how to make a business plan

how to make a business plan

How to Create an Effective Business Plan

1. Introduction

Have you ever written a business plan? Did you once write a business plan and never look at it again? I ask the following questions because your approach to your business plan is the difference between your business it is now, and what it could possibly be. The planning stage is the most crucial in creating a business. It is the foundation of your business and will dictate how your business will run. A bad plan is better than no plan at all, but unbelievably if you stick to a bad plan that will ultimately lead to failure, it is much worse. A bad or poor plan is the result of bad decisions. Bad decisions are made because of lack of knowledge. Lack of knowledge comes through bad research or no research at all. A bad plan may be a good plan once you have educated yourself. A good plan will only become a reality if you stick to the plan. A “good” plan will consist of a long learning commitment. You need to educate yourself in the following areas: your target market, your products or services, what resources you will need to achieve this, your competition, what separates you from your competitors and how will you market and sell to your potential clients. By educating yourself in these areas, it will give you a stronger understanding and confidence in making your business idea a reality. A good plan is a road map for success. It will help you allocate resources, make good decisions, and keep track of achievement. This guide will teach an easy process to creating a business plan and an effective one. After explaining and going through the process, the last sections will be about resources to find deeper knowledge about all these areas mentioned to build a strong foundation for your business.

2. Defining Your Business

a) What is the business? To begin defining your business, you should begin by stating your company’s name and its mission. It’s as simple as that. Creating a mission statement is an important task and you should definitely spend some time on this. A mission statement should be a clear and concise articulation of how you picture your business in the future. It needs to define what your business actually does. Try to think not in terms of what it will achieve, but how you will achieve it. This is not to say you shouldn’t set goals for your business, because you definitely should. The difference is that the mission statement sets the long-term goals, and it may not actually be achievable. It’s supposed to be the vision of your business and it’s something that you don’t mind working to achieve. A mission should also be timeless. At any point in time, it should represent how you’re going to do business. Once you have this mission in mind, you can start to set goals that will help to complete this mission. A clear mission can help to give your business direction, and it can also help with customer interaction. People often times will not want to take time with a company that has no direction. At this time, a SWOT analysis would also be a good idea. SWOT stands for analyzing your company’s Strengths, Weaknesses, Opportunities, and Threats. By defining these, you can use the strengths to try to further your business, work on a plan to improve its weaknesses, utilize the opportunities and be mindful of the threats. This is a good way to identify internal and external factors that will help or hurt your business.

Your business has just begun, and you’ve had a problem in finding customers for your small business. It can often be frustrating when your small business isn’t bringing in the income you had hoped it would, or not bringing in customers at the rate you had expected. With a business plan, you are able to determine the feasibility of your business and it can act as a beacon to guide you through tough times when you may be unsure what your next step should be.

3. Market Analysis and Strategy

Market analysis and strategy requires a series of goals to be achieved. The first goal is to create an outstanding image of the company’s services. Gaining a positive image is very important for a company’s survival. Image is an overall impression that helps consumers to distinguish the company’s services. Several methods will be undertaken to achieve the desired image of superior service and client satisfaction when using Bizcomm’s services. Advertising campaigns in local newspapers. Research on target market will help to establish where the best place to advertise is. For example, if our research turns out that our target audience is homeowners of ages 35+, it would be best to place ads in local newspapers in areas where the majority of homeowners fit into the age category. Building business relationships and mingling in professional social groups is another method to obtain new business. Word of mouth has an outstanding effect on contracting new clients, so if we are able to impress fellow business owners with our services, it is likely they will refer us to other companies. This method is also part of the second goal, increasing market penetration. With a clear target audience of homeowners 35+, we will only need to mingle with the social groups and start to obtain business contacts from there. Finally, promoting community involvement and goodwill will also have a positive impact on our image. This method includes activities such as charity fundraising events and donating small amounts of free work in areas of low income. Free work can be beneficial in that it creates a rapport with potential clients. This will not be an ongoing process; once we have achieved a desired corporate image, we will shift our focus to other goals.

4. Financial Projections and Funding

A budget can be a very useful tool, if it is reviewed regularly and used in the right way. Budgets should be prepared for a specific purpose, for example, to acquire funding. A company should prepare a budget using the Key Factors which were developed in the early stages of the Business Plan. If priorities change then the budgets should be adjusted to reflect this. Actual performance should be monitored closely and regularly compared to the budget. This will provide an early indication of any problems which arise and allow corrective action to be taken. Comparing the original and updated budget to the actual performance can provide useful information, as to the cause of the variance in performance. Providing it is used properly a budget can help a business to achieve its goals and in the long run increase the wealth of the company and its shareholders.

Financial projections are crucial in the determination of a company’s performance. They represent a written forecast of what a business is planning to achieve in terms of revenue and sometimes the costs in forthcoming years. The preparation of a budget is a detailed process which can have a major impact on a company’s success. Budgeting issues are especially important for smaller businesses, since they often have fewer resources. The main issue is the trade-off between a detailed precise budget which takes a long time to prepare, and a rough budget which may be obsolete within a short time.

5. Implementing and Reviewing Your Plan

The ongoing monthly or quarterly review of a business compared to the plan is the first line of defence and is where most entrepreneurs will identify changes in assumptions or market trends. Many entrepreneurs now find that a ‘learning’ approach is more effective, especially in fast-changing technology industries. This approach considers a business plan as a living document, continually open to revisions in response to changing conditions. An alternative for small businesses is the ‘what matters’ practice, where each member of staff is encouraged to consider simple questions: How can they get closer to the customer? How can the business do what they are doing better? And how can they change in a way that they will be able to measure? This method of questioning can provoke some radical ideas.

After the business plan has been put into practice, or when it has failed, the strength of the supporting ideas should be reviewed. Slight changes will be made over the course of the plan being implemented, for example to combat any unforeseen problems or new opportunities. An entrepreneur should review the new businesses with the original plan and make any revisions to it, implementing those changes in the next round. Revising the plan can also take the focus away from short-term survival, taking a longer-term view. This can also be useful for businesses trying to change the direction that they are taking. This can be achieved by setting goals of what the entrepreneur would like to achieve by a certain time. The achievement of these goals can be reviewed against the plan and changes to its direction can be made. This process will make the entrepreneur more decisive and build the business that they originally set out to, not losing sight of their original vision. At periods of stagnation or decline, a business review process can prove to be a catalyst for change and revitalisation.