A Business Plan is also known as a:
- Business Proposal
- Marketing Plan
- Business Strategy
- Marketing Strategy
- Sales Plan
Lenders and investors are constantly presented with new business proposals. If you provide all the required information in a consistent format then lenders and investors can make an efficient and fair analysis about the viability of your business ideas. By preparing a comprehensive business plan you send a message to your lenders and investors that you have already made an objective assessment of your business ideas and that you are serious about your business plan.
This is also the same for online sellers to access brands and even some market places.
In a manufacturing environment, Cost of Goods Sold includes the material costs AND the direct labor costs necessary to produce finished goods.
In a simple retail or wholesale environment COGS can be calculated as beginning inventory plus purchases minus ending inventory. Ideally this indicates the inventory consumed in the reporting period.
Benefits of a Business Plan include:
- Ensures you take a disciplined approach to analyzing your business ideas.
- Shows your investers and lenders that you have systematically analyzed your business ideas.
- Helps you clearly define your goals and what you want to accomplish.
- Helps you identify and analyze your risks as well as your opportunities.
- Helps you assess the strength of your target market.
- Helps you define your day-to-day business processes and challenges.
- Helps you analyze costs and capital requirements.
What is included in a Business Plan?
While a Business Plan may vary in how it is organized, it can include:
Executive Summary: This portion of the plan summarizes your company. It can include an overview of your company's management structure, a description of your product/service, your goals, and a summary of your finances and marketing strategy.
Business Description and Mission Statement: This is a brief rundown of your business's history, ownership, and its mission or vision statement.
Product or Service: Here you can include a breakdown of what your product or service is, its unique features, any patents you may have, as well as any future products you want to develop.
Marketing Strategy: Your marketing strategy is how you plan to get your product or service in front of customers. This is where you can include your ideas for promotion (online/traditional methods), as well as how you physically plan to sell your product or service (brick-and-mortar, ecommerce, etc.)
Competitors Analysis: This section describes your competition and how you intend to compete against their current strategies.
SWOT: SWOT is an acronym for "Strengths, Weaknesses, Opportunities, Threats." A SWOT analysis evaluates these specific aspects of your business.
Operations Overview: An operations overview provides a glimpse into the daily operations of your business, including the management and staffing structure, human resources plan, your physical operational facility, and your production methods, such as quotas or manufacturing details.
Financial Plan: Your financial plan may include your company's income (profit and loss) statements. It can also encompass your capital requirements if you are pitching your ideas to investors. In that case, you may describe the investment amount you require and how you plan to repay this capital in a repayment plan.
How to write a business plan?
Research is your best friend. Find out whatever you can about businesses, market and competitors, this will give you a head start into drafting a business plan. I think this step-by-step guide by Entrepreneur.com is rather helpful. I’d suggest this as a compulsory read for those who want to write up a business plan for startups.
Think about Dimension of the Business
Startups usually sprout out of people with a technology or business background. When they write a business plan most of the focus is on information that they’re experts on.
For instance, a technician is most likely to concentrate on technology and how it’s different from others in the market. If the plan is written by a business analyst, then sales numbers will be the central idea in it.
In reality, the business plan should encompass a broader vision, from technical details, sales numbers, marketing strategy to profits. It all needs to be in one place whether you’re showing it to a salesperson or the CEO.
Keep it short
Business plans should be short and concise.
The reasoning for that is twofold:
- First, you want your business plan to be read (and no one is going to read a 100-page or even 40-page business plan).
- Second, your business plan should be a tool you use to run and grow your business, something you continue to use and refine over time. An excessively long business plan is a huge hassle to revise—you’re almost guaranteed that your plan will be relegated to a desk drawer, never to be seen again.
Know your audience
Write your plan using language that your audience will understand.
For example, if your company is developing a complex scientific process, but your prospective investors aren’t scientists, avoid jargon, or acronyms that won’t be familiar.
Accommodate your investors, and keep explanations of your product simple and direct, using terms that everyone can understand. You can always use the appendix of your plan to provide the full specs if needed.
Don’t feel intimidated
The vast majority of business owners and entrepreneurs aren’t business experts. Just like you, they’re learning as they go and don’t have degrees in business.
Writing a business plan may seem like a big hurdle, but it doesn’t have to be. You know your business—you’re the expert on it. For that reason alone, writing a business plan and then leveraging your plan for growth won’t be nearly as challenging as you think.
And you don’t have to start with the full, detailed business plan that I’m going to describe here. In fact, it can be much easier to start with a simple, one-page business plan—what we call a Lean Plan—and then come back and build a slightly longer, more detailed business plan later.
Start with a clear, concise executive summary of your business. Think of it like an elevator pitch. In no more than two pages, billboard all the important stuff. At the top, communicate your value proposition: what your company does, how it will make money and why customers will want to pay for your product or service. If you are sending your plan to investors, include the amount of money you need and how you plan to use it. You have to know the whole picture before you can boil things down, so tackle the summary after finishing the rest of your plan.
Tip: One sentence business overview
At the top of the page, right under your business name, include a one-sentence overview of your business that sums up the essence of what you are doing.
This can be a tagline, but is often more effective if the sentence describes what your company actually does. This is also known as your value proposition.