Part 1: Writing a Business Plan for Your First Business

Hi, I'm Hari, a student in Grade 11. This post is the first in a series of 9 posts. If you have taken the time to click on this post, I take it that you are here to learn how to write a business plan for your first business. I am not going to disappoint you!

I'll assume that you are a complete beginner with no knowledge about how to write such documents. Just so you know, a business plan is written to help entrepreneurs plan for the future of their business. Together, we will go through how to write a successful business plan, and I will also show you the one I made for my business, The iKeme Store.

What is a Business Plan?

A business plan is a formal document that points out the financial objectives and operations of a business. Mind you, I used the word formal, not legal. It is perfectly legal to run a business without a business plan. However, running a business without a plan is like driving without deciding an end destination. You would not know where you want your business to go and could end up going in circles, eventually going broke and losing interest in entrepreneurship. This is one reason why writing a business plan is crucial. Other reasons are listed below:

• Easy analysis of financial requirements and forecast cash flows,
• Analysis of point of Break Even,
• Goals and Objectives are written down for the business to work towards,
• Better chances at obtaining finance for starting and running the business, depending on how well the cash is forecast, and
• A better understanding of the possible strengths, weaknesses, opportunities and threats to the business through SWOT Analysis.

There are multiple parts to a business plan, the most important being the Executive Summary. Investors and Shareholders (people who could bring more money into the business) read this part to decide whether to read on. The other parts of the plan are devoted to the other aspects involved in the business, such as marketing or operation.

The parts of the Business Plan

A typical business plan consists of 3 primary sections:

1. The Business concept
2. The Marketplace section
3. The Financial section

Before sitting down to writing out the plan, you must spend some time conducting in-depth research of the industry and the market you're looking towards jumping into. This is an important task to complete before writing out the plan, otherwise, you may misjudge your competition and make incorrect decisions. 

Useful sources of information are books, industry experts, existing competitors in the market, and, of course, the Internet. You must make sure that the plan must be written in a way that no part is isolated from the other. All parts must link together to achieve a successful plan.

Table of Contents

This part is pretty straightforward: all you have to do is write out the headings present in your business plan. I'd advise you to write your contents page at the very end to ensure that all the page numbers are correct. Correct numbering is important so that a person can quickly and easily find the sections they are interested in. Since I made use of Google Docs, making a Table of Contents page was extremely easy. 

Here, I have embedded my Table of Contents page for you to have a look at yourself.

The Executive Summary

The executive summary is the most critical part of the business plan. Many readers will read the executive summary and then decide whether to proceed further or discard the plan. The executive summary should be written last (before the Table of Contents, of course). Key elements to consider including are:

• Business concept: A description of the business, its products and the market it will serve. You need to describe what will be sold, to whom and how it has a competitive advantage.

• Financial features: The summary should highlight the important financial points such as sales, profits, cash flows and return on investment.

• Financial requirements: You need to be clear about how much capital is required to start and grow the business. You must include how you plan to use that capital.

• Key features: All the features of the business that distinguish it from competitors. Things like Unique Selling Point and business objectives can be included here.

Here, I have embedded my Executive Summary page for you to have a look at yourself.

Company Description

For this part of the plan, you may split each sub-part into a heading of its own. However, all the key points mentioned below must be explained to achieve a good business plan. 

About the Business

You must elaborate on the business concept. The aim of the business must be established here. In my case, I explained what the business was, who the customers were, and the aims for the business (which, sadly, I wasn't able to achieve). 

Product and Pricing

You must explain the product line, and how you plan to price them. If you plan to sell more than one product, you could include a range of prices. A byline could be added, stating the reason for the pricing range. For example, in my case, my product was Ice Cream Sundae, and my pricing ranged between ₹170 and ₹190 based on the flavour selected by the customer. A menu can be added in the Appendix section, which I will explain towards the end.

Target Market, Sales Targets and Sales Strategy

You must identify your target market, i.e, the market you are planning to introduce your product to. You could mention which customer group you selected, and why. For example, in my case, my targeted customer group was children. Therefore, I adjusted my marketing strategy to target households where children were present. Here's something to note: If you've selected one (or more) target group(s), it doesn't mean that you aren't going to offer your products to other customers. It just means that your primary focus is the customer group you chose.

Following this, you must put forth your sales targets. You can give estimated sales for each product on a daily, weekly and monthly basis. For example, in my case, I projected monthly and weekly sales for my product (Ice Cream Sundae). You could go a step further by including predicted daily sales, but that would be unnecessary since a day is a relatively short period of time.

