How to Write a Business Plan
the information provided below is for informational purposes only, is not intended to be construed as legal or any other type of professional advice or guidance and may not be accurate or suitable for your specific situation.
Every great business starts out as an idea. A spark of inspiration on the commute to work. A hypothesis hastily scribbled down in a notebook. But taking that idea and crafting it into a tangible reality is a long and winding road. In order to navigate it successfully, as a new entrepreneur, you need to start out with a clear direction and focus for your hypothetical small business. You need to establish proof of concept, familiarise yourself with the market you wish to occupy and get a greater understanding of the resources your start-up will need.
In short, you need a business plan.
Writing this humble document is an important first step in any entrepreneur’s small business journey. But if you’ve never written one before, it can be a daunting prospect. We look at everything you need to outline in your plan in order to lay a strong foundation for success.
Why do I need a business plan?
You’re excited to roll up your sleeves and start trading. In your zeal, you may wonder whether you even need to write out a business plan. But to venture on this journey without one could see your nascent enterprise struggle in its early days.
This initial business planning helps you as an entrepreneur better understand the logistical considerations, challenges, financial implications and potential obstacles associated with making your idea for a small business a reality. It separates the thinkers and fantasists from the doers and realists, which is especially important when making a case for financing. Lenders and investors are inherently risk-averse and want to see an extremely cogent and comprehensive business plan before they consider funding your business venture.
A business plan has internal value, too. It serves as a reminder to you and your team what you’re working towards, establishing your initial goals and serving as a benchmark for performance. It provides a focal point for your operational and marketing strategy that you can adjust over time as your goals change.
Your business plan is essentially a roadmap that enables you to navigate the perilous first years of business. According to Fundsquire, 20% of Canadian small businesses fail in their first year, while 60% fold within their first 3 years. The more considered and comprehensive your business plan, the less likely your company is to become just another statistic.
How do I write a business plan?
Before you sit down to write out your business plan, it’s necessary to understand who and what this document is for. Your business plan serves several functions, and therefore needs to satisfy the following objectives:
Clearly and thoroughly explain your business idea
Identify the unique selling proposition (USP) that differentiates it from competitors
Outline clear and measurable goals and objectives for the future
Identify any threats to your business and how you will mitigate them with the right safeguards
Set out realistic financial projections for your first year including cash flow analysis
You will more than likely adapt your plan slightly, with different iterations for different intended readers. For example, your team may need an easy-to-read summary that briefly outlines the company’s goals and objectives. On the other hand, lending institutions, business angels and other investors will expect more granular detail, especially when it comes to financial planning.
It’s essential for your business plan to be clear, precise and carefully structured. This makes it easier for you to adjust, expanding and truncating in selected areas to make it more accessible and relevant for different readers.
What do I include in my business plan?
Here we break down the different areas that your business plan needs to cover. These act as discrete sections to lend structure and focus to your business plan. While they will likely be included in most online templates you encounter, the earlier you familiarise yourself with them, the easier you will find it to write your plan.
Let’s take a look at the sections your business plan should include.
A company summary, or executive summary, provides an overview of the company, including:
The date the company was founded
Its mission statement and broad operational goals and what progress has been made in achieving them
An overview of the company’s offering
The USP that differentiates your brand from its competitors
Breakdown of your products and services
Your company is only as strong as the products and services it offers. Outline yours here. Again, what makes your offering stand out from that of your competitors? Do you have relations with suppliers that are known for quality? Do you have a more sustainable or ethically aware supply chain than most?
Current market and competitive analysis
As well as having a clear idea of what your company is and what it represents, your business plan should demonstrate a clear understanding of your place within the context of your chosen market. Inevitably, this requires a degree of competitive analysis.
What is the value of your chosen market?
What market segment/s will you cater to?
Who are your competitors, and how much of a market share do they command?
What opportunities do your competitors present? How can you improve upon their offering?
Do you foresee any consumer trends that could create new opportunities for you?
In carrying out the research and analysis above, you may find it useful to carry out a SWOT analysis. This is a detailed analysis of your Strengths, Weaknesses, Opportunities and Threats as a company. A SWOT analysis can be carried out for any business, individual or even a country.
Carrying out a SWOT analysis shows an awareness of your fledgling company’s strengths, as well as its limitations and the potential threats that could undermine it.
Strengths- What are you good at? How has your prior experience (and that of your team) prepared you for success in this field?
Weaknesses- Where are the areas in which you need to develop? How might your more experienced competitors have an advantage over you?
Opportunities- What emerging market trends or consumer behaviours are you able to capitalize upon? Are there any areas in which your competitors fall short? What does your target market want that they are not currently getting from other companies in your field?
Threats- It’s important to be realistic about the potential threats your business faces. As well as competitors, are there any technological, social or economic changes that could pose significant challenges to your business? How could you potentially overcome them?
How will you sell your products or services? Will you sell online, via a physical store or through blended retail strategies that use both? If you sell online, will you sell through your own ecommerce store, or through other channels like Amazon, eBay, and social platforms? How will you make yourself visible and establish your brand on these competitive channels?
What pricing structures will you use, and how will you ensure value for money while also facilitating the cash flow you need to survive as a new small business?
How will you market your new business, products and services to your target audience? What social platforms do your target audiences use? What papers do they read? What websites do they visit? What billboards do they pass on their daily commute? These insights will help you to determine how best to market to your target audience, and establish a marketing budget for your chosen strategy.
Financial projections and analysis
Finally, you need to be able to demonstrate an understanding of how your business will perform within its first year. This means detailed financial forecasting including a cash flow analysis.
How much will you need to borrow/source to cover the cost of opening?
How will this translate into monthly repayments and how will they impinge on cash flow?
How much will you expect to make in sales in your first year? Will demand within your target market experience peaks and valleys from one month to the next?
What operating expenses can you expect to bear?
What, if any, profit do you expect to make?
How long do you estimate it will take your business to become profitable?
Being able to answer these questions realistically and drawing on real data will help you to make a strong case for yourself to lenders and investors.
Struggling with SWOT analysis? This guide from the BDC will help to guide and inform your analysis
The Canadian National Statistics Agency is a useful resource for carrying out secondary research and getting an overview of your target market
Want to carry out a competitive analysis but not sure where to start? The BDC also has a useful guide on the subject
Start Your Business
It’s time to get down to business: the business creation process. You can now take the concrete steps of setting up your new business.
Manage your business
You have successfully completed the previous steps and your business has finally opened its doors. Congratulation ! Now you have to learn how to manage your day-to-day affairs.