What exactly is a business plan?

A business plan is a roadmap that you create for your business. It details the fundamental principles of your business and how you will go about generating revenue and ultimately a profit. This may cover the different strategies that you are going to use, your organisational structure and the products or services that you are going to market.

By putting everything down on paper, you are committing your thoughts to a workable plan.

Why have a business plan?

Going through the process of writing a business plan forces you to think strategically about your business. If you are presenting to potential partners or investors, they will want to know that you have detailed the opportunity, the risks, your product or service and have a good understand of your marketplace.

Gain clarity in processes

Business plans help to give you clarity about the processes that you are going to follow. A plan puts a timeframe on your goals, which can tune your dreams into actions. A business plan is not about having a day-to-day schedule of what you’re going to do; it is about developing your long-term roadmap and vision.

Define you unique selling points

If you’re starting your own business, you’re probably already thinking about what sets you apart from competitors. Coming up with your unique value proposition (UVP) or unique selling proposition (USP) creates a strong foundation for all your marketing messages and strategies for engaging and acquiring new customers.

Defining your target customers

You need to figure out who your ideal customers are. Your target market or target customers are a group of consumers or organisations that are most likely to buy your products or services. Marketing to these buyers is the most effective and efficient approach. The alternative – marketing to everyone – can be both inefficient and expensive.

Defining your focus

The day-to-day of running a business can be overwhelming. It’s easy to get sidetracked by a multitude of things that aren’t necessarily the most valuable thing you can do for your business.

By having a business plan, you can continually revert to the roadmap and understand which activities are going to drive you towards your goals

What should go into your business plan?

A business plan will usually include an executive summary, a description of the business, your goals and objectives, details about the product and or service, marketing direction and strategies, how the business will be managed and operated, and the financial plan for your business. The below bullet points may be helpful in structuring your document.

Don’t obsess over every detail to start with. That will make the plan long and hard to change and adapt as you go. Keep it short and concise initially.

  1. Executive summary
  2. Target Market
  3. Customer Descriptions
  4. The Opportunity
  5. Competitor Analysis
  6. Financial Plan
  7. Operating Plan
  8. People

Executive summary

Although this should be the first section in your plan, it’s often easier to write it last. It’s one of the hardest sections to write well, as it needs to be concise but capture the main points. You have to answer the question “what do you do?” in as few words as you can, while making sure it’s interesting and memorable. This summary is sometimes called an elevator pitch. Try to imagine you’re riding a few floors with a potential investor, adviser, employee, or customer.

Your elevator pitch could be something like: “I run a business called (name) that provides (product/service category) mainly for (target market). We provide (unique customer benefit/business purpose) by (how you achieve that). It’s something we believe in and do really well.”

Target market

If you try to sell your products or services to everyone, it’ll be almost impossible to outdo your various competitors. You’ll also risk wasting time and money on people who don’t need or value what you sell. That could mean disappointing a lot of people, who then have a less-than-positive story to share about you.

To define your target market, begin with the big picture then speak with some potential customers and trusted advisers to see if your assumptions are correct. Gradually refine your market definition as you continue testing your ideas. Here are some thoughts to get you started.

  • Will you sell to businesses or consumers?
  • Will you make isolated sales to customers or develop an ongoing relationship with regular clients?
  • If you’re selling to businesses, describe the size, turnover, and sectors you have in mind.
  • What business roles will benefit from your product or service, and who is likely to make the purchase decision – CEO, sales manager, HR director, marketing manager, property manager, etc.
  • Describe your typical customers in terms of:
    • Their age group, gender identity, socio-economic attributes
    • Where they’re located
    • Particular employment, profession or interest groups you might be targeting

Customer descriptions

Once you’ve tested and defined your target market, it can help to create a few specific customer descriptions. These are sometimes called customer personas. They describe fictional individuals who represent your main customer groups, as though you know them personally. Business customer personas contain more about the individual and their work. Consumer personas focus more on their life away from work.

