The first step to starting a business is having a great idea. But what do you do once you’ve found your great idea? Putting together a business plan can help you take your idea from a fuzzy concept to a workable plan with a mission statement, concrete business goals, and a picture of your ideal customer. A well-written and thorough business plan will give potential investors, lenders or partners confidence in the viability of your startup. It will help you address what sets you apart from potential competitors. It will also save time down the road by providing an outline that makes it easier to communicate your ideas clearly with other people. In this article we’ll walk through how to write not just a basic business plan, but a killer business plan that will get your partners, investors, and clients to give you an enthusiastic yes!
Step 1: Define Your Business Objective
The first step in creating your plan is to take that great business idea and define your objective. Writing a business plan is a great way to help you organize your thoughts, create your company description and mission statement, and help you to focus on and clarify the details of your business.
So what type of company do you want to start? What product or service are you providing? Are you starting a business that does not require any capital investment, such as selling handmade crafts on Etsy, or providing personal services as a sole proprietor? Or will you have a brick-and-mortar business that will rest on getting investors, a business loan, or both? What type of business model will allow you to reach your goals while providing value to your customers? Will you sell directly to consumers via retail stores? Or will you partner with retailers to distribute your products? How much inventory will you require? Who will manufacture your products? Where will you source materials? These are all important considerations before beginning any sort of business venture. The more information you gather upfront, the easier it will be to answer these questions later down the road.
Defining your business objective makes it easier when the time comes to file legal paperwork to start your business. You’ll need to consider the unique advantages of running a limited liability company (LLC) versus sole proprietorship.
It can be easy to get into the weeds of writing out every detail, and that is important when brainstorming aspects of your business like your scope of service, your ideal customer, your marketing plan, and your financial projections. Just keep in mind that you should be able to define your business objective in one-page, and that this page will be the start of your overall business plan. Keeping that in mind will help you write an objective that is simple and clear. If this is the first page that banks, investors, and business partners see, then you want to make sure that it is concise and easy to understand.
Step 2: Identify Your Target Market
Now that you know what your business objective is, think about your target market. Who are your ideal customers? Will you offer services and products that bring value to other businesses in a B2B (business to business) model? Or are you more focused on individual clients as potential customers as a B2C (business to consumer) company?
Once you have identified who your ideal client is, you can drill down to their geographic region, age group, gender, income level, education levels, hobbies, interests, and more. You may even consider doing some research online to see which demographics match up best with your product or service offering.
Use this knowledge to develop an average profile of your potential customers. This helps you determine whether there’s enough demand for your product or service among those individuals. It also helps you make decisions on what your customer relationships will look like and how you’ll manage customer service. This can also help you build a customer relationship management (CRM) software into your business growth plan, which can demonstrate your ability to forecast growth and future business needs for investors.
Clarifying your target market will help you create a picture of your ideal customer. Having this in mind will not only help guide you through the next steps of creating a killer business plan, it will also serve to guide your business decisions with your potential customers in mind.
Step 3: Develop Your Competitive Advantage
Once you have determined your target market, you can now turn your attention towards developing your competitive advantage. Think about why someone would choose your brand over another similar brand. Is it because you provide better quality goods at lower prices than your potential competitors? Do you offer superior customer service? Does your brand stand out due to unique features or benefits? You have to consider all of these factors in order to create an accurate market analysis statement.
Whatever it is that makes you different from your competitors, focus on highlighting these strengths throughout your business plan. If you’re unsure of exactly what your competitive advantages are, ask yourself questions such as “What do I want my customers to say after using our product?” and “How does our product/service set us apart from others?”. The answers to these types of questions will give you an indication of what your competitive advantage might be.
Go further and ask yourself “What problem does my company solve?”, “How does my company differ from other companies in its industry?”, and “Why should anyone buy my products or services instead of buying something else?” Think about the challenges that exist specific to your chosen niche.
If you get stuck on these questions, you may need to go back and revisit your business idea and objective. While it can be discouraging to feel like you are going back to the drawing board, it is time well spent on ensuring the success of your business. Your ability to address questions about your competitive advantage can be the key difference in a successful business pitch to banks and investors versus one that flops.
