Write Your Business Plan Like a Pro

Why you need a business plan

As a start-up entrepreneur you know you need a business plan, but do you know why? Is it just to land funding or for a bank loan? Or is it to understand exactly what you need to do to ensure your start-up’s success?

We believe it’s to ensure success. Your business plan should be a step-by-step guide that makes sure you’ve thought of everything you need to do to build a great business.

Here’s the reality: Many start-ups fail because entrepreneurs make crucial mistakes during their business planning process (or because they skip the planning process altogether).

We want to make sure that doesn’t happen to you with this Step-By-Step Business Plan Guide.

Start with an idea that will work

A. Stress-test your thinking

What does stress-testing my idea mean?

A stress-test, according to Harvard Business Review, is a test of how a system, process or idea works in the real world, when it’s under pressure.

The point of a stress-test is to help you see where your business is weakest before it’s really in trouble.

You’ll need to ask the tough questions about your business plan to highlight any confusion or weaknesses in your strategy or how you’re rolling it out. It’s also the only way to test if you have a product or service that your market is willing to pay for.

B. Why should I stress-test my idea?

Many start-ups are based on assumptions. This isn’t necessarily a bad thing. Successful start-up entrepreneurs spot problems and go with their gut while they develop solutions.

Some of the world’s biggest and most successful businesses have been built on gut-instinct – on knowing that there was a problem that needed to be solved – including Airbnb and Apple.

The difference between a successful start-up and one that doesn’t make it, often lies in whether or not the initial ‘great idea’ was stress-tested. Because here’s another start-up truth: Most businesses will pivot at least once in their early days – some many more times than that – based on market feedback.

“No business plan survives first contact with a customer.”-Steve Blank, Silicon Valley entrepreneur and founder of the lean start-up movement.

C. How do I stress-test my idea?

Step 1: Keep these 5 key questions top-of-mind the entire time you are researching your market and creating your business plan.

Think about it this way: You’re trying to find all the reasons why your idea and business won’t work so that you can solve any potential problems before they pop up.

• Am I really clear about my idea? Can I explain it in 30 seconds so that someone else can understand it?
• Do I create value for customers? Is my idea better, faster, stronger or cheaper than what’s currently available? And does it matter?
• Do I solve a real problem? Is there an unaddressed need in the market that people will pay to resolve? Did you know? 4 400 mousetrap patents have been issued, but only 20 of those ideas have ever made money. Are you just trying to build a better mousetrap when the old one works just fine?
• Does my idea have a competitive advantage? Am I doing something better than everyone else out there?
• Can my idea make money? Does it cost less to deliver my solution than I can charge for it? Have I taken all of my costs into account?

Step 2: Hit the streets. Real businesses are built on real people – that is, real customers who will pay you with real money.

Why would you build a business without speaking to as many of those people as possible to find out if you’re offering something that they want?

Why you need to fail fast and fail often

Too many start-up entrepreneurs are scared of failure. Failure is your friend. Here’s why:

• You have quick answers. You learn quickly whether something will work or not – before you’ve invested too much time or money into it. You want to fail quickly so you can move on to the next solution.
• You can become market ready. Most ideas need to be tweaked and refined before they’re ‘market-ready’. Fast failures show you where tweaks are needed.
• Great businesses are agile. If you’re used to failing fast and often – but more importantly learning from your mistakes and adjusting your model – you’ll be an agile business that can take on anything.

So, before you spend months sitting in a room all by yourself and planning your business, let’s take a look at the lean start-up method. This method champions the ‘fail fast and fail often’ mantra. It’s designed to get you to start-up success as quickly as possible.

What is the lean start-up method?

It’s simple: You build something, take it to your customers, get feedback and make it better. This strategy works better than spending months perfecting your product only to find customers don’t like it at all.

“If you’re not embarrassed by the first version of your product, you’ve launched too late.” Reid Hoffman, founder of LinkedIn

Reid Hoffman has built the biggest business networking site in the world based on this principle. He wasn’t perfecting his platform in isolation. He was doing it in real-time, based on real user feedback.

Here’s how the lean start-up method works:

Tip 1: Keep it simple

How you plan to run your business should be simple and straight forward. Don’t over-complicate your plan too early by including everything, just start with the essentials.

Include:

• Your strategy
• How you’re going to achieve it step-by-step
• Important dates and milestones
• The data you pull along the way (what you need to be measuring – in LinkedIn’s case this was users on the platform)
• Who is accountable for each step
• What you think your business will achieve.

It’s also important to include a review schedule. This ensures you keep checking in, you adjust for any changes and your plan stays relevant and up-to-date.

