1 Killer business plan in eight steps
You have a dream of taking your great idea and turning it into a full-fledged business. Or maybe you’re already operating but want to take your venture to the next level. Either way, to get to the success you envision, you need to lay some groundwork first. One essential piece of that prep is a business plan.
In fact, according to Harvard Business Review, people who include a formal business plan as part of their startup are 16% more likely to achieve success than their counterparts who don’t. And entrepreneurs who want outside financing are 19% more inclined to develop a business plan.
So, what exactly is a business plan and how do you go about writing one? A business plan is a roadmap for how you see your business growing and developing. It’s also a good exercise in reality. If you – and your potential supporters – can’t follow that map to get from beginning to end, then you may need to rethink your approach or idea.
Creating a formal business plan is not complicated – it just takes some careful thought and time. Here are eight steps for building a strong business plan.
1. Write the first part last
Your executive summary is your opening and needs to be strong so people interested in your business will keep reading what follows. It should contain the best high-level points of your plan and include what your business does, what sets it apart, your revenue projections, and the seed money you may need. But just because it’s the first thing in your plan, doesn’t mean you should write it first. Instead, craft your executive summary last. Doing so will allow you to summarize everything you’ve put together.
2. Include visuals
To keep your readers’ attention, it’s a good idea to incorporate charts, graphs, infographics, and other visual elements in your business plan. Having these visual guideposts breaks up your text and makes your document easier to read. Visuals can also be an effective way to present basic information – particularly in the Company Overview section, which is home to nuts and bolts like your company’s location, business structure, and history. For instance, instead of listing company milestones in this section, consider creating a simple chart with dates on one side and accomplishments on the other.
3. Back up your claims with solid research
Facts are critical to your business plan, so make sure you’ve done your research to support your forecasts about your business. If you’re planning to launch a food truck because you think they’re popular with millennials, dig deeper and find the demographic information or industry statistics that back up your hunch. Don’t just cite one article or use vague generalizations. The National Restaurant Association, for example, might be a good resource for your food truck business plan. The U.S. Census Bureau’s American FactFinder is another rich source of demographic information for all types of businesses. You can find population, income, geographic, and other details there.
4. Make it concise
Since your business plan is not just for you to read, make sure you keep the readers’ attention. Take a high-level approach, and don’t go overboard with details. Keep your writing straightforward and simple. Bullet points, for example, can be a great way to present bites of information. Consider asking friends or other outside sources to review your plan before its final. If they stumble over some of your sentences, rewrite them. Remember, shorter is better.
5. Talk the talk
If you want people to take you seriously, your business plan needs to use language that’s common to the industry. At the same time, you don’t want to resort to jargon that may turn off investors who aren’t familiar with the terms. To strike a balance, use industry terminology when appropriate but define it for investors, without being condescending. Let’s say you want to open a boutique brewery. In your business plan, spell out ‘alcohol by volume’ the first time you use the term. After that, you can abbreviate it as ‘ABV.’ This will make is clear to readers both inside and outside the industry.
6. Develop your marketing plan
You’ve got a great idea and a cool product or service. But how are you going to reach potential customers? Investors want to know, and you should have a good answer.
Small businesses need to develop a year-round customer experience that not only draws in first-time customers but encourages repeat business. As you develop your strategy, keep in mind the four Ps of the marketing mix: product, price, placement, and promotion. You can mix up the order, but it’s important to consider all four.
For product, ask yourself what customers might expect from your offering and how it differs from what’s already out there. Take a deep look at pricing and make sure you’ve included variables such as distribution costs. Then consider where you’ll place your product for sale. Are you thinking of brick-and-mortar retailers, online outlets, or a mix of both? Next, decide how you plan to promote your product. Is traditional advertising the best method or do you need a mix of online and print ads?
Going through the four Ps will help you refine your marketing strategy and position your product just right.
7. Be open about your revenue goals
You want to make readers and/or investors comfortable about your long-term success. If you are already in business, include financial records for at least three years. If you are starting out, show your financial projections in small increments such as quarterly for the first year. Graphs and charts play well here.
8. Be honest about funding
Investors want to know how much money you are requesting. Be realistic. What do you need to succeed without appearing out of touch? And keep your potential investors in mind. Family and friends may not ask for sophisticated documentation, but professional lenders and investors will require different information such as loan repayment or return on investment (ROI).
Now that you’ve made the decision to start or expand your small business, this is the time to protect your investment. Hiscox offers a variety of small business insurance including general and professional liability insurance to help protect your company. Having coverage is a smart way to show your investors that you’re protecting their investment as well.