If you are a business owner or thinking about starting a new venture, then you’ve probably heard about the importance of creating a business plan. This vital document records the purpose of your operation, what you hope to achieve and how you plan to do it.
However, a business plan also acts as an accountability tool for the organization, by creating a roadmap of goals and steps of action. Most importantly, this planning tool is critical to get funding or applying for financing.
So, what does a business plan entail? It can vary based on the industry and the size of your operation.
Below, we’ve provided a step-by-step guide to creating a business plan that can be used to direct your company’s future and help you secure future financing.
Step 1: Define the Market Opportunity
Before you begin to write your business plan, it’s important to understand the market. This will help you to vet the opportunity before you expend significant resources on writing your plan or starting your business operation. To start, research and record high-level details, such as:
- Market size in revenue
- Whether the market is growing, stable or declining
- How stable the industry is overall
- The specific market segment, identified by demographics and buying behaviors that you intend to target
The point of conducting market research and a competitive analysis is to identify where you are most likely to find success. To illustrate the point, we’ll use an imaginary company called Tough Chews. Tough Chews has developed a proprietary fabric and construction technology, allowing them to make indestructible chew toys for dogs.
Pet products are part of a $103.6 billion industry.[i] Without narrowing in on specific customer segments, our dog toy manufacturer is likely to get lost in the competition.
However, by reviewing consumer trends and statistics, Tough Chews can see that affluent households spend triple that of lower income brackets on pet products.[ii] Deep investigation reveals that 92% of millennials buy gifts for their pets and 50% do so monthly.[iii] By narrowing in on affluent millennials, Tough Chews could corner a segment of the national market.
To do so, Tough Chews will need to do more research on their target segment, determining other demographic factors, such as where consumers are most likely to live, how they purchase pet products, and the size of this niche market.
From there, Tough Chews can take a look at the top competitors serving their targeted segment, asking the same questions above about their business operation and tactics. By assembling this information up front, the business can later determine their go-to-market strategy, including how they will spread awareness of their business and bring products to market.
Step 2: Start Writing Your Plan with an Overview of Your Objectives
While your final business plan will start with an executive summary, it is actually easier to write this statement last, once you’ve had an opportunity to work through your goals, objectives, assets and capabilities. As a result, we’ll begin by writing the overview and objectives of your organization first.
The overview and objectives section of your business plan has 4 parts:
To begin this section, you’ll deliver a brief synopsis of your company, including where it is located, the industry of operation, the product or service you provide, and the market you target.
Next, you will need go into greater detail on the products or services you will offer to customers and how you will deliver them, utilizing data drawn from the market analysis you created in the first step above.
Next, you’ll write a summary of your market. This section provides an overview of the customers that you will target with your product. While it helps to provide some detail in this section, it is not the place to dig deep on the business landscape. You will discuss this in greater detail later, when you write the competitive analysis section of your plan.
To complete this section, you will outline how you plan to distribute your products to your customers. Tough Chews, for example, will need to market through established pet retailers, since nearly 60% of consumers who purchase pet toys do so at retail location.[iv] However, the online market for pet sales is growing, so Tough Chews should also state its intentions for approaching this demographic.