01 Sep 7 things you should know before writing a business plan

The Business Plan Essentials

When drafting a business plan for a start-up, you may often get sidelined by other trivial things as opposed to actually concentrating on the task at hand. It is essential for a start-up to have a detailed business plan in place before going full throttle with an idea.

A well-thought out and well-drafted business plan can ensure that your idea converts into something concrete. You will be able to flesh out an action plan for the business. When you are developing a plan, you will realise that your understanding about the competition and market will be based on concrete facts, as opposed to speculation.

Fleshing out the facts

When you are drafting a business plan for your start-up, you may want to summarise the vision and mission of it. You need to mark all the important information in the plan. Make a summary of your value proposition: what is it your start-up does, how you plan to make money and why customers will choose you over your competitors. If you intend on sending the plan to potential investors, mention the amount of capital required to get it running. When you have a clear picture laid out, you will have no problem going forward.

1.   Understanding your market

You will need to identify your market opportunity. You need to be aware about the size of your target market, and if it is growing, the pros and cons, and ways to deal with a volatile situation. It is imperative that you make a good assessment of your value proposition.

2.   Size up the competition

While your product might have good features, you need to understand who your competition is, and how they size up. Understanding and assessing your competition will allow your business to grow. Try and find out the market share they have. Also, assess what makes your product better than theirs. You also need to make a list of indirect competitors that possess the same capabilities as you, but caters to another market and could give you stiff competition.

3.   Employee engagement

Your business plan should have a section on how you plan to engage the employees that work for you. It is important to keep your employees happy, engaged and focused on the task at hand. A business plan that makes special mention of employee engagement will ensure your workers put in their best efforts to propel the business. You will have to spell out performance metrics, and rewards based on good performance during the course of the year.

4.   Cater to investors

It is important to break down your business model for potential investors. This will allow them to understand it better. Your business plan should include revenue streams (advertising, services, product sales and licensing) as well as the cost structure (salaries, inventory, rent and maintenance). Make a list of all assumptions, and provide a justification of all of them. Make a list of important distribution partners and key suppliers.

5.   Social media plan

Social media dictates how we interact with one another. It also dictates how start-ups generate buzz for their products and services. Therefore, any new business plan should be able to give a clear picture of how social media will be used to bring in the money. A section dedicated to social media should also highlight how the company will engage customers. With so much to offer in terms of reach, start-ups should make best use of social media to spread the work, and make a mark.

6.   Money talks

An important aspect that requires documenting is that amount of money your business stands to makes. You need to make a fair assessment of when the money is expected to come through. This is the main reason why a section on fiscal performance is necessary in your business plan. A section dedicated to financial projections is also necessary. Some of the other components that should form part of the business plan include a forward-looking balance sheet, profit and loss and cash-flow statements. These are necessary to understand how well your company is faring.

7.   Dropout plan

Although you might not want to think about it, providing an exit plan for your start-up could be a good move. This will help you sell your business later if it does not do too well.

Therefore, it is essential to have a detailed business plan in place for a new venture.