I have directly started my previous businesses without much planning and thinking.
And I was constantly nagging I am not getting success in business?
But sometimes we need to think rationally and apply day to day hacks to find out the root cause of the problem.
So I did RCA (Root Cause Analysis)….
What I have discovered, most of the business failed due to lack of planning and direction.
The simple Pareto Principle(80/20 Rule) applicable to business management as well, like
80% of sales come from 20% of clients
This business management derived from the well-written business plan.
When starting a business you must have clear picture, goals, and purpose which is challenging parts of any business.
The best way to deal with this challenge is to create the business plan; a well written, informative, organized layout for how you want, grow, perform and excel the business.
Before directly jump into business plan writing, it is most important to understand 5Ws of your plan.
Yes, 5W…What Why, Who, When, Where
I recall famous quote here,
“If you failed to plan, you definitely planned to fail”.
I am going to cover below topics today so let’s dive in,
Select Your Favorite Section
- 5W (What, Why, Who, When, Where) of Your Business Plan
- Pain Behind Business Planning
- How to Write Business Plan
- Traditional Business Plan
- Lean Business Plan
- Common Business Plan Mistakes
5W (What, Why, Who, When, Where) of Your Business Plan
1) What is a Business Plan?
A business plan is an important document that outlines your business.
It defines what is your business, how it will be structured, who are your competitors, what are your services, who are your executives, sponsors, investors etc. what is your marketing plan, how are planning to sell your services & product, what are your future plans and projection in terms of finance etc.
2) Why must you write Business Plan at the early stage?
Business is evolving, dynamic, adaptive process and as a business owner, there are many different reasons like below which state that why you may need a plan.
- For Applying Business Loan.
- Searching for Investors.
- Making Improvement in your existing business.
- To map the Business future
- Create a new business.
- Develop new business alliances.
- Share and explain business objectives with your management team, employees and new hires.
- Set specific objectives.
- To identify Market and Competition.
3) Who cares about your Business Plan
4) When Business Plan needed?
Today business plan not only limited at the early stage of the business but also as needed at later stages of the business.
A good entrepreneur is one who regularly reviews the plan as it shows whether a business is on track or not
In some cases its static document and in other its dynamic document.
So you have to write a plan at the initial level of the business (before starting the business) and continuously review it.
5) Where to write a plan?
This is one the weird question I have seen while doing research…
There is no specific answer to this question.
A business plan can be written anywhere.. there is no specified place.
It can be written even on plain paper, online, Wordpad, smartphones etc..
Note: –There are various online software platforms where you can automate business planning like LivePlan which is leading player in the market.
Before proceeding to the next step here is the deal for you
Now let’s look at some paint point and solution of business planning
Pain Behind Business Planning
How to Write Business Plan
It’s 4 Step Process
- Prepare Checklist.
- Choose a right template.
- Define each element of chosen business plan template.
Let’s see each in detail.
The checklist is the best way to plan, complete anything and it works for the business as well.
Well prepared checklist will save your time and efforts when you have lots of stuff on your plate.
So first prepare the checklist.
I have made sample checklist which will help you to prepare a business plan.These are few questions you need to ask before planning business.
1. Executive Summary
- Who are the key executive in the business.?
- Why will the business succeed?
- Is there any need for funding.
- How much money is required?
- What is the return on the investment?
2. Business Description
- What is a Business Idea?
- What is a Unique in your idea?
- What is the growth potential?
- What is the type of business?
- What products or services will you sell?
- Why does it promise to succeed?
- What is your organization hierarchy and How will you structure your organization?
- What approvals, licenses, and permits will you need to run the business?
- Who will manage the business?
- Initially how many employees will you need?
- What are your plans for employee salaries, and benefits?
- What consultants and specialists will you need?
- What legal form of ownership will you choose? Why?
- Who are you, key competitors?
- What’s unique about your competitors?
- Who are your potential customers?
- How large is the market?
- What is your marketing approach: Inbound or Outbound?
- What advertising and promotional strategies will you use?
5. Research and Development
- What are initial technical challenges in terms of the setup, machinery etc?
- What technical assistance have you received?
- What research needs do you anticipate?
- The cost involved manufacturing your product or service?
- What are your needs for production (e.g.raw material, facilities, equipment)?
- Who will be your suppliers?
- What potential problems could arise and how to mitigate it?
- What are your total financial needs and sources of finance?
- Do I need funding? How?
- What will it cost you to open the business?
- What will your personal monthly financial needs?
- What sales volume will you need in order to make a profit the first three years?
- What will be your projected assets, liabilities, and net worth on the day before you expect to open?
- What is your business projection?i.e timing,goals.
- Have you set up objective and your deadlines for each stage of your business?
After preparing checklist you must do the analysis. An analysis in terms of Industry, Company, and Competitors.
Company Analysis: what products, services do you offer now and/or what will you develop and offer in the future?
Industry Analysis: how big is/are your market(s) and how are they changing? What are current trends affecting them and do these trends bode well for your future success?
Competitive Analysis: who are your competitors and what are each of their key strengths and weaknesses? In what areas will you have gain a competitive advantage? What is the marketing strategy you have opt-in?
3.Choose correct business plan template
This is next important step after analysis.
There are various templates out there, but key pain point is how to choose correct template.
You must ask questions while choosing and writing a business plan along with below characteristics.
Questions to be asked while choosing a business plan
- Is it fit for the business need?
- Is it realistic and can it be implemented?
- Can I track results in the plan?
