If you are serious about attracting investors or getting a business loan, then you need a plan. Whoever said you don’t need a formal business plan to start or expand your business was certainly not addressing those who need funds from creditors and investors. That is why i wrote this guide for three set of individuals:
- Entrepreneurs who are just starting out in business and want to write their own business plan
- Established business owners who want to expand their businesses and need a business plan
- Those seeking funds (grants, loans or equity) to finance their business project
Our Most Popular Sample Business Plans & Templates
You don’t just write a business plan anyhow, there are laid down steps to follow so that your business plan will have a professional look and flow. This article will teach how to structure your business plan.
The Beginner’s Guide to Writing a Business Plan to Attract Investors or Get Loans
1. Cover Letter
The cover letter serves the same purpose as it does when you submit one along with a resume as a job candidate; it introduces your business plan to the reader. Because your goal is to market your idea to prospective investors, creditors, partners, employees, and other stakeholders, all the parts of your plan must appeal to the reader. Here are the elements that you need to include in the cover letter:
- Address of recipient
- Your address
- Salutation (you must include a specific name as in, “Dear Mr James.”)
- Body (state clearly that you are submitting a business plan for your business, which you can describe in one sentence; state clearly that you are seeking financial support for your business idea. Tell the reader what to expect in the following pages, and express your eagerness to hear back from them. Don’t forget to add your contact details)
2. Title Page
Remember, you will never get a second chance to make a first impression. So, you certainly don’t want to overdo this aspect. Since nobody will blame you for simplicity, stick with that option; which means you should avoid bright or contrasting colors and unnecessary fancy borders. The following are what to include on your title page:
- Your business logo (if you have one)
- The name of your business
- Founder’s name
- The words “Business Plan”
A Business plan executive summary is the most important section of a business plan because it is the first thing an investor sees. This chapter will reveal you the basic necessities and data that must make up your business plan executive summary.
Components of a Business Plan Executive Summary
- Business concept (what you do or what you intend to do)
- Business goals and vision (what you want to achieve)
- Product/service description and differentiation (what you offer and what makes it different)
- Target market (who you want to sell to)
- Marketing plan (how you plan to reach your customers)
- Current financial state (what you currently make in revenue—for existing business looking at expansion, or how much you already have on ground—for startups)
- Projected financial state (what you foresee making in revenue)
- The request (how much funds you are asking for)
- The team (who runs your business)
A company profile is a formal introduction of your business. It usually contains all you would want potential clients, investors, and the general public to know about your business. It is used as a marketing tool and it is your company’s unique selling point.
A complete company profile is expected to contain the vision, mission, and goals of the company, a detailed description of the product and service offering of the company, the profile of the founding members of the company, a brief story of how the company got started and what they intend to achieve. So also, information like company name, address, phone number, website and email et al must be part of your company profile.
Components of your Company’s Profile
- Structure of your business (sole proprietorship, general partnership, limited partnership, or an incorporated company)
- The date your business was established (for existing businesses)
- The nature of your business (what are you selling, or what are you planning to sell?)
- The industry you are in
- Business vision, mission, and values
- Background information on your business or its history
- Business Objectives (short and long-term)
- The Business team
In this section of your business plan, you will demonstrate that the industry’s market size is worth going after, who your main competitors will be if you decide to take a plunge, and how you will be able to carve out a niche for yourself and give your competitors a run for their money. Planning a business goes beyond analyzing the potential of your offer. You must analyze the following three factors as well:
- The strengths and weaknesses of your business
- The competition
- Who your customers are, what they want, and how they want it
These are the major components of a business plan’s market or industrial analysis and it is also known as a SWOT (Strength, Weaknesses, Opportunities and Threats) analysis. This section of your business plan reveals the chances of your business to achieve success with its offers.
And that’s why the industry analysis is a very important section of your business plan, which must be carefully conducted and documented. This chapter covers everything you need to know about competition analysis, market size and target audience, market forces and trends, environment analysis and risk assessment.
