All you need to know about making a business plan
Where do you see your business in the next five years? Do you want to make a million-dollar company or foresee it making just enough for a luxurious life? Do you want to make a brand that lasts several generations?
If you have recently started a company or already own a small business, you must have already worked out long-term goals for your company. But what about the plan? Is it in place? Does your business plan comply with your ultimate goal?
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A five-year strategic business plan serves three basic purposes for a business: communicating marketing ideas, operational guidelines and strategic planning. Such a plan is often used by small companies and startups as a document that holds the projections and proposals of your business that need to be presented to bankers or potential investors. Successfully written business plans explain the strengths of the business, industry trends, future growth prospects and financial projections.
Here’s what you need to do to write a business plan in a way that takes your business to the next level with each passing year.
Determining the objective
This is nothing that hasn't been said before, yet many businesses start without any specific objectives and shut down within the first five years. A solid business plan with a clear objective makes all the difference in determining the ultimate success and failure of a business. Jonathan Goldhill, a small-business consultant and former economic development expert, says, “We studied firms that had developed a business plan at the outset, and found that 85 per cent were still in business after three years.” (As stated in an article in Bloomberg)
Here is a list of questions you need to ask yourself before sitting to write your business plan. Remember that each answer must be backed by relevant data and metrics.
- How determined are you to establish a successful business?
- Do you want to invest your money without expecting any profits in return for many years?
- What is the expected revenue mark for the next five years?
- What will be the market share of your company in five years?
- Do you plan to enter a niche market or sell a broad spectrum of goods?
- By when do you plan to expand geographically?
- Are you ready to work long hours without any pay for months or may be years?
- Do you have a backup plan if the venture somehow fails to generate revenue?
- Do you plan to hire a team?
- Do you have what it takes for investors to invest in your business?
- Do you want to remain independent and privately owned or do you aspire to go public?
Steps to write an effective business plan
Step 1 - Combine your goals and vision to write a strategic plan. Begin by addressing the right marketing strategies to reach your target audience.
Step 2 - Prepare a company overview and executive summary outlining your company’s objectives, goals and strategies. You should be able to explain your expertise in the industry and how you plan to leverage your experience in achieving results.
Step 3 - Talk about the experience and talent of the management team. Adding a career graph for each founder will add credibility to your company’s projection. For example, if you have a strong technical background, be sure to mention it. If you decide to outsource some functions, explain how you plan to use the expertise of others and whom you're considering.
Step 4 - Give a detailed analysis of products or services you plan to offer. Your projection or presentation should clearly talk about the demand of your products or services and their marketability. Clearly state sound reasons about why your products are currently viable.
Step 5 - The last step is to create financial projections for the next five years. This summary should include sources of revenue, income statements, balance sheets and other cash flow estimates. While old businesses should create spreadsheets covering financial data of the past five years and projecting the next five years, new establishments may use pro forma projections based on estimated costs of operations for the next five years.
Use a SWOT analysis to identify your business’s strengths and weaknesses and focus on the opportunities and challenges of the industry. Your plan should cover all aspects of your business, including financial standing, marketing and sales, talent acquisition, operations and sources of revenue.
So are you ready to take charge and create a five-year strategic plan for your business? Trust us, it might sound like tedious work, but could be lots of fun, if you are really feel passionate about your business.