- Does it defines responsibilities for implementation?
- Is it communicable to the people who have to work and run the business?
- Does it keep people Motivated?
- Can it be dynamic and kept alive by follow-up and planning process?
Characteristics of good business plan template
- Great Summary.
- Proof of Vision.
- Good Formatting and Clear Writing.
- Easy to Understand and Read.
- Short and Simple
- Realistic Financial Projections.
- Detailed Market Research and Competitor Research.
4.Define each element of chosen business plan template
Now define each element of business into the chosen template.
Here I found that why business owners feel the pain of planning business….because they don’t know the difference between Traditional and Lean Business Plan.
Yes, it’s confusing.
Let’s Look at Traditional Business Plan Vs Lean Business Plan.
Traditional Business Plan
Traditional plans are lengthy about 40-60 pages of the document like college projects and still many of the entrepreneurs only creating it.
Elements of Traditional Business Plan(Format)
● Title Page
● Table of Contents– mentioned your tables of contents.
● Executive Summary– a high-level view of the company and in which you summarize your vision for the company.
● General Company Description– here you mention an overview of your company and the services.
● Market Analysis– Identify what’s your target market, and why market customer interested in buying from you?
● Products and Services– in which you describe, in detail, your unique product or service.
● Management and Organization– in which you describe the structure of your organization and the philosophy that governs it.
● Marketing Plan– in which you describe how you’ll bring your product to its consumers.
● Operational Plan-in which you describe how the business will be operated on a day-to-day basis.
● Financial Plan-in which you illustrate your working model for finances and business need from investors.
When to use Traditional Plan?
I agree sometimes banks, venture capital firms may ask you details but it’s not the case every time.
Lean Business Plan
Meaning of the word Lean started with lean manufacturing, which is focused on a cycle of continuous improvement which is called as PDCA(Plan-Do-Check-Adjust)
It is lean business planning because it makes perfect sense to apply the same idea of starting with the minimum, reviewing regularly and improving over time to business planning.
A lean plan is a collection of bullet points, lists, tables. It’s not an elaborative business plan or document.
Simple 1-2 page business plan can fulfil your requirement.
Here is , a well know for business planning expert and Founder of Palo Alto Software, bplans.com saying about lean planning –
Elements of Lean Business Plan(Format)
Identify Need That Your Business Fulfils
- Need which your business satisfies.
Describe How to Fulfill Needs
- List the mission statement and actions of your business to address gaps in the market.
- How your business will do better than others who already there in the market.
State Uniqueness Of Your Business
- Outline your unique business model how its unique than others.
- Mentioned key strengths, weakness, competition in the market.
- State how will end user takes benefit of the uniqueness.
- Identify and state your keyboard members, management team, advisors.
- Mention what value they add to your business.
Know Size Of Your Market
After identification of the niche, check the market conditions –
- How is your size of the market growing?
- What is the earning potentials & how big it is?
Design Ideal Promotional Strategies.
- Identify how to reach and pitch in the market.
- Devise your promotional strategies plan(inbound, Outbound and both).
- Identify and strategies which promotional medium it suitable for your business.
Segregate Your Revenue Stream
- It includes-Expenses(internal, external), Pricing model, Costs, Margins on which your business is running.
Identify Budget to Start With
- Fundings which typically come external sources(Angel Investors, Loans, Venture capitalists, friends).
Formulate the Plan for Braking Points
- Make breaking point with +ve and -Ve scenarios with contingencies and without contingencies e.g If you hit or slow down in the market and you don’t have a plan, your business could even fail.
When to use a lean business plan?
All businesses should use the lean plan methodology and a traditional plan.
The traditional plan becomes useful only in special case business events such as applying for a bank loan or seeking outside investment.
In those instances, entrepreneurs can use the lean plan as a first draft, and then add summaries, market analysis, more explanations, and a lot of background information to make it into a traditional plan.
Current thinking about lean plans?
Most of the Venture Capital firms, Angel Investors are likely to be happy with Lean Business Plan combined with images, pitch presentation, summary memo, and executive summary.
Common Business Plan Mistakes
During my research, I have come across some Business Plan mistakes that most of the Entrepreneurs are doing.
❏ Not caring to write.
❏ Not doing enough market and competitors research.
❏ No clear purpose of your business plan.
❏ Not having a clear business model.
❏ Ignoring market realities.
❏ No awareness about financials and how to plan it.
❏ Setting your business plan aside after you’ve written it.
Business Plan is winning WEAPON for Entrepreneurs.
“The development of a comprehensive business plan shows whether or not a business has the potential to make a profit.”
So there has to be some baseline planning needed to run and grow business in the future.
Anyone can start a business, but before starting any business you must follow step by step approach rather than directly jump into the business.
The exercise of writing a business plan will help you better define your business opportunity, ideas & strategy.
You will go through a process of streamlining your thoughts & organizing concepts into the well-defined message.
Wisely written Traditional and Lean Business Plan is the sure shot way to run and grow your business.
There are multiple mediums to help you out there like consultants, seeking advice from the business gurus, software and each of this medium have their own funda(ways).
That’s it for the day.
Over to you.
What do you think of business planning?
Or maybe you have a question about an above mention process.
I’m glad to understand below from your end,
- Which plan are you using for your business?
- How are you planning?
- What is your Approach?
Let me know in comments if my study helped you and if I missed anything or you may have any further questions!
I’ll be around to reply your comments and answer questions.
And also don’t forget to read how I have built my business using step by step planning here
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