Tip 2: Make changes as you go

Grow your plan as you grow your business. Start with the important parts: The purpose of the business, your ultimate motivation for starting, who your target market is (and why). Then develop the rest of the plan as you go from step-to-step.

So where should you start? That’s up to you. Some people build their whole plan around a sales forecast, while others start with customer research. You should start developing your plan where it makes sense to you.

Tip 3: Keep things loose

You need to stay on top of your ever-changing plan. You also need to manage your assumptions as you start to get real data. If something worked even better than you expected, that’s great. Your plan tells you how the different areas are connected so that you can adjust everything else.

Did something take longer than expected? Go back to your plan and look at how everything is interconnected and establish the reasons why it took longer. Once you have your answer, update your plan and keep moving forward.

Agility is key. Be prepared for wins and losses, for getting some things right and others horribly wrong. And be happy when you figure out that something doesn’t work and why, because now you can fix it or change course, down a more successful path.

FUNDING: Do you want to use your business plan to land funding?

• Format: If you need a business plan to apply for funding, first check with the funder or bank to make sure your business plan format is correct.
• Look online: Most organisations offer Business Plan guidelines on their websites in the Application section.
• Follow their process: If you don’t find what you’re looking for online, call them and ask. You don’t want to spend hours writing your plan, only to be told that you need to rework it into another format.

Your step-by-step business plan format guide

The one-page business plan versus a 10-section document

You might have heard of the one-page business plan and are asking yourself why you need a ten-section file. Here’s the difference between the two.

The one-pager: A one-page business plan is your ‘working’ plan. It’s designed to keep you focused on the most important areas of your business. It’s also meant to keep you quick and agile. You should be referring to your one-pager daily and adjusting it regularly.

Your full business plan: Your full business plan is important for three reasons.

1. If you want to approach a funder or lender
2. To make sure you have properly planned and researched your business and stress-tested everything
3. To give you a working plan to return to when things get tough or you face unexpected challenges. What does your research tell you to do?

The mistake many business owners make is going through the motions of building a business plan and then never referring to it again. Your business plan should be the foundation of your business – but, you should also be able to adjust it and correct assumptions as you start selling to customers. Think of your business plan as a living, breathing document.

Getting started

A business plan format usually has 10 sections. They cover everything important that will help you to build a strong business.

The basic outline has three parts:

1. The business idea
2. The marketplace strategy
3. The financial plan

1. Executive Summary

This two-page summary is one of the most important sections of your business plan. People (particularly funders) will decide whether to keep reading or not based on this section.

How to get this section right:

1. Describe your business, its products and which market it will operate in. Include what you’ll sell, who your customers are and how your business has a competitive advantage.
2. Include your financial projections. These include sales, profits, cash flow and return on investment. Make it clear how much money you need to start and grow.
3. Stress-test it. Read it from the perspective of an investor. Is it still impressive? Would you invest in it? Be critical!

2. Company Description

Give an overview of your business and how it operates. Include the name of your company, the type of legal entity it is, who the owners are and if there are any significant assets.

Also include your business mission statement, business goals and objectives, along with your business’s company strengths and core abilities.

How to get this section right:

1. It’s an overview. Don’t focus on too much detail in this section. You can go into more detail later.
2. Unpack your industry. What industry are you launching in, how big is it, and why is it popular. Unpack the opportunity based on statistics and data.
3. Stress-test your work. Does your pitch hold up under scrutiny?

3. Market Breakdown

This section should be between 2 to 3 pages. It involves a high level of research and includes insights into the industry your business operates in and the opportunity you have discovered.

Your goal is to understand who your target market is, how much are you going to charge, and what your distribution strategy will be.

How to get this section right:

1. The Market
   1. How big is the market?
   2. How fast is it growing?
   3. What percentage of it will you have?
   4. What are the major trends?
2. The Industry
   1. How hard will it be to start your business?
   2. Who is your competition? (Top tip: everyone has competition, so don’t say ‘nobody’. Rather figure out who your competitors are.)
   3. Do your customers or suppliers have enough power to impact your pricing structure?
3. The Opportunity
   1. Where is the gap in the market?
   2. Why is there a gap?
   3. How will your business fill the gap?
4. Keep it lean. Remember that as you learn more; your market, industry and opportunity may change. By keeping your business plan agile, you can re-adjust your focus and remain profitable.

4. Strategic Plan

Your strategic plan needs to cover a few bases in one-to-two well-researched pages: How will you compete? How will you manage to appeal to your target market’s motivations and requirements? What is your primary competitor doing? How will you compete with them? Where could unexpected competition come from?