This chapter discusses practical steps on how to devise your marketing strategy, identify your customers demography and psychography, draw your advertising and promotional plan, your sales distribution plan, etc. It also answers your most important marketing questions about your customers/clients which include:
- Where do they live?
- What’s their age range?
- What’s their level of education?
- How many of them are there?
- What are some common behavior patterns?
- What do they spend their free time on?
- Where do they work?
- What technology do they use?
- What ethnicity are they?
- How much do they earn?
- Where are they commonly employed?
- What are their values, beliefs, or opinions?
Advertising and Promotion Plan
- Will you have a dedicated presence across many of the popular online channels (such as website, social media, relevant marketplace, etc) used today to gain brand awareness?
- Will your marketing plan be primarily inbound focused (such as SEO, social media, blogging, etc), outbound focused (such as PPC, affiliate marketing, sales teams, etc), traditional focused (such as direct mail, brochures, and print advertising), or a mix of all three?
- What are other low-cost yet effective marketing mediums that you will leverage to get attention?
- What is your PR strategy? Why would the press be interested in your story?
Sales and Distribution Plan
- What channels will you use to get your product out there? Will you sell via your website, a retailer, wholesaler, or a totally different channel?
- How will customers pay for your product?
- What will your return policy look like? Will you offer any guarantees? If so, what will they look like?
- What happens after a customer makes a purchase? What type of customer support will you provide?
The business plan operations plan presents the company’s action plan for executing its vision. The operational plan details the processes that must be performed in order to serve customers every day. In other words, the short term processes. It also details the overall business milestones that the company must attain in order to be successful. This can also be referred to as the long term processes.
When writing the operations section of a business plan, you should endeavor to cover major areas such as labor, materials, facilities, equipment and processes. You should also provide details on things you feel that are critical to your operation and will give you competitive advantage.
If you can do this effectively, you will be able to answer investor’s questions about operations without having to be overwhelmed. This chapter teaches how to prepare an operations plan and also describe your production process. You will also learn how to conduct a manpower analysis.
The Production Process
- You will also need to give details of your entire production process, and that means answering the following questions:
- How long it will take you to produce a single unit or a predefined number of units?
- What measures have been put in place to integrate customer feedback into your product or service? As in, have you allotted time to create and test prototypes, pricing, or delivery mechanisms?
- How will you deal with major influxes in demand? That is, what procedures or steps will you have in place when you offer a sale and orders come flying in?
The Supply Chain
Let’s start with the workflow that you will have to deal with to make your ideas a reality. Some of the things you will want to touch on are as follows:
- Suppliers: Who will be providing you with all the materials that you won’t be manufacturing yourself?
- Facilities: Where will you house your inventory (if any), or which office will you use for your operations?
- Personnel: How many staff will you require for your daily operations? What will their duties look like?
- Equipment: What tools and technology do you require to be up and running or to take your company to the next level? (This could include everything from computers to office desks and everything in between).
- Shipping and fulfillment: Here you will have to outline whether you will be handling all the deliveries on your orders or if you will be using a third-party fulfillment partner.
- Inventory: Here you will highlight how much you will keep on hand, where it will be stored, and how you will have it shipped to third-partners if applicable. Also, an important detail to note is how you will keep track of everything going in and out.
- Customer support: How will support requests, refunds, and customer complaints be considered and integrated in your business workflow?
In essence, this section should signal to the reader that you have a good handle of running your business. It also passes the message that you have a contingency plan in place to account for uncertainty in the marketplace. By taking this advice into account you will create a more convincing operational plan.
In this chapter, you will learn how to devise your short and long term business growth strategy. This is important because investors want to know your long term expansion plans and where your company will be in the next five to ten years.
How to Present your Business Growth Strategy
- Explain the development options and opportunities in detail.
- Review and document the financial requirements for each option.