While often used for marketing purposes, personas can also help you, your employees, and your advisers to make better decisions based on customer needs. You can even use an image library picture of someone the persona would typically look like. Before long you’ll be referring to them by name, and whether a business decision will benefit so-and-so or which option they’d prefer.

Here’s an example for a Christchurch-based expert gardening service designed for older people.

Mary has been a keen gardener for as long as she can remember. She knows a lot about plants and takes great pride in her garden. She likes the exercise and being out in the fresh air. Mary is straight up and direct. She enjoys a good laugh but doesn’t have much time for pretenders. Now in her 80s and still reasonably well off, she’s living alone in the family home in Fendalton but finds it increasingly difficult to keep things in order. Many of her friends have moved into retirement villages and they seem to visit less and less often. Sometimes she feels a bit lonely. Her daughter has suggested hiring a gardener, but Mary says it would have to be someone trustworthy who knows what they’re doing and can work alongside her. It would also be handy if they could get supplies for her from the local garden centre. And maybe stay for a cuppa from time to time. As with many things these days, her daughter says she’ll see what she can find and then they can talk it over.

The opportunity

In this section you can describe your assessment of the immediate market potential, but also demonstrate your understanding of how the business can grow. What is the wider potential, how will you reach that market and scale up to meet the demand? Can you sell your products or services online? Will you have to hire more people? Are physical premises required in new locations? How will you ensure you retain your point of difference and service standards? What new opportunities will expansion bring?

Competitor analysis

Ignoring the competition will only lead to problems and it’s a sure sign you’re not very business-savvy at all. Although it may be hard to focus on what could undermine your business, it’s an essential part of planning for success. Here are some ideas for this section.

  • List all direct competitors – the ones that are primarily focused on selling the same service or products as you, particularly if it’s to the same market segments.
  • List your indirect competitors – the ones that cross over with your business, but their focus isn’t the same as yours.
  • Write down the challenges or barriers that will help to prevent more competitors appearing in the market.
  • Describe what sets you apart from competitors, your unique selling proposition (USP) and why it’s likely to remain unique to your business. For example, if you sell products, you might have a way to differentiate your business based on quality, service, price, or range. This needs to be believable, so stick to facts not wishful thinking.

Financial plan

Include high-level financial information about your set-up costs, ongoing expenditure and projected income. An accountant or some types of business software can help you create a draft cash flow forecast that shows how your business will survive. A summary is all you need to include here.

Marketing plan

Most marketing plans address what are known as the five Ps. Just remember to keep things brief and stick to the facts.

  • Product: What are you selling? What need or issue does it address? What are its unique benefits? How will it be packaged/delivered? Is there a warranty? And so on.
  • Price: What will you charge? How does this cover your expenses? How do you know your customers are willing to pay this amount? Does it fit with your brand? How does it compare to your competitors’ charges? What is your expected profit per item?
  • Place: Where will you sell your product/service? How does this make it easy to reach your target customers or meet their expectations? How will this change as you expand? Will you have temporary variations for things like events or seasonal changes?
  • Promotion: How will you promote your product or service? How does this align with your target customer groups? How have you worked out which methods will provide the best return on investment?
  • People: How will you attract the best employees? Collaborate with others? Build strong connections with customers? Make it easy for people to become your social promoters or ‘brand evangelists’?

Operating plan

Focusing on the present or immediate future, describe the day-to-day tasks required to make your business successful. Like a project plan, this section needs to include what needs to be done, who does each task and when does it have to be done by. It should cover all aspects of the business at a high level. It basically shows in a simplified form that you’ve thought all your processes through, including the points at which they depend on inputs and outputs from each other.

People

What skills and experience does your business need to succeed and where will they come from? What people will you need to employ? What skills and experience can you tap into as required, through the likes of contractors, advisers, and business professionals? How will you identify, attract, and retain the best you can afford and those you can trust?

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