When you do the work of thoughtfully addressing each step in your business plan, you save yourself both time and money in the long-term. It is better to identify growth areas when your business is still a concept on paper, than to sink thousands of dollars in start-up costs over a half-baked idea that doesn’t gain traction with your target audience.
Step 4: Create a Marketing Plan
Every entrepreneur dreams of hitting on that one magical idea that fills a need in such a unique way that it eliminates all other competition. It can be an inspiring thought and can certainly spark creative thinking when you are brainstorming business plans. But the fact is that almost any service or product you come up with will already have a competitive market. This is where your marketing plan is just as crucial as your business idea.
But if you know what your services entail and who your perfect customer is, then you do have a head start in developing your marketing plan. A marketing plan is an outline of all the steps involved in promoting your product or service. It includes the objectives, strategies, tactics, and activities that you will use to promote your business. It answers the question of how you will attract customers and let them know that your small business is the perfect solution for solving a problem in their life.
A marketing plan is based on the following three principles: identifying your market, determining your budget, and setting goals.
Lucky for you, if you follow this guide step-by-step to create your business plan, you’ll already have your target market defined when the time comes to create your marketing plan. You know exactly who you are serving and how your small business meets your ideal customers’ needs; you need both of these to begin creating a marketing strategy.
Once you have identified your target market, you must decide how much money you will invest into advertising. What percentage of your projected budget can you reasonably devote to marketing? Will you advertise through television? Radio? Newspapers? Direct mailers? Social media sites? How do you envision your online presence? Each medium has pros and cons. For example, direct mail tends to cost more per piece but they reach many people at once. Television ads typically cost less per impression, but fewer viewers see them compared to print advertisements. Social media is virtually free, but it does take a lot of time to find strategies that will beat the algorithms and get your services in front of the right eyes. You need to weigh every option because the best marketing strategy is the one that brings the most return relative to your efforts.
Your ultimate business goal is to make as much profit as possible while spending the least amount of money. To achieve this, you need to set up realistic financial projections so that you don’t end up losing money before making any profits. This way, your company won’t run out of cash too quickly. And marketing is an investment. You’ll need to commit to setting a specific marketing budget that gives you room to test different methods to find the most effective ones for your small business.
Step 5: Make Financial Projections
Now is the time to get into the nitty-gritty of financing your new business. This will look different for every entrepreneur depending on the services or products that your business provides. If you have a product, what will it cost you to develop and produce it? If you need office space, don’t just calculate rental costs; include hardware, software, furniture and other items that will make an office or boutique space feel complete. Even if you plan to work from home, you still need to calculate hardware, software, and other technology costs. You may even want to look into rates for a co-working space, if you envision this as part of your growth plan.
If you are planning to hire employees, how much do you think you’ll spend each month on payroll taxes, benefits, insurance, etc.? Will they need computers, software, or company cell phones? Do you want to invest in payroll and accounting software to have your inventory, time tracking, paychecks, and other accounting needs housed in one place?
What levels of security will your business need? For a brick-and-mortar business, what will it cost you to install alarm and security systems? If you are managing a high volume of customer orders and information, what are your cybersecurity needs to ensure that their data is protected as required by law? What security measures are needed to keep your business website secure, especially if you are processing orders and other transactions? Even if you are working from home or a co-working space, you’ll still need to consider cybersecurity options such as firewalls, antivirus, and a virtual private network for yourself.
Does your growth plan include outsourcing? At what point in your business growth will it make sense to contract with payroll services, a marketing firm, outsourced IT, shipping, or warehouse services?
Once you figure these things out, you can start creating your income statement. Your income statement shows where your revenue comes from and how much you spent producing those products. It also includes all expenses related to running your business including rent, utilities, employee salaries, supplies, equipment maintenance, and anything else that might be required to keep your doors open. Once you have calculated everything, add up your total monthly revenues and subtract your total monthly expenditures. That’s your net operating loss. Now divide your NOL by 12 months to determine your average annual gross margin. Multiply that number by 100% to arrive at your estimated yearly sales volume.
A good business plan includes a detailed financial plan that demonstrates that your products or services can profitably fill a current need in the market. Having a reasonable financial forecast will help you get investors and bank loans, in addition to giving you the confidence that your new business will be successful.
Did you know that Tech Masters provides free business assessments that include an executive level summary with best value recommendations? Whatever stage you are at as a business owner, we can help you take it to the next level.
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