Starting a business can be exciting and daunting at the same time. While you are proud that you’re finally on the path of making your entrepreneurial dreams come true, you also have to grapple with the stress of ensuring your business is a success.
According to Statista, the average startup failure rate in Africa stood at 54 per cent in 2020. In Kenya specifically, startups had a failure rate of 24% that year. Another survey by Statista points to a lack of financing/investors as a major reason for the failure of startups worldwide. This brings us to business plans and why they are important.
Business plans are a necessity for both startups and other businesses that are already established. By preparing a business plan entrepreneurs have a clear blueprint of how they are going to accomplish their business goals. Additionally, and most importantly, it plays a fundamental role when seeking to secure funding from investors.
Getting into the Business Plan Writing Process
When it comes to preparing a business plan, there are three ways you can go about it. The first straightforward option is utilising business plan software to generate business plans. According to Forbes, business plan software is a better choice and contains features that make the entire process easy.
Another alternative is outsourcing the writing services. There are a variety of freelancers out there with the know-how of creating business plans. If opting to go the freelancer way, it will be necessary to check their credentials and previous work experience to ensure you get the right individual for the job.
Lastly, you can prepare the business plan yourself. No one knows your business better than you and you will be better placed to clearly outline the vision you have for your business. Preparing a business plan doesn’t have to be a nerve-racking process. Once you have the structure, you’ll be able to pull this off.
If you’ve decided to do this yourself, here is a step-by-step process to get you started.
Step 1: Executive Summary
The first section of your business plan is the executive summary. As you can tell from the title, it’s a summation of the content of your business plan. It provides an overview of what the investors will find when going through your business plan.
There are a few key notes to consider when writing the executive summary. For starters, it’s the last thing you work on when preparing a business plan. Also, it needs to be concise and very convincing. It should also include a unique selling proposition. Often, investors will judge whether they want to go through the rest of your business plan after reading the executive summary.
Step 2: Business Description
The business description section gets down to talking more about the specifics of the business. Here, you will speak in-depth about the business idea and how the business came into existence.
You will also include other factors such as business location, products or services provided and the type of business. It is also crucial to include the legal structure of the business i.e. is it a sole proprietorship, partnership, corporation or limited liability corporation?
Step 3: Market Analysis and Strategy
Before selling your product or providing your services, there needs to be a clear understanding of the market. You need to understand what is happening in your market/industry. What are the current trends and are they working in your favour or not?
You should also highlight who your competitors are. You also need to be clear on who your target customers are by understanding their demographics.
Step 4: Marketing and Sales Plan
In this section, you will delve into the tactics and techniques you will use to ensure potential customers interact with your products and services and even purchase them. Marketing strategies will help with attracting customers while sales strategies will help with sealing the deal. Some of the marketing practices to look at may include advertising, social media marketing, content marketing and search engine optimisation.
Step 5: Management and Organisation Description
Investors will need to know about the people leading the organisation and their competencies. Therefore, this section will look at the management team, why they were the best fit and their respective professional backgrounds. This will include their names, position in the company, core responsibilities and education.
Step 6: Products and Services Description
In this section, get into detail about the products and services that you will be offering. This is where you get specific about your offerings. Factors to consider when writing this section include the innovative features offered by your product and how it stands out from other products and services already in the market. Be sure to include a list of unique selling points.
Step 7: Competitive Analysis
Taking a deep dive into your competition will show that you aren’t getting into the market blindly. Take note of who your competitors are, how they have positioned themselves in the market and the pricing policies that they employ. It will also be important to show how your product and that of the competitor compare in terms of features, pricing and quality.
Additionally, include how you intend to differentiate yourself from the competitor. Make sure to implement the SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis when writing this part.
Step 8: Operating Plan
An idea will remain just that if no execution takes place. It is up to the operating plan to show how the concept will be made into reality through actionable steps. Take the time to outline the short-term processes and long-term processes that will lead to business success.
Talk about how you intend to conduct processes such as distribution and manufacturing and how customers will be served. Include key milestones and target dates for when they should be met. Don’t be afraid to use charts for visualization purposes.
Step 9: Financial Projections
When coming up with the amount of funds needed for a business this is often a result of estimations and projections. Backing up these numbers with how they will be utilised is also crucial.
Preparing the financial plan can be tricky if you have no background in finance. You may opt to have someone come in and help you. You should, however, be clear on what a financial plan entails.
First, make sure the sources of funds are clear. This may include owner’s equity or bank loans. Owners equity is money that you, as the business owner, have put forward to help in the business operations. Lenders prefer to see that owners have raised a particular sum of money
Three important financial statements that need to appear on the plan include an income statement, a statement of cash flows, and a balance sheet. Information provided in the sales section will be useful when developing the financial plan.
Step 10: Appendices
This part is a supplementary section. This means that any additional documentation that will support your business plan and emphasize your validity is placed here. These may include maps, tables, charts and figures.
Every entrepreneur with the intention to succeed should have a business plan. In the words of Winston Churchill, ‘He who fails to plan, is planning to fail’. Get started today and give your business a fighting chance.