The Steps to Writing an Effective Business Plan
It can be overwhelming to write a business plan. Many people find when they become overwhelmed at the idea of developing a business plan that they also become confused or completely immobilized and unable to move on to the next step. Understanding all of the essential steps involved can help you to develop a clear vision of what you need to do to write an effective business plan.
Audience and Funding Type
One of the first and most important steps involved in writing a business plan is to determine who the audience will be. Who will be reading your business plan? This decision will help to shape the direction of your business plan.
For instance, are you planning to obtain financing? Are you looking for investors? Who will be reading your business plan can play a large role in the direction that plan will take. For instance, if you are preparing a business plan for a bank where you hope to obtain a business loan, 10-15 pages that are focused on the subject of the risk the bank will assume will be sufficient.
On the other hand, if you are looking for investors, your business plan may need to be as long as 30 pages and will need to be much more in-depth and contain all of the details, facts and figures to support any market assumptions.
Business Plan Outline
The second most important element of your business plan is the business plan outline. You will need to prepare the outline for your business plan before you actually conduct any research or writing for the plan itself.
Collection of Research and Information
After you have determined the type of funding your business will require, the next step is to conduct some research. The research for your business plan will cover several critical areas:
- Insight from your experience both working in and observing the industry for your business.
- Published information from the Internet, etc. This will include information on market growth, overall industry perspective and customer profiles.
- Field research. This will include interviews with prospective customers as well as suppliers, industry experts and competitors.
One of the easiest ways to collect all of the information from your research is to create files for every section of the business plan. Such files can be paper based, computer files or using some type of business planning software.
General Industry Overview
The research process should be started with an overview of the industry you plan to enter. A general understanding of the industry will help you to avoid possible embarrassment of asking basic questions of industry experts.
After you have collected the majority of the information and data you will need, you can then begin analyzing it. Consider building a competitive profile, risk assessment and contingency plan.
Begin the financials section once you have some average industry information for your business. Be sure to work closely with your accountant in order to develop realistic projections. If you are overly optimistic, it can set you up for failure and may cause your banker or investors to question your plan.
The executive summary should actually be saved for last. Once you have completed all of the other sections of the business plan, you can then go back and write the executive summary, making sure to highlight key points.
Review and Editing
Keep in mind that you only have one opportunity to make a good impression. A business plan that is well-written can open up numerous doors and opportunities for your business. Do not overlook the important step of reviewing and editing your business plan. Ask others to look over it and provide you with feedback.