You have an idea and you are seeking funding but wait, how are you going to explain your idea in detail? How will you remember all the stuff of business? You need a piece of document in which you articulate the plan and present it to your potential investor or lender, we call it a Business Plan.
A business plan is the extensive report of your plan and it takes hefty time to prepare, but still, I suggest to every entrepreneur to dedicate their time to create them. The size of the business plan depends on certain goals. If you are seeking investment, so you need a detailed plan as an investor or lender keen to know everything about the business, or if you require for internal purpose so it’s ok to be short.
This article will tell you the essentials that have to demonstrate in your business plan nevertheless you require funding or expansion.
This is officially your first heading however this segment is written last. Because it ought to give a short, compact, and hopeful diagram of your business that catches the investor’s/ lender’s consideration and gives them enthusiasm, a reason to attract to it.
This is an ideal opportunity to catch your investor’s eye and let the individual realize what it is you do and why the person in question should peruse the remainder of your marketable strategy or proposition.
Investors and lenders are already preoccupied. Suppose somebody gave him an 80-page record and said, “Read this” they most likely first need to know why.
There is no set structure for an official outline, however, there are rules you should pursue. To begin with, consider your center qualities. Use visual cues to show your thoughts, and ensure you generally utilize brief language.
To articulate the perfect passage, you must ask that question to yourself;
- What Unique proposition your idea poses?
- What kind of clients you have? And are they paying you?
- Do you have licenses or Patents for your innovation?
- What future would be like?
To make the structure would workable for the investor, bank specialist.
- Company Brief Description
- State Problem
- Your Solution
- Why Now
- Expected Return value
The Why Now point is one of the most significant desire questions of the investor, and you must state this answer smartly. If you qualify for that part, an investor will be keen to go through your business plan, and if you fail, you will lose the investor.
In this section, you give a history of your business, i.e. when and where the idea was born. Similarly, State that what you do and what makes your business unique. Whether an investor or lender read your company description, it should have a clear understanding of the scope of your business idea.
The company’s description will not be enough, you must put the Vision and Mission of the company. Investors or lenders don’t look for a precise or precious line for vision and mission, but they compare the company’s vision with your capability.
If you already have a running business, so you must outline the core value that you follow in the business operations.
Your business history must be constantly refreshed as your business grows or changes.
Now Investor has got the idea about the business, but still uninformed with the idea maker or their core team. Many investors and lenders want to know the quality and experience of the management team is one of the most important factors used to evaluate the potential of a new business. Through this Management Team section investors will evaluate the skills, experiences, and resources your management team will need.
The chances for success is not just only depend on an idea, but it also depends on the management team. Before building the team, an entrepreneur must build a diverse team, in a way that they strengthen each other. The investor will not only judge the idea builder nor the business, but he evaluates your team’s capabilities with the business. There are lots of entrepreneurs who bring the exceptional idea but failed to execute just because of not having a diverse and competitive team.
In this section, you need to describe your Products and Services and how it differs from others. Keep in mind that this section is not for technical descriptions and definitely not recommended. Sometimes an investor is not an industry expert, so he doesn’t understand the technicality or industry jargon.
Try to use simple terms rather than to use industry buzzwords so that your readers can easily understand. Contrarily, explaining how these products and services will differ from the competition is critical, but you have to describe in a way that creates value to the investor, and you can only impress them when you demonstrate with your heart. List all the details if you have applied for copyrights, trademarks, and patents.
If your product already has competitors, so you don’t need to explain much but differentiate your idea from others along with Unique Selling Proposition (USP) and if you’re creating a new product or service, make sure you thoroughly explain the nature of the product, its uses, and its value,- etc. Otherwise, your readers will not have enough information to evaluate your business.
Importance of Market Analysis in Business plan
In the previous section, you have defined your products and services, but where your product will serve? In the section, you need to explain the market where you actually sell.
Market research is really critical and also a time-consuming task. Your job is to observe the market opportunities, finding gaps along with that you have to build a buyer persona as well. Meanwhile, you need to collect the following information about your targeted customer.
- Customer demographics
- Customer behavior
- Buying cycle trend
- Purchasing power
- Household income
You also need to explain your niche market where you focus on and have to validate your future market with rationale. Fortunately, there is a good and precise way for market validation, the concept called TAM/SAM/SOM. Through this exercise, you will easily demonstrate your market and explain the expected no. of customers you are going to serve.
Total Market Available(TAM), this is the total market of your product/ services, irrespective of the geographies and competitors, but obviously, you can’t serve all the market, despite having lots of competitors striving for market share.
Serviceable Available Market (SAM) is the sub and geographic market where you will actually work.
Service Obtainable Market (SOM) is the market that expects to capture in a reasonable time. Remember this is the percentage of your SAM you expect to cover.
This is a great way to explore your market by using TAM/SAM/ SOM funnel, but this is not the end. When you are illustrating your research, make sure you have clear evidence of your research, representing research with graphs and tables will add on the value and give clear insight. I highly recommend including graphs in this section.
Role of Marketing Plans/ Strategies in Business Plan
You have a great product, but who will buy from you, when no one will get to know about your product, that’s why explaining marketing strategies is very important. Keep in mind that marketing is not just advertisement, buzzes, social media, promotions, public relations, and billboards. You need to consciously find your market and plan your marketing mode from where your customer can see you. Remember marketing is bad expenses, once your expense and sales do not happen, you will never get back the marketing amount. The only way to get a return is to Sell. So build your strategies wisely.
Here are some of the basic steps involved in creating our marketing plan:
- Focus on your Target Market
- Evaluate your Competitors
- Make your brand position
- Focus on benefits
- Focus on Differentiate
You also need to build pricing strategies and state who and how the customer will pay you. Your pricing strategy should be based on your product and market. If you are going to differentiate your product, so your pricing must be higher or competitive
and if your product is the same as a competitor you must change low pricing, in order to gain market share. Both strategies are correct and still exist, it only depends on which type of business you are in.
Competitive Analysis for Business Plan
Now a day every company keeps its eagle eye on its competitors and marks strategies according to competitors’ moves. In this section, you will devote your analysis to your current or future competitors.
Understand the Strength and Weakness of competitors and compare with your strength. I would recommend doing your SWOT Analysis. If you understand the SWOT analysis, believe me, you can easily figure out your USP.
This section will not only be helpful for competitor analysis but also for scanning your environment. Do your PESTLE analysis, it will help you to evaluate your risks prevail in the market.
Financial projections and estimates help entrepreneurs, investors, or lenders to evaluate a company’s potential for success. It tells you whether your business has a chance of being viable–and if not let you know you have more work to do. Every entrepreneur has to provide comprehensive financial reports and analysis if they are going for funding injection whether from Investors or lenders. Every business must plan to include at least three basic reports or projections.
There are five basic reports or projections:
CAPITAL EXPENDITURE and OPEX
A detailed breakdown of your investment that you capitalize on expense. This report helps to identify the burn rate of investment, along with that it also helps to explain the startup cost.
Income Statement: It is also called the Profit and Loss statement, in this report we provide the projected revenue and expenses. It shows whether a company will be profitable during a given time period.
Cash Flow Statement
A projection of cash receipts and expense payments. It shows how and when cash will flow through the business.
Describes the company cash position including assets, liabilities, shareholders, and earnings retained to fund future operations or to serve as funding for expansion and growth. It indicates the financial health of a business.
These reports tell the time to be in zero profit means how much time a company needs to be in profit.