In the Sales Strategy part, you must establish a sales strategy that has been refined substantially, using multiple variables. The idea is so that the strategy you develop would work for almost every situation because you have already calculated the possibility. For example, in my case, I pushed initial sales using marketing campaigns, where I offered incentives to children if they made a certain number of customers make a purchase. 

Here, I have embedded my Company Description page for you to have a look at.

Competition

Before writing out this part of the business plan, you must conduct research about the competitors (businesses who offer products or services similar to those you intend to offer). I would highly recommend using a notepad to take notes about valuable information, such as:

• How large the competitor's customer base is?
• How many units do they sell on a weekly/monthly basis?
• Do they have outlets within a 5-kilometre radius of your business?
• What advantages do you have over the competitors?

For example, I identified three competing business within a 5-kilometre radius of my business. I identified how big their customer base was, whether they offered delivery service and whether customers are happy with their products. 

Here, I have embedded my Competition part of the business plan for you to take a look at.

SWOT Analysis

SWOT stands for Strengths, Weaknesses, Opportunities and Threats. For this part of the business plan, you must identify the business's, well, strengths, weaknesses, opportunities and threats:

• Strengths: What your business offers that competitors cannot. An example could be something you developed specifically for the business (new technology, or revolutionary service, etc.)
• Weaknesses: What your business lacks at doing. It is not necessary that your competitors must be able to do it. An example could be limited scope or a small area of service.
• Opportunities: The gaps you identified in your research session. These are the points your business must aim to exploit. An example can be a new medicinal drug that can cure an incurable disease. The market could be exploited, as no other business offers a product like yours. However, you must apply for a patent so that competitors cannot recreate your product for a fixed amount of time. This could help maximise profits before competitors enter the market.
• Threats: The possible issues that could damage the business. For example, in my case, an ice cream store would not run as well out of season, so maximum sales would only happen during summer. 

Here, I have embedded my SWOT Analysis part of the business plan for you to take a look at.

Marketing and Operational Plans

You must develop a marketing plan and explain it in this part of the business plan. You could include the means of advertising, costs involved in marketing and reasons for why you selected that specific marketing strategy.

You must follow this up with your operational plan, which must explain how you intend to operate the business. You could mention the following:

• Where the business is operating from?
• Teams, such as Marketing team, Customer Service team, etc.
• Proposed actions for the business to start, such as identifying and purchasing equipment and identifying suppliers.

Here, I have embedded my Marketing and Operational plans for you to take a look at.

Team

Here you must introduce the team (the key people involved in the business). You may include the position given to that person, and a picture of them, which is optional. This part of the plan is probably the easiest of them all.

Financial Plan

This part of the plan doesn't need any writing, just tables full of values. You must include values for the following:

Start-Up Costs

Here, you must list out all the costs involved in starting up the business. You can list out costs involved in the purchase of equipment, lease/rent of premises to set up the office, and purchase of raw materials.

Here, I've embedded my Start-Up Costs table for you to refer

Projected Profit and Loss Statement

Here, you must display a projected profit and loss statement for your business. You could include your break-even chart in this section of the plan. The table must be organised as follows, showing values for anywhere between 3 to 6 months:

• Revenue
• Cost of Sales
• Gross Profit
• Expenses
• Net profit/loss

Below, I have included my projected profit and loss statement for you to get a rough idea of how to enter values for the above-mentioned headers.

Here, I've embedded my Projected Profit and Loss Statement table for you to refer

Projected Balance Sheet

A balance sheet includes values for assets and liabilities. You must project a balance sheet for your business, using estimated values for the assets and liabilities. You can provide values for:

• Current Assets - Assets that can be liquidated for immediate cash, such as machinery
• Non-current Assets - Assets that cannot be liquidated for quick cash, such as trade credits
• Current Liabilities - Liabilities that you must clear out within a business year, such as debts
• Non-current Liabilities - Liabilities that need to be cleared at a later point, such as bank loans

Since my business had no examples of Non-current Assets or Liabilities, I did not include them in my table of values. However, if you do have values for them, do make sure to include them in your business plan.

Here, I've embedded my Projected Balance Sheet table for your reference

Appendix

If you have any documents that are relevant to the business plan, you must include them in this part. For example, in my case, I included a copy of my Menu in the Appendix for the readers to understand how I achieved the pricing I mentioned earlier in the plan.

Tips to Writing a Successful Business Plan

Your aim while writing the plan is to be able to communicate your business idea to a