How to write a Business Plan, Louis Pasteur said ‘Chance favors the prepared mind.’
No matter how it’s looked at, writing accurately, briefly, and with clarity is an essential business skill. This is because writing, particularly in a business context, fulfils four important roles:
- It conveys information by communicating intentions, objectives, opinions, and ideas as well as on-going developments and plans for the future. Written material – in any format – can also be conveniently filed away and stored as a form of definitive recording.
- It clarifies information by helping to eliminate misunderstood ideas. Writing forces the person who is writing to think about and clarify the idea/subject that he or she is writing about. Topics tend to be confirmed and strengthened when someone takes the time to write them down.
- It reflects seriousness on the part of the writer. Committing a project to writing shows intent, devotion, and dedication.
- It holds people accountable. Poor communication is often blamed for problems as diverse as: a) credibility issues; b) incompetence; and, c) differences in beliefs. These situations can be avoided if the use of clear, concise information is understood beforehand. Writing also provides a guide that can be used to measure and compare thoughts with others as well as future results.
Why Write A Business Plan?
When one takes into consideration the fact that the number one reason why new businesses fail is a lack of planning, the importance of writing a business plan becomes more apparent. Don’t try to avoid the time and hassle of sitting down and putting together a comprehensive plan. A well researched business plan makes it possible to:
- define and refine a business concept,
- keep a focus on objectives,
- spot and rectify weaknesses before they become major problems,
- recruit personnel by defining what is needed and what skills employees must have,
- create a map that helps guide a business through unfriendly environments,
- convince investors that the business idea is sound,
- convince money lenders of the entrepreneur’s ability to pay back a loan, − convince potential customers that the business will serve them reliably, and, − obtain necessary permits and licenses.
The Essentials of Good Planning
The main purpose of a business plan is to compare the (potential) sales of a product against its expenses. Put another way, a business plan is not a forum for an entrepreneur to brag about how wonderful or creative his or her idea is. What potential customers say about the product and what the market reveals are far more important. The point of business research is to:
- determine who is going to buy a product,
- find out how many are going to buy it, and,
- discover if the market is strong enough to sustain future sales.
A business that plans on selling ice cream, for example, needs to know how much it costs to produce, sell, and store ice cream. This includes the cost of raw materials, equipment expenses, the cost of licenses, utility costs, and so on.
Further analysis will reveal how many scoops of ice cream must be sold per week to cover these expenses. If the numbers show that the amount of money collected from projected sales is greater than the costs of production, it’s likely that a profit can be made.
The Most Common Mistakes Made When Writing a Business Plan
− Verbosity. If asked to describe themselves, few people begin by talking about their birth, their adolescence, their teen years, their first love, their pets, and all their experiences and encounters up to the present day. Curiously, however, many people take this route when writing a business plan. The message? Don’t overdo it. Keep each section of the business plan as short and concise as possible.
− Lack of Scope includes not having sufficient data to complete nine sections of a business plan as well as ‘the 13 Main Reasons Why Businesses Fail’.
− Overconfidence or Lack of Insight. ‘Eager beaver’ entrepreneurs who rely on hope, charm, or enthusiasm rather than legitimate research impress no one. Every section of a business plan should stick to solid research and facts. All it takes is one embellished ‘fact’ or uninformed opinion to reveal itself and the entire business plan will be seen as a complete fabrication.
Additional Suggestions for Writing a Solid Business Plan
Keep the following suggestions in mind before, during, and after writing a business plan:
1. Stay on track (consider the specific reason why your plan is being written)
- What is the plan’s intention? What is it supposed to accomplish? Is its purpose to acquire funding, to gain licensing permission, or is there another focus?
- Can the aim be summarized in one sentence and be used as the main point? It should.
2. Convey the message of the plan in a way that its recipient(s) will understand − Exactly who will be reading the document?
- What are their likes and dislikes? (if this is not known, ask the recipients)
- Is the correct tone or attitude being used?
- How much does the recipient already know about the topic?
- Will he or she understand the terms and language used?
3. Structure the plan carefully (organize and clarify)
- Does the document proceed in a logical and organized way?
- Does every sentence and paragraph justify itself? (i.e.: is it organized around a central theme?) − Have enough graphs, details and/or explanations been included to support the main point? − Is everything that has been written down necessary? (if not, remove it) − Is it clear to the reader what he or she needs to know or do afterwards?
4. Take the time to develop, revise, and edit the ‘completed’ document before submitting it.
- Is the document’s layout effective? (are its titles, spacing and text well-balanced?)
- Is the documents information and style easily accessible?
- Has someone proof-read the document? (it should be proof-read by several people) − Do the beginning and ending statements have a resounding impact?