[ADV] What Goes Into A Business Plan?
Writing a Convincing Proposal
Great ideas are born out of a problem waiting to be solved and soon-to-be discovered intelligent solutions. How exactly would you be able to discern a great business plan? We say write it down! Some things are meant to be written.
Business is both science and art. Just like how the very first scientist did it centuries ago, we have to follow a method to test the idea. It always starts with an observation, followed by a statement of a problem or a question, formulation of an answer or a solution, testing, analysis and ends with writing a conclusion. And then, art comes with application.
What is that problem or need that you wish to fulfill? It is always best to go to the heart of the problem. Experience it. Learn what’s behind it. Speak with the people experiencing the same thing not to just dwell on it but to better understand the reason behind it. Observe and listen to what they say. Listen to what your mind and heart say. And then…
When there is a problem, there is always a solution. Man is smart enough to always find a way out of a problem. Not all solutions are efficient though and each solution has to undergo a series of tests to be proven effective. It is always best to think of different options to start a problem. Test them all and screen the best. Now that you already have a problem and a solution, let the writing begin!
The Business Plan.
Once you’ve come up with an idea, the next important step is to create a plan. Writing a business plan is one important step in the business creation process that cannot be skipped. It is very beneficial as a business plan allows you to clearly state your business objectives, be better placed to look for funding, seek out new opportunities, and better organize and manage your business. Think of a business plan as a scientific method that you need to follow. This will serve as your guide in the future.
Writing a business plan for start-up entrepreneurs could be very challenging. Some tend to copy ready templates (with ready text) online without really evaluating if it is applicable to their business structure or not. To help you better understand what should go into a business plan, we have prepared a smart guide for you.
A. Executive Summary
An executive summary is simply a condensed business plan. It could make or break the deal. It could convince the investors to give you a chance to pitch or just shut you off right then and there. Investors have no time for your tell-tales so better keep it short and sweet, effectively summing up your objectives and strategies.
- Introduction – Type of Business
- Problem and Opportunity
- Technology / Service / Product
- Management Team
- Business Strategy and Route to Market
- Exit Strategy
An effective executive summary will help you land a pitch schedule with the investors. Reading this summed up presentation of the whole business plan already gives them an idea on whether or not your business idea is a great investment.
State what the problem is. Do not guess. Create awareness about the problem by stating facts and figures. State how the problem affects the society and what its long-term effects are. Gather as much data as you can. You may use data gathering techniques such as collating available information (write-ups, previous studies), observation, conducting interviews, and spreading questionnaires. It will be smart to combine them or better yet, make use of social networking sites by running polls and online surveys.
C. Solution (Product or Service)
Having figured out the problem and conducting a study, you will be able to think of solutions that may fit and fulfill the needs. State what that product or service is. This is the part where you thoroughly explain how it works and why this is the best solution for the problem. You will have to explain the technological backbone of the product as well. How do you create the product? What do you need to secure to produce it? Where will you get your supplies? How efficient is it?
D. Market Size and Analysis
In business and marketing, a market refers to the group of consumers or organisations that is interested in the product, has resources to purchase the product, and is permitted by law other regulations to acquire the product. It is important that you know the business environment before you take the plunge. Know how many other companies offer the same product/services, learn about how they manage their business and how well are the responses they get. Update yourself by watching news, reading newspapers and business magazines.
Defining and analysing your market is important because the more you know about your consumer, the stronger you become in providing their needs. Make sure to create a customer profile stating the demographics (income, occupation, age group, gender, education level and lifestyle). Market knowledge provides you more insights on how to drive marketing and think of effective sales strategies.
First, create an effective branding strategy to create awareness. Your product must have a distinct quality and its own personality. Make use of it so that whenever a consumer thinks of your product, he/she can instantly relate it to a positive trait (or for a service, a positive experience e.g. soap = smooth and silky; Spa = relaxing and rejuvenating).
Second, decide on a promotional mix or a system of disseminating information to your target market. You may do this by placing advertisements on radio, TV or print (newspapers and magazines), utilize social networking and technology. The growing trend is promoting services using social networks such as Facebook and Twitter, SMS blast or phone applications. You may go by traditional direct marketing or giving out samples and discount vouchers. Make sure the return will justify the costs.
Third, identify your direct and indirect competitors. Direct competitors sell the same product while indirect competitors sell alternative products that serve the same needs. Know how much they sell in units and in dollars, the number of years they have been in the market and their specific market niche. Knowing all these will help you know the size and strength of your competition and at the same time, improve your product and services to gain edge.
Fourth, state your product/service edge. Stating the difference your product/service makes, pulls the consumers towards the brand, and therefore subtly pushing them to buy it. State the advantages of buying the product/service, even the obvious.
F. Revenue Model
A revenue model is the business plan for a company to make money. To make the business viable, it has to earn money. For the business to survive, you have to devise a revenue model. An example of revenue model is Direct Selling where you earn by directly trading your products and services to the actual consumers. Another way of gaining revenue is through Advertising. A magazine or newspaper for example, would earn through selling ad space to business owners and at the same time earn through monthly and annual subscriptions from readers.
Write a short text explaining your revenue model and accompany it with a graphical representation (chart, graph or pie) so that it’s easier to understand.
G. Financial Projection
Entrepreneur.com defines financial projections as Estimates of the future financial performance of a business. A financial projection is important in transforming financial plans to specific targets within a specific timeframe. Develop a model that projects either the current year or a rolling 12-month period by month. Forecasting your budget for this duration will help you better manage and control your business and forecast possible downfalls and conflicts. For start-up companies, the initial business plan should include a month-by-month projection for the first year, followed by annual projections going out a minimum of three years. A chart, graph or pie would best represent a financial projection.
H. Management Team
Write a clear and simple description of the management team. Do not put too much emphasis on the job title. Limit the management team to three or five people who are involved in the decision-making. Write a clear description of each, stating their role, related experiences, previous companies and how long they have been in the industry. Disclosing the management team’s credentials adds credibility and this is one factor that investors also consider when granting loans.
Whether or not you need to look for investors, having a business plan helps you effectively organise and manage your business. This outline also serves as a checklist of the things you must know before launching a venture. It’s always a combination of a bright idea, an organised plan and proper execution that makes a business successful.
Now that you’ve read how to write a business plan, start writing! Ideas.inc Business Challenge 2011 is actively looking for young aspiring entrepreneurs aged 26 below to give birth to Singapore’s next best business ideas. Turn that idea into reality by gaining access to funding, mentorship and workshops conducted by experienced entrepreneurs. We’re not even asking you to write a business plan yet! All you have to do is register for the competition and submit and executive summary to qualify.
Hurry! Register now at www.ntu.edu.sg/ideasinc before the submission deadline on 14 February 2011 (Mon). 15 semi-final teams get funding up to S$15,000 each. 6 final teams get funding up to S$50,000 each.
This is an article contributed to Young Upstarts and published or republished here with permission. All rights of this work belong to the authors named in the article above.