- Document the marketing strategies you will need to accomplish and nurture your chosen growth option.
- Review the financial breakdown of internal or external capital and how the capital will be made available throughout the growth process.
- Document a breakdown of other things that will be needed, expanded, or ditched.
- Print your growth plan and review it regularly until you are ready to implement it.
In this section, you will learn the basic documents that make up a financial statement. You will also learn how to prepare a financial plan, estimate your sales projections, estimate your expenses and arrange them in a spreadsheet.
Components of a Business Plan Financial Statement
This beautiful composition of numbers tells the reader what exactly your sources of revenue are and which expenses you spent your money on to arrive at the bottom line. Essentially, for a given time period, the income statement states the profit or loss (revenue-expenses) that you made.
The key word here is “balance,” but you are probably wondering what exactly needs to be weighed, right? On one side you should list all your assets (what you own) and on the other side, all your liabilities (what you owe), thereby giving a snapshot of your net worth (assets – liabilities = equity).
Cash flow statement
This statement is similar to your income statement with one important difference; it takes into account just when revenues are actually collected and when expenses are paid. When the cash you have coming in (collected revenue) is greater than the cash you have going out (disbursements), your cash flow is said to be positive.
And when the opposite scenario is true, your cash flow is negative. Ideally, your cash flow statement will allow you to recognize where cash is low, when you might have a surplus, and how to be on top of your game when operating in an uncertain environment.
You are not going to die with your business; neither are your investors. This is why you need to prepare an exit plan not just for yourself but also for your investors. An exit strategy is a method by which entrepreneurs and investors, especially those that have invested large sums of money in startup companies, transfer ownership of their business to a third party, or by which they recoup money invested in the business.
Some forms of exit strategies include, being acquired by another company, the sale of equity, a management-employee buyout, et al
Types of Exit Strategy
- Initial public offering (IPO)
- Selling your business
- Acquisitions and mergers
- Liquidation of assets
- Management buyout
- Family succession
Raising capital is one of the toughest challenges entrepreneurs face in business. Writing a business plan is one thing, doing a business plan presentation to investors is another thing and walking away with the needed capital is the ultimate achievement.
PowerPoint is an efficient way to present anything including a business plan. In the game of business presentations, one key fact that the audience look out for is the simplicity of the information shared. If you are dealing with investors, they would want to see the workability of the business idea and every other details of the project.
List of Equipment for a Business Plan Presentation
- Lecture stick
- Laptop or desktop computer or tablet PC
- Microsoft PowerPoint software
Most people intertwine a business plan with a feasibility study report, but they are definitely not the same. A feasibility study is carried out with the aim of finding out the workability and profitability of a business venture. Before anything is invested in a new business venture, a feasibility study is carried out to know if the business venture is worth the time, effort and resources.
On the other hand, a business plan is developed only after it has been established that a business opportunity exist and the venture is about to commence. This simply means that a business plan is prepared after a feasibility study has been conducted. This chapter will help you understand the difference between the two and their specific role in the business planning process.
- Is a strategic plan the same with a business plan? The answer is YES and NO; depending on the perspective you are looking at it. This chapter will highlight the differences.
Chapter C: The Basic Components of a Business Plan
- In this chapter, you will learn the fundamental factors that make up a business plan. Without these factors, your business plan will not achieve its purpose.
- This chapter teaches you in detail how to get in the right mindset, prepare your business plan cover letter, write your title page and table of content. You will also learn about the various tools you need to write faster and accurately.
7 Success Keys to Planning a Business That Wins
Many people only dream of building a business empire; others dare the consequences and take the leap into the business world. Statistics reveals that 90% of all businesses started fail in their first five years. Of these failed businesses, 80% were failures right from day one. They fail even before launching because the business was poorly planned. This reminds me of a quote from my mentor:
“A successful business is created before there is a business.” – Rich Dad
For your business to be successful, it has to be strategically planned correctly from the very scratch. It’s just like building a house; you must first plan the structural design before ever embarking on laying the foundation. The same is applicable to starting a business. Below are seven steps to planning a business that wins:
I. Plan a business that can grow with or without you
The first step to planning a business that wins is to make sure the business is modeled to grow with or without you. This is actually where most new entrepreneurs miss it; they build a business around themselves. They start a business to run it themselves; they cherish the idea of being your own boss and doing things their own way.
