Critical Steps to Writing a Business Plan
Overwhelmed by the Idea of Writing a Business Plan? Start here.
Writing a business plan can be an overwhelming task. These feelings often translate into immobilization or confusion as to how to start the business plan. Starting a business plan begins with the first step:
1. Audience & Funding Type:
When writing a business plan, you must determine who will be reading it. This decision will shape the business plan. Do you plan to go for debt or equity financing? Each form of funding for your business has pros and cons. For instance, the venture capital market can be very time consuming and competitive. Do you have the time to write the business plan for investor funding and to network within the community?
Writing a business plan for investors is 15-30 pages with in-depth analysis and full details of facts and figures to support assumptions of the market. Writing a business plan for the bank is 10-15 pages and focused with the bank's concern with risk. A venture plan presents the upside and potential return on investments, whereas a bank plan reduces the risks and sells the ability to repay the loan.
2. Business Plan Outline:
A business plan outline is the second most important starting point once you've pre-determined your audience. The business plan outline should be prepared before the actual research and writing of the business plan.
3. Research & Information Collection:
Once you have made the decision of the type of funding your business requires, it is time for the research. Business plan research covers several key areas:
- Insight from your experience working and observing the industry you will enter. This data will have to be backed but by the next two sources.
- Published information from library, Internet, and paid database services will provide information on the market growth, overall industry perspective, and customer profiles.
- Field research covers interviews with customers, suppliers, competitors, and industry experts. This provides the real insight behind all the published facts.
4. Collection Files:
The easiest way to go about collecting all your experiences, interviews, and research is to create files for each section of the business plan. These files can be: paper-based, computer files or set-up using business planning software. As you start the research and collection phase of planning, fill your files with notes and printouts.
5. General Industry Overview:
Begin the research process with an overview of the industry; uncovering industry and association reports. By having a general understanding of the industry, you will avoid embarrassment in contacting experts with basic questions. Begin the field research once you have a good grasp of the industry fundamentals and need answers to the hard-to-find information.
Once the bulk of the data has been collected, the process of analysis begins. Look at building a competitive profile, contingency plan, risk assessment, etc.
Start the financials when you have found some average industry ratios for your business. Work closely with your accountant to develop realistic projections. Being overly optimistic will raise eyebrows with your investors or banker.
8. Executive Summary:
Save the first section for last. When you have thoroughly, completed all sections of the business plan, write the summary. Highlight the key points and include the return on investment or loan payback requirements.
9. Review & Editing:
Remember, you only have one shot at making a good impression. A well-written business plan that opens doors and wins the money is a plan that has been revised and reviewed. Do not forget this important step. Ask others for feedback. Make certain to edit, proofread, proofread, and proofread.
Business planning is not easy but by following these critical steps to writing a business plan, you will ensure your business has a chance at funding and success in the future.