Among the very first things we suggest start-up owners to do is ‘craft a business plan’. A business plan is a document that portrays your business in its true sense – the nature, product or service provided, intended market, finances, and the short- and long-term goals.
Ideally, it should be somewhere between 12-16 pages long (with a maximum of 20). Longer business plans can put the readers off. As the business expands, the plan needs to be updated, since goals are continuously met, and new ones set. Having a plan at hand, allows you to outline strategies and look ahead.
Benefits of having a Business Plan
- Help with better decisions – preparing a business plan requires you to not only conduct a thorough internal analysis of the product/service you intend on providing, but also the market and competitors. Having such data at hand ensures that you can avoid making mistakes and take better decisions moving forward.
- Viability and scalability of the business – understanding the requirements of the market and the customers, will take you a long way in determining if your offering is a good fit for the intended niche. Staying competitive takes a lot – right customer segmentation, pricing, capital.
Furthermore, scaling that product/service into a business, requires thorough insight into the above, which can only be done with the help of a solid business plan. Scaling also includes requirement of a team, which can be carefully planned and executed when a business plan is being drafted. - Set and achieve objectives – every organisation has goals and objectives which lead its direction. What they are, how they are to be set and what to do once they’re attained – are all questions whose answers lie in the business plan. Even in the absence of the leader, the team uses the business plan to map its layout for optimum strategy, since it is all towards the end goals.
- Raise Investment – Raising capital is crucial to any business which wishes to scale and expand its operations. And the first thing investors ask for is your business plan. Why? Because it gives them all the information about your business, the product/service, and the market surveys in one document. They have all the information they need to decide if they want to be associated with this business, and if so, how much investment you need, as well.
- See the bigger picture – knowing the direction in which you wish to take your business, is one thing, but actually planning for the same is a different ball game. Preparing long-term strategies to help the growth of the business, and reducing the risks along the way, are all integral advantages of your business plan.
So, in short, business plan is quite an important document. You will need it at every stage of operations. A good one can take you far, and a mediocre one can set you back by time and capital investment you don’t want.
Now that we have established its importance, let’s go ahead and understand key features to be included in it.
Key features
- About the company – this segment is for you to explain your establishment, type of registration, and the overall mission and vision of your organisation. It helps to talk about the company as an entity. It draws the reader’s (potential investor or client) attention to it as though it were an individual.
- Your product/service – now that you have got your reader’s attention, it is time for you to explain your product/service. Describe its features and then its functions. Explain to them how it works. If it’s a process, illustrate with a diagram. In short, explain it like you would, to a 10-year-old. The simpler the better.
- Market – show your market study. Your analysis of the needs of the customers, depicts your demand and this matters to the reader. It indicates your position in the market and helps project your brand.
- Competitive Analysis – a full SWOT analysis with your major competitors, to showcase your strengths and opportunities to grow. This is a very critical stage, since a low competition can mean that there isn’t much demand for your offering in the current market, whereas a high competition could mean a potential barrier to entry. It is always better to approach professionals to conduct a thorough competitive analysis.
Read more about Competitive Analysis and why you need it. - 2-Year Strategy – outline your short-term (2 years) strategy and how you intend on meeting short-term goals. Use this space to further indicate a breakdown of your strategy and signify your impact on the niche.
- Revenue – if yours is a fresh start-up, investors would be interested in seeing projected revenue. This can be done by putting down your fee structure (or price) and how you intend on making profits.
- Your ask – now it is time for your expected number. You must bear in mind the costs you shall be incurring (operational, production, etc) before you ask for your investment amount. With your fee and your costs known, make it clear as to how much you need, and the period of time to breakeven (your nullifying point, where you’re making no loss or profit).
- Utilisation of the funds – investors like to know where their investment intends on being used. If your product/service is still in the prototype phase, indicate so by breaking down the requirements for Research and Development, salaries, rent, etc. If your business is raising investments for an expansion, then showcase which areas of expansion will see the funds – team building, additional locations, etc. Yet again, keep it simple.
We cannot emphasise enough on the importance of keeping it simple. Nobody likes seeing heavy words or terms that need long explanations. Such remarks may put the readers off in a moment. Like we said earlier, explain how you would to a 10-year-old.
With that in mind, it is generally suggested to approach a professional, who can help you create an impact with a good business plan.
What business ideas do you have? We would love to hear them. Let us know in the comments below.