How to get this section right:

Ask yourself the following questions

1. How will your business create something unique and valuable to become successful?
2. What makes your business special?
3. How are you different from your competition?

You need to stress-test your strategy by coming up with all the possible scenarios that could close your business down. You goal is to develop a strategy that will keep your company running, no matter what.

Don’t be too committed to your strategy. If the market, your customers or competition change, you need to be agile enough to change too.

5. Business Model Description

Your business model determines how much profit you will make. Keep this section to approximately a page, and include your products and services, why your offering is unique, your target market and how you’ll make your money.

How to get this section right:

In this section you need to breakdown your finances. You need to include your main costs, how much you think you’ll make minus costs, and how much money it will take to get your business off the ground. You need to use your financial plan to get these figures right. For a step-by-step guide to building your start-up’s financial plan, read this article, Supercharge your start-up with a strong financial plan.

Inside scoop: A good business model needs three fundamentals:

• To find high-value customers
• Offer genuine value to those customers
• Make a profit

Stress-test your business model to see if your business will be derailed by anything. The common culprits are having unhappy customers, not being able to maintain your position in the market and not being able to generate funding for growth.

6. Management and Organisational Team

Your team are important. They’re the foundation of your start-up and investors in particular will want to know who they are, their experience and their skills. This is the section where you get to show them off (including yourself).

Include names and faces, as well as qualifications and experience. Break down who will be running what and why they’ve been selected.

How to get this section right:

• Unpack the logistics. Who is responsible for what, what tasks are assigned to which department and how much money you’ll need to keep these superstars happy
• Leadership and support staff all play a role. Besides the head honchos, you also need to list how many behind-the-scenes fairies you’ll need to keep your business running smoothly.

7. Marketing Strategy

Marketing gets your business out there and attracts customers. In this section you’ll need to ask yourself the following:

• Why is your product/service so important to customers?
• Who exactly is your target market, down to freckles and nail polish colour?
• How will you show off your product/service?
• How much is your fabulous product/service going to cost?
• How will you get your products to your customers? For example, will you use trucks and physical stores, or drones and online stores, or a combination of both?
• You need to come up with a promotion strategy that will include public relations activities, promotions, advertising and potential viral marketing activities.

To find out more about smart marketing strategies, read these two articles, Strengthen your customer value proposition and win more customers.

How to get this section right:

• Don’t overspend. You need to spend money to make money, but your cash flow will determine how extravagant you can be with your marketing strategy.
• Go where your customers are. The marketing channels and strategies you choose should be about your customers, their interests and where they are (both online and offline).

8. Operational Strategy

Operations are all about the day-to-day running of your business. Where will your offices be? What equipment are you using? What processes will your team follow? What will keep the business running, and how much money is needed to do so?

How to get this section right:

• Describe your operating cycle: From invention to customer and back again. How will your business deliver its service or create and sell its products?
• Your team: Where will you find all your skilled people and material for your products?
• In-house or outsourced: Are you going to outsource any aspects of your business? How will you manage this?
• Cash flow: Breakdown your cash flow cycle, show when you will receive money and when you will make payments.

9. Financial Strategy

Don’t overload this section with detailed financials. Rather have projections and supporting documents in the appendix. Your detailed financials live in your Financial Plan. Read our guide: Supercharge your start-up with a strong financial plan.

This is the section investors will pay close attention to, so ensure everything is covered. Experienced investors, lenders and partners can assess how long your business will survive based on this section.

How to get this section right:

Don’t skip any steps in this section.

• Start-up costs: How much it will cost you to launch your business and where you expect to get the money from?
• A 12-month profit and loss projection: Break this down monthly, but also include a three-year profit and loss projection, which you should breakdown by quarter.
• Cash flow projections: You need to share your cash flow projections for the next 12 months and the next three years.
• Projected balance sheets: Include at the launch of your business and at the end of each year.
• The all-important break-even calculation: This indicates that you’ve worked out when your business will start making money, also known as your break-even point.

10. Appendix

Supporting documents can slow a reader down, but investors might still want to review them after they’ve read your business plan. That’s where your appendix comes in.

How to get this section right:

Include the following supporting documents:

• Advertising material
• The research you used to come to your conclusions in each section
• Blueprints and plans, as well as maps and photos of locations
• A list of equipment your already have or still need to buy
• Letters of support from customers who have already tested your product/service
• Your accountant’s hard work – detailed financial calculations and projections.

Copy edit your plan – nothing sows the seeds of doubt as fast as typos

Get feedback from a trusted advisor or business mentor

Test and revise your business plan frequently – the more up-to-date it is, the more helpful it will be to keep your business on track.