Not all business plans are equal. Some business plans are useless, while some are effective. This article will direct you to the different ingredients that your business plan should have.
An effective business plan is simple. It has the most important things inside that are relevant to the business. It is customized to how the business model of your company works. Simplicity is a characteristic of an effective business plan because if you cannot put into simple words how your business works, then you do not understand the business.
Remember that your business plan will be seen by your investors, partners, and managers. You would not want them to get a headache after reading the plan. The idea is to convey as simple as possible the mission of the company and how it will achieve its goals.
A good model to use for your business plan will be the business model canvas. You can see at one glance how the business works. I recommend that your business plan incorporates the business model canvas.
Another reason why your business plan needs to be simple is that it is a living document. It is not something that you cannot modify. The truth is that the business environment we operate in is in perpetual flux, and is driven by rapid technological change. As such, the business will continue to adapt and make changes. Your business plan should reflect that, and you should take time every three months to check if your business plan needs updating.
Solves a problem
An effective business plan details out what problem the business is trying to solve through the product or service. Before a business begins operation, it has to know the current situation, i.e., the current problem.
The business plan should have a playbook on how it intends to solve the problem. This is important because if your solution is creative and scalable, investors will see that your business is a worthy place for their money.
So make sure your business plan does not just paint a rosy picture of the now and the future. Let it explain the reality of the current situation and how your business will solve a specific problem and make lives easier.
A real business plan solves a problem, and this is where it gives value. So make sure your business plan explains how it contributes to a better way of life.
This part is important, because the only real way to create revenue is to solve a problem. Investors will look for your value proposition because they know they can get a good return on their investment if the business knows its niche well, i.e., it understands what it is trying to solve and the solution is superior to alternatives.
Cautious and realistic financial numbers
Another thing that your business plan should have is cautious and realistic financial figures.
Yes, everyone who starts a business is optimistic and excited about its potential. As a result, emotions get in the way, and their business plan becomes overly optimistic, and thus irrelevant.
It is important to control your emotions when projecting your financial numbers. If your sales figures are overly optimistic, you might think of expanding too quickly, taking on debt to sustain the growth, and immediately indulging in unnecessary expenses because you believe that your future revenues will cover it.
It is better to be overly cautious, and lean towards a bit of pessimism so that you do not allow your emotions to get the better of you.
You hustle more when you believe things are going to be tough. You become more creative and take care of your resources better when you understand that the business landscape is cutthroat competition. Be optimistic at the back of your mind, but be grounded and ready for the uncertainties of being an entrepreneur.
Strong Marketing Plan
An effective business plan highlights its approach to marketing. I consider marketing to be the lifeblood of the business, because it drives cash into the business. Without money, the business is not sustainable.
As such, a strong marketing plan is critical in a business plan, because it serves as your playbook in generating and growing revenues.
Your marketing plan should have a good understanding of the psyche and habits of your target customers so that your entire business is geared to meet their needs and wants. A strong marketing plan coupled with a superior product and service will ultimately lead to business success.
If you have the financial resources, try to tap the services of market research firms. They can help gather information for you that will prove useful in making critical decisions such as pricing your product and where to locate. They might also give you insights as to what the opportunities are available in the industry which you can capitalize on.
Finally, your business plan should highlight the risks that your business faces and how it plans to address them. This is in line with making things in the business plan be realistic. Risk Analysis allows you to see how your business can potentially fail or be threatened.
Investors will surely look at this part critically. They want to assess if the potential rewards outweigh the risk, because that is the only time they will part with their money. Risk analysis involves looking at the industry and your business critically and developing ways to mitigate those risks.
To sum up, an effective business plan is not made because it is a usual practice. Crafting effective business plans is all about understanding how the business works internally and externally. It then attempts to deliver those insights and strategies in a simple and straightforward language.