A small business’s success or failure is determined by its business strategy. A well-thought-out strategy lays out a clear path for the future, forces you to consider the viability of a business idea, and can help you gain a better grasp of your company’s finances and competitors.
A business plan normally spans three to five years, outlining all of your objectives and how you intend to accomplish them. According to Craig Allen, a financial advisor who offers business plan writing seminars at Southern New Hampshire University, a business plan indicates you’re prepared and have thoroughly researched your business idea if you’re seeking a loan or looking for investors.
Essential Tips to Writing a Good Business Pan
1. a brief summary
The first page of your business strategy is this. It should include a goal statement that outlines your company’s principal purpose, as well as a brief description of the products or services you offer, basic information about your ownership structure, and a synopsis of your plans.
2. A description of the business
This section gives you a quick overview of your small business. It comprises vital information such as the company’s registered name, addresses of any physical locations, the names of key people in the firm, the company’s history, the nature of the business, and more information about the products or services it offers or will offer.
3. A mission statement or a set of company objectives
An objective statement should clearly identify your company’s objectives and include a business strategy for achieving them. It lays out exactly what you want to achieve in the short and long term.
If you’re searching for outside investment, this section can help you explain why you need the money, how the money will help your company expand, and how you plan to meet your growth goals. The idea is to give a detailed explanation of the possibility and how the loan or investment would help your business expand.
If your company is introducing a new product line, for example, you could explain how the loan will help you launch the new product and increase sales by 50% in the next three years.
4. Organizational and management structure
Here, you’ll mention your company’s legal structure (sole proprietorship, partnership, or corporation), as well as significant employees, managers, or other owners. It should also indicate the percentage of ownership held by each owner, as well as the level to which each owner is involved in the business.
5. Services and products
You can describe the items or services you offer or plan to offer in this section. The following items should be included:
a description of your product or service’s operation
- Your product or service’s price strategy
- The typical clients you work with
- Your distribution and sales strategy
- Why is your product or service superior to that of the competition?
- How do you intend to fulfil orders?
- You can also talk about any existing or pending trademarks or patents that are related to your product or service.
6. Sales and marketing strategy
This is basically a description of your marketing strategy and how you intend to implement it. Here you can discuss how you want to persuade clients to acquire your products or services, as well as how you intend to build customer loyalty and repeat business. This section can also emphasize your company’s capabilities and focus on what sets you apart from the competitors.
7. Financial examination of a business
If you’re a startup, you might not have a lot of financial information yet. If you’re applying for a small-business loan, you’ll need to provide income or profit-and-loss statements, a balance sheet listing your assets and debts, and a cash flow statement showing how money enters and exits the company.
You can also provide ratios that highlight your company’s financial health, such as:
The percentage of revenue kept as net income is known as the net profit margin.
The current ratio is a metric that measures your liquidity and ability to repay loans.
Accounts receivable turnover ratio: a metric that measures how often you collect receivables each year.
8. Budget estimates
If you’re looking for funding or investors, this is an important aspect of your company strategy. It explains how your company will make enough money to repay the debt or provide investors with a reasonable return.
You’ll offer monthly or quarterly sales, expenses, and profit forecasts for at least the next three years, with future amounts assuming you’ve gotten a fresh loan. Before making projections, thoroughly examine your previous financial accounts.
Your objectives should be ambitious, but they should also be achievable. “If you can justify it, it’s OK to be optimistic,” Allen adds. “You don’t want to stand out in a negative way by being overly optimistic in general.”
You’ll need to demonstrate that your company can generate enough cash flow to satisfy the loan’s scheduled debt payments. But, as Allen points out, you should also handle the business’s numerous risk concerns.
Resources and advice on writing a business plan
Here are some pointers to assist your hard work stand out now that you’ve finished your company plan:
Avoid overconfidence: If you’re looking for a business loan through a local bank, the loan officer will most likely be familiar with your market. Providing unrealistic sales projections can jeopardize your loan acceptance.
“They understand what kind of sales you can expect for that type of firm in that market,” Allen explains. “If you come in with a sales prediction that’s 50% higher than the competition, they’ll know you’re not being realistic, and it will work against you.”
Keep it short: A solid business plan only requires 15 to 25 pages if it is clear, concise, and contains all necessary information, according to Allen.
Avoid getting caught down in the technical features of your business or using too much industry jargon by focusing on the core elements of your business plan. In the appendix, you can always include supporting facts or other important elements.
Proofread: Spelling, punctuation, and grammatical issues can pop off the page and turn off lenders and potential investors, drawing their attention away from your company and toward the faults you made. You could wish to employ a professional business plan writer, copy editor, or proofreader if writing and editing aren’t your strong suits.
Make use of free resources: SCORE is a nonprofit organization that connects you with a broad network of volunteer business mentors and experts that can assist you in writing or editing your business plan. For further information, look for a mentor or contact a local SCORE group.
The Small Business Preparation Centers of the United States Small Business Administration, which offer free business consulting and assistance with business plan development, might also be helpful.