Statistics carried out in the USA identified that out of one million businesses that start in a particular year, only two hundred thousand make it past the fifth year. in simple numbers, only one in five businesses survive for 5 years or longer. A survey into this exposed that most of the factors that led to the decline of these businesses were preventable. It was seen that one of the reasons why businesses fail is a lack of a business plan. This article is aimed at educating you on how to write a business plan and execute it effectively.
This will to win is worthless if you do not have the will to prepare – Thane Yost
In Kenya, the same statistical figures apply thus the need to have your business plan.
What is a business plan?
A business plan is a document that gives an overview and strategies a company will employ in the future. It establishes the financial statement, the capability of an investor and the risks the business will likely face, alongside possible exit strategies.
A business plan is what keeps a company or enterprise on its toes even when the market conditions are extremely unfavourable.
How much time should you take to make your business plan?
Coming up with a good business plan takes a lot of time and energy. It certainly isn’t a walk in the park. Others may describe it as a visit to the dentist.
Generally, writing a business plan should take around fifty to a hundred hours which will enable the entrepreneur to include research, documentation, analysis and review.
Important facts about a good business plan
The type of business you pursue depends on a few essential factors. Before embarking on writing your business plan, answering the following questions will ensure that you are on the right path to success.
- How much money do you have to invest?
- Can you attract other investors?
- What return do you expect?
- Where is your expertise?
- What do you like to do the most?
- Are you willing to work hard and long hours?
- What are prominent consumer trends in your industry today?
Building blocks of a good business plan
A. Mission statement
The mission statement should be a 50-word or less paragraph that outlines what you sell and to whom. In other words, this is your ‘Unique Selling Proposition”. A mission statement explains why the business exists. It gives detail on the organization’s purpose, customer orientation, business philosophy and values of the company in clear concise language. Limit your mission statement to a maximum of two sentences. Below is a sample of a mission statement;
Our mission is to create innovative and high-quality products that improve the lives of our customers. We aim to be a leader in our industry by consistently delivering exceptional value and exceeding customer expectations.
B. Name your business appropriately
A business name is a central factor of success. You need to choose a business name that immediately informs a potential client what your enterprise is about. ‘Pizza-Inn’ is a better title than ‘Food-Maker’ because the former gives specific details about the business, and therefore, pizza lovers will likely make a call to order pizza from Pizza-Inn instead of Food-Makers.
In line with marketing, using a good name will reduce the total money spent on marketing your company.
If you choose a bad business name, you will have to spend time and resources teaching the public what your business is offering. This is not good for your business plan.
C. Consider all the uses of a business plan
Here is how you can use a business plan:
- It helps you take charge of your entrepreneurial life – A business plan is evidence of your initiative to take charge, build something and drive it into success. With such, you are more organized and more likely to succeed in achieving your goals.
- Helps you lay out a master blue blueprint – This blueprint is a logical organization of an idea that should grow into a successful business venture.
- Facilitates communication of the master plan to your team – Your team needs to understand your plan for the company or enterprise. What better way to communicate than through a business plan?
- Helps attract money to your project – Potential suppliers of capital will analyze your business plan before deciding to fund your project.
D. Management team
In this section, you should plan how you will acquire the most qualified management team. The success of your enterprise is driven by this team of managers. Their functions include:
In selecting your team of managers, it is important to be objective rather than emotionally choosing friends or family. Professionals are more likely to manage your business properly as compared to family and friends.
E. Current and projected financial statements
When determining your current and future financial needs, you will have to employ economics skills that project whether or not your business is worth funding.
In your business plan, you should include:
- A profit-and-loss statement
- Your balance sheets
- Your cash-flow statement
F. Your products and services
Here you will list the products or services you are offering in the market. Your description should include why you are a better option as compared to competitors and this may grab the attention of a finance supplier.
This business plan section explains how your product or service works and whether you will save your customers time and money.
Include tests and case studies that will help you back up your claims.
In addition, discuss the future and how you plan to adapt to the ever-changing needs of your customers.
G. Your marketing plans
The future of your market is determined by the market environment. Carrying out a good marketing analysis will make evident what strategies you should employ to manoeuvre an unfavourable environment and at times, it may prevent you from starting a business that would yield losses.
Despite the above point being negative, a good marketing plan will save you money so that you can spend it somewhere else with a better financial reward.
A market analysis describes the existing marketplace in which you plan to operate your business. Key features included in a marketing analysis are:
- Product Features
- The lifestyle of your targeted customers
- Geographical location
- Cyclical factors – Expansion, peak, contraction, and trough. Factors such as Gross Domestic Product (GDP), interest rates, consumer spending and total employment help determine the stage of the economic cycle.
Market analysis will also expose potential competitors, how the market is shared among the participants and whether the market is rapidly growing.
H. Focus on your Unique Selling Proposition
A Unique Selling Proposition is that single, unique advantage, benefit, essence, or big deal that holds your product above all others that are in the market. Your USP is what will make customers choose your product or service over all your competitors.
Your entire enterprise will be built on your business plan USP and all parts of your business plan rest on the stability of your Unique Selling Proposition.
What are the parts of a business plan?
- Executive summary
- Statement of purpose
- Statement of the mission
- Market your customers, and your product or service
- General Company description
- Context of your business
- Business Profile
- Specific market profile
- Anticipated challenges and planned responses
- Present Situation
- Give a summary of the current situation
- Calculate the current and quick ratio
- Record your business objectives here
- Product/service section
- Describe your product or service
- Added value, tests and approvals
- Product or service life cycle
- Trademarks and copyrights
- Market Analysis
- Market strengths and weaknesses
- Customer profile
- Analyze competition
- Marketing sales and strategies
- Build a great marketing plan
- Selling tactics
- Flaunt your unique selling position
- Establish marketing objectives
- Establish promotional and advertising concepts
- Management Section
- Chart your formal organization
- Incorporate your management team
- People and talent requirements
- Financial Projections
- Financial projections
- Implementation schedule
- Statement of resource needs
- Substantiate your claims
In conclusion, having a solid business plan is critical to the success of any business. With the numerous uses of such, you must write your business plan as soon as possible.