But building a business with you as the sole proprietor is a poorly planned business and it will not stand the test of time. The point i am trying to emphasize is this; you must design a business that will not lean solely on your shoulders.
II. Create a business that will be driven by your vision
The next step is to plan a business that will be driven by your visions and aspirations. Today, i see businesses without future plans and visions. In the process of designing your business, you must set target milestones to achieve. You must set five year and ten year goals for your business.
But formulating a vision for your business is not as important as making sure that this business of yours is driven by the vision. Your employees, team and the entire system of your business must share in the pursuit of your visions.
III. Create a business that will be bounded by your core values
The third step is to design a business that will be bounded by your core values. Your core belief and values must be instilled on your business. I will drive home my point with the following examples; Sam Walton believed in taking care of his employees and he made it his company’s core value. That’s why Wal-Mart implements a profit sharing plan with its employees.
Debbi Fields, during her early start up years was reputed to dispose over $500 worth of cookies because of its poor quality. Debbi has a reputation for insistence on quality even if it means a reduction in profit margin. Quality was her core value and that’s why her company’s motto goes: “Good enough never is.”
Now that’s for Debbi Fields and Sam Walton, what about you? Is your company bounded by your core belief and values? If yes, then make sure it is included in your business plan.
IV. Plan a business that will constantly increase its customer’s value
Customers are insatiable and their wants are endless. So it’s up to you to design your business in such a way that it will always on increase its customer’s value. Your business must continuously strive to give the customers the best of service. Take a look at Apple Computers; they have grown an army of loyal customers because of their ability to satisfy their customers by constantly offering them technological innovation.
V. Create a business that will be led by a strong team
Another important key to business success is to plan your business to be powered by a strong team. One entrepreneurial rule of thumb is this; you must hire people smarter than you. If you are the smartest on your team, your business is doomed.
Just take a look at how Microsoft Corporation has been driven forward by their management and team of computer wizards. If you take the pain to build a formidable business team, then your business will undergo positive leaps.
VI. Plan a business that will be a good corporate citizen
Most entrepreneurs don’t put into consideration their corporate social responsibility when designing their business. But every good and successful entrepreneur put into consideration his society when designing his or her business. As an entrepreneur, you must factor in your community in your business plan and also figure out how your business will positively impact on the surrounding environment.
For instance; if you intend starting a mining business or any business that occasionally results to environmental degradation, then you must plan that business to also give back to the environment as a mark of being a good corporate citizen.
VII. Create a business that will help you achieve your primary aim
Be you an employee, entrepreneur, student or unemployed; we all have personal aspirations and goals. Just as our goals are different; so also are our paths to achieving them different. As an entrepreneur, you have to design your business to fall in line with your primary aim. You must factor in a way to use your business as a leverage to achieve some or all of your primary aim.
No matter what your primary aim is; you must find a way to leverage your business in pursuing that aim of yours. So when designing a business, make sure your personal aims and objectives are also considered.
In conclusion, i believe i have been able to pass an entrepreneurial lesson across. Always bear in mind that properly designing a business before starting it will reduce the likelihood of failure. As a final note, i leave you with this quote:
“A successful business is created before there is a business.“ – Rich Dad
- How to File a DBA in Los Angeles (Requirement, Cost, Fees & Steps) - April 3, 2021
- How to File a DBA in Florida (Requirement, Cost, Fees & Steps) - April 3, 2021
- How to File a DBA in Pennsylvania (Requirement, Cost, Fees & Steps) - April 3, 2021