations for parties (consumables) and a party rental store would more likely rent tables, chairs, chaffing dishes, etc.(durable items).
You are still going after the same market, which you are familiar with; however, you will be targeting a different segment. The business plan for a rental store is much different than a retail outlet. You need to consider the higher assets that will be required to have enough rental equipment to maximize your sales while not tying up too much capital during the off-season.
I'm not sure why someone would buy the actual business plan. If the product design is as good as you say it is, then the product would virtually sell itself to investors, and that is where the sales would go: to the product manufacturer, and not the person who put together the numbers. Sorry!
However, if you're applying for a loan and if it is a big amount, banks and even the SBA may consider other factors aside from your business credit:
- A business plan explaining what the business is, but this is only the first step
- Your background and experience in the business — in my experience, this is KEY in the eyes of the bank because they want to make sure that you know what you are doing and that you can make the business work. If you don't have any experience with the business, have someone on board that knows the business to give banks assurance that someone will guide you
- Your credit factors because it shows your dependability and how well you handle credit. They will do a credit check on you and poor credit history may be frowned upon, or even reason for the disapproval of your loan application
- Your collateral. Banks, even SBA guaranteed loans, want the borrower to show collateral. They want to be guaranteed that somewhere somehow they can get payment from you
- Condition or terms of loans. Banks would want to know three important things: "How much money are you requesting? What will it be used for? and For how long will it be needed?" Banks oftentimes prefer to approve loans for items that can be identified, has lasting value, and can be repossessed and sold if things fail.
Thanks for the support!
Alan Toaca