Writing A Business Plan Is Easier Than You Think
Follow These Steps to See if Your Idea is Worth Pursuing:
Many people have the desire to start a business but are daunted by the process and never move forward with their idea. It’s easier to do than you think. Start with an uncomplicated approach to writing a business plan, and once it looks like you have a viable idea, you can dig deeper. Writing a business plan can validate a business idea and give you insight into how much it will cost.
In this article, I will give you an overview of each section of a business plan so you can understand the elements needed to launch a business.
Let’s get started…
I. Executive Summary
Come back to this section once you work through the business plan and know the skillsets needed to form a team. This section is especially important to showcase your management team and their experience when looking for funding from investors.
II. Company Description
In this section, explain the overall vision of your business, but revisit this section once you know all the answers- keep moving.
- What is the opportunity in the marketplace?
- What problem are you solving in the marketplace?
- What is the legal structure of the company?
- What does future growth look like for the company?
III. Products & Services
This is where we start- describe your product or service. You don’t need to reinvent the wheel, but you DO need to stand out from the competition. Product, packaging, marketing, and branding design are extremely important for getting your message across and attracting customers, make sure to hire professionals to get this right.
Sometimes forging a business partnership with people who have expertise in certain areas is a way to bootstrap your startup if you don’t have the proper funds to hire experts in their field.
IV. Market Research
This section provides details on your industry, target market, competition, and what people would be willing to pay for your product or service.
1. Target Customer
Describe your target customer. A clearly defined target market will set the stage for your product development decisions, and marketing & sales strategy.
Here are some factors to consider when outlining your customer:
- Age range
- Gender
- Location
- Shopping habits
- Income
- What technology do they use
- Their values, beliefs, or opinions
2. Competition
What do your competitors charge for their product or service? What are the key features? How do they stand out? Flaws? Profitability? Customer base?
Dig deep into learning about your competition. It will give you insight on how to approach other areas of your business.
How does your product or service stand out from the competition?
3. Strategic Position
What is your brand image? Luxury, mass market, specialty, low-end? This will determine where to sell in the marketplace, where you will strategically position your brand. What will you charge for your product/service? Is it competitively priced?
V. Marketing Plan
How will you market your product/service? Marketing can be costly, but it is imperative to winning customers- business doesn’t walk through the door just because you launch a website. Make sure to develop a comprehensive marketing plan for your business so that you can avoid costly mistakes and ineffective results. Which tactics are your competitors using successfully?
Shopify is an eCommerce platform for entrepreneurs looking to build a website. It offers multiple plugins you can use to assist and track marketing and sales operations, BUT it should not replace a marketing and sales team.
Marketing tactics may include:
- Business website
- Social media marketing
- Email marketing
- Mobile marketing
- Search engine optimization
- Content marketing
- Print marketing materials (brochures, flyers, business cards)
- Public relations
- Trade shows
- Networking
- Word-of-mouth
- Referrals
- Paid Advertising
It may be easier to calculate your marketing budget based on a percentage of your 1st-year projected revenue. You can calculate this revenue further down this article using the profit and loss template.
WSJ report on marketing budgets and expenses based on industry.
VI. Distribution Channels & Sales Strategy
Distribution channels:
Where can people purchase your product or service? Retail? eCommerce? Distributor? Wholesale?
I think the pandemic has taught us the importance of having multiple revenue streams to survive financial hardships AND to maximize revenue opportunities. In most cases, it takes a business 2–3 years to break even, but an omnichannel sales strategy will increase your chance of success.
Read my article on omnichannel strategies here.
Sales Strategy:
Each industry has a standard strategy to sell their product or service. Some use an inside sales force, independent sales representatives, trade shows, 3rd party sellers, agents, brokers, or eCommerce to name a few.
Try to speak to someone in your industry to learn what sales strategy works best, what doesn’t, and what to watch out for. For instance, trade shows are expensive, how many should you do a year, and which ones have proven to be the most successful? What is a standard sales rep commission? What is the standard licensing or professional service fee in your industry? How do you go about getting an agent?
Implementing a sales strategy can be costly, so make sure to investigate methods used in your industry as a guide to developing the most effective plan.
VII. Operational Plan
This section explains the daily operation of your business. Every industry has its own standard operational needs; below is an example of a consumer product-based business to give you an idea of costs to be considered.
Don’t guess on costs if you want the most accurate financial picture of your business — do the research.
1. Manufacturing Production
Where will you manufacture your product and how much will it cost? It’s easier than you think to find a manufacturer- Put the word out to your network of family or friends to find a lead. Another option is to use a B2B platform like Alibaba, ThomasNet, SourcingPlayground, or something similar.
More on how to find a manufacturer for your product.
Don’t be shy about getting a supplier on the phone to get educated about the process, I’ve always found them more than willing to share their knowledge. They want your business! To them, you could be the next Apple.
The factory will need a prototype of your product so they can give you an accurate cost per unit to manufacture. Of course, the more you manufacture the less it will cost. Ask the manufacturer what their minimum order is and plug that cost into your profit and loss statement. Most likely you will not make more sales than your minimum order the first year.
Based on the cost per unit from your factory, you can use this formula to calculate the retail cost of your product and make sure it lines-up with the pricing of your competition.
5. Warehouse, Distribution & Shipping Logistics
Again, get a warehouse on the phone to learn the ropes and to get their list of services and costs. Tell them you are expecting a shipment of 5,000 units in 4 months and you are looking for a warehouse. Don’t tell them you are “thinking” of manufacturing a product because they may not take you seriously. There are so many variables in a warehouse’s costs, ask if they will give you an estimate based on your shipment and distribution plans.
More on warehousing and distribution.
7. Legal Environment
Nowadays, there are many legal regulations a business MUST comply with that can affect their bottom line. Make sure to research the regulations associated with your industry so that you are not blindsided by extra costs and red tape. Here are some to consider:
a. Licenses, permits, certifications.
b. Trademarks, copyrights, or patents
c. Insurance coverage your business requires and how much it costs
d. Environmental, health, or workplace regulations
e. 3rd Party testing/verification
8. Personnel
What type of personnel and departments will your business need? You will need to plug these numbers into your profit and loss statement. Salary.com is one place that will give you standard pay rates.
VIII. SWOT Analysis
Now that you have the big picture, it’s a good idea to examine the Strengths, Weaknesses, Opportunities & Threats (SWOT) of your business idea to see if you should move forward. Here is a SWOT worksheet courtesy of SCORE:
Your team or friends should try and “poke holes” in each topic, and then you should answer them.
IX. Profit & Loss Statement
Below is an example of a profit and loss statement you can use as a guide to record your expenses and crunch numbers. There are many local and national resources with free business planning tools that may be more in-line with your industry- here is a link to the Small Business Administration as one way to get more help.
Good luck…
