Creating A Business Plan: This is how you do it!

What Is a Business Plan?

Many people start different kinds of businesses without a plan. In the end, the lack of a plan or rather a good plan is the reason behind the failure of many businesses. According to Investopedia, a business plan is a strategic document that outlines a company's goals, aspirations, and the roadmap to achieve them.

A Good Business Plan

A good business plan should have the timeline, financial requirements, and methodologies necessary for the success of a business entity. Additionally, a business plan might include a mission statement and a comprehensive overview of the products or services offered by the owner of the business or a company.

The duration covered by a business plan can vary based on the business's stage and objectives. However, a good business plan will include the following benchmarks:

• Product Goals and Deadlines: Monthly targets and milestones.
• Monthly Financial Projections: Covering the first two years.
• Profit and Loss Statements: Spanning the first three to five years.
• Balance Sheet Projections: Also for the first three to five years.

Business plans are essential for startups, entrepreneurs, and small businesses. They serve as a guiding documentation that help in facilitating growth. Larger companies such as Safaricom and CocaCola also create or update business plans to align with their high-level goals, financial objectives, and timelines.

Beyond serving as a structured outline of a business or company’s goals and financial plans, a business plan is also crucial for evaluating the viability and profitability of a business. It can help determine when the business will become profitable and how much capital is needed from investors to make a business entity a success. Additionally, the process of creating a business plan is valuable as it holds the company accountable to a timeline and can be a powerful tool to attract potential investors, thereby fostering growth.

Steps to Create a Business Plan

Every good business plan must have these:

How to Write a Business Plan: A Step-by-Step Guide

Creating a compelling business plan requires careful research and thoughtful consideration of each section. Here's a streamlined 10-step guide to help you through the process:

Step 1: Executive Summary

The executive summary is always the first section of your business plan. It should provide a high-level overview of your company, answering:

• What is the vision and mission of the company?
• What are the company’s short- and long-term goals?

Step 2: Business Description

Define the scope and intent of your venture by addressing:

• What industry are we in?
• What does our business do?

Step 3: Market Analysis

Show that you understand the current marketplace and the niche your product or service will fill by answering:

• Who is our target customer?
• What does our customer value?

Step 4: Competitive Analysis

Highlight how your business will outperform competitors by addressing:

• Who are our main competitors?
• What sets our product or service apart?

Step 5: Organizational Management

Provide an overview of your team, including:

• Key roles and responsibilities
• Team structure or hierarchy

Step 6: Product or Service Description

Detail your product or service, ensuring you answer:

• What are we offering?
• What resources are required for production?

Step 7: Marketing Plan

Outline your marketing strategy by considering:

• Who is our target market?
• What channels will we use to reach them?
• What is our budget and timeline?

Step 8: Sales Strategy

Summarize your approach to sales by answering:

• What is our sales strategy?
• What tools and tactics will we use?
• What are our success metrics?

Step 9: Funding Requirements

If seeking investment, detail your financial needs by addressing:

• How much capital do we need?
• What are our physical and team growth needs?

Step 10: Financial Projections

Provide future financial projections, considering:

• When will the company become profitable?
• How will we sustain profitability?

This streamlined approach will help you craft a business plan tailored to your audience—whether internal or external—while ensuring all key elements are covered.

Does the Order of Your Business Plan Matter?

The structure of your business plan is flexible, except for the executive summary, which should always be at the beginning. Beyond that, organize your plan in a logical, easy-to-follow manner that best communicates your strategy and goals.

Traditional vs. Lean Business Plans: What’s the Difference?

Traditional Business Plan: This follows a standard structure and is more detailed, often running several dozen pages. It's ideal for established companies, large businesses, or ventures seeking external funding, as it provides a comprehensive overview of the business, including financials, market analysis, and strategic goals.

Lean Business Plan: A Lean plan is more concise, typically just one page, and focuses on summarizing key points. It's suitable for startups or companies that prioritize agility and expect to pivot quickly. This type of plan is often used internally and is particularly effective for businesses that already employ Lean or Agile methodologies. However, a Lean plan may not be sufficient for investors, who often prefer more detailed and less flexible plans.