A business plan is an essential roadmap to guide a company, regardless of size or industry. It communicates a company’s goals, ambitions, timeline, finances, and methods needed to achieve them. Business functions and members of the organization can better align their activities within these milestones.
Benefits of a business plan
There are specific reasons why business owners and entrepreneurs develop a business plan as their first step in building their businesses. It’s because a business plan gives you these several benefits below:
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It helps you understand where you want to go with your business and what it will take to get there
It is critical to design your future strategy when running a business because it relates to your business model, your market, and your finances. With a business plan guiding you or your business, you can prioritize expenditures, markets, and activities. As a result, you will have an idea of who you are targeting, when, and why. It also helps you identify low-hanging fruits which you can pursue as you build your cash reserves and manage your cash flow.
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Reduces your overall risk
Starting a business involves risks. There is a chance you would be thrown a curveball. A business plan allows you to identify potential risks you may face. With that in hand, you can plan for mitigating measures or how to prevent them altogether. Nothing is more painful for a business owner or entrepreneur than when they have to end their venture prematurely because they were caught off guard by something they could have prepared for.
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It helps you uncover your business’s potential
Your business plan often outlines your business model within the market you plan to operate in. This allows you to identify your competitors as well as potential collaborations. Knowing your market value allows you to demonstrate your familiarity with the market. This, in turn, helps you convince potential investors. Knowing your business plan also allows you to evaluate when is the right time to seek financing facilities.
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It makes you more confident as a business owner and more likely to succeed for long
According to a study published in the Journal of Management Studies, companies that have a business plan and evaluate it regularly grow 30% quicker than those that don’t. In fact, these companies succeed and perform significantly better in the long run. Instead of being arbitrarily guided by milestones, you would be able to determine whether these milestones are in line with your expectations. It sets the context for you to evaluate your business and its activities.
What to include in a good business plan
Now you know how important it is to make a business plan before you start a business. Here are some essential aspects you need to include in your business plan:
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Executive summary
The executive summary is an overview of your business plan. Usually, this section is placed on the first page of the business plan. However, it is not uncommon to find executive summaries as a separate part of the plan. You’ll want to cover the highlights of your detailed business plan in a succinct manner.
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Business description
This part usually starts with a short description of the industry you will operate in. When you describe the industry, remember to explain the present situation and future possibilities. You should also provide information on the industry’s various markets, including any new developments that may affect your business. This includes the gaps in what is being offered and how your product, service, and solutions would minimize or fill those gaps.
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Market analysis
This is where you can show all of your potential customers and their market segments. This section also covers your target market as well as the growth of your market. Try to be as specific as possible. With precise market analysis, creating a sales and marketing plan will be easier. The better you understand your market, the better you can target and connect with them. Remember, even when your product or service benefits the general public, you don’t have the budget or resources to target everybody.
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Competition analysis
The goal of competition analysis is to reveal the strengths and weaknesses of your market’s rivals, strategies that will give you an advantage, barriers you can establish to prevent competition, and any flaws that may be exploited during the product development cycle. The market analysis paints the potential; competition analysis helps you narrow down your effort. Understand your competition’s value proposition and unique selling points. This allows you to plan how much you need to spend to compete; or how much the competition might cost you. In the former, it refers to your active marketing activities like roadshows, Google Ads, and search engine marketing among others. The latter relates to a potential price war within a price-sensitive ecosystem: will you be able to compete when your competition slashes its prices?
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Organizational management profile
Use this section to describe your team in detail. It would help if you also offered a brief description of your company’s location, legal structure, and history. You can include brief profiles for each significant team member. Include reasons why your team is the best fit to make ideas a reality. Also, describe your business ownership. It is also important to use this as an opportunity to understand what the key personnel bring to the table: this includes their strengths and weaknesses. That will allow you and your team to better plan your entry into the market by leveraging on the strengths.
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Product or services description
It’s the most critical section of the business plan: what your business brings to the table. The product or service description describes the challenges you successfully solved for the consumer and the solutions you provided. Describe your market’s competition as well. If you have a competitive advantage, this chapter is an excellent opportunity to discuss it. Take a leaf out of the big-name businesses out there: mobile phone and automotive manufacturers produce a variety of models. Which market segment do these different models target? How do they compare to their competitors in that market segment? You can replicate the same for your products or services.
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Marketing plan/sales strategy
Your marketing plan in the business plan is a brief description of how you will bring your product, service, or solution to market. Here you explain your plan to reach your target market segment, how you want to sell to that market, what your pricing strategy will look like, and what types of partnerships are required to make your business a success. This is also an excellent section for displaying your business’s SWOT (strengths, weaknesses, opportunities, and threats) analysis.
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Funding details (or request for funding)
If you are planning to get funding, include brief funding details in your business plan. This part explains how you intend to use the funds raised from investors. Usually, this section is referred to by the term “Use of Funds”. If you plan to raise through SME digital financing platforms, you may want to include it here so you can plan how it fits into the overall financing and funding plans.
Include your exit strategy as well. An exit strategy is a plan to sell your business to another company or the public. If you want to keep ownership indefinitely, you can skip this part.
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Financial projections
Financial projections outline your financial plans for the future. This is frequently a terrifying aspect for business owners. Therefore, there is no harm in seeking assistance. Today, you can use many tools and resources to help you make projections.
Developing a solid business plan can significantly impact your business’s long-term viability. With a business plan, you may quickly expand and accomplish your company’s visions without encountering substantial challenges. Most importantly, your business plan is not etched in stone. You can still revise it annually or following a major event affecting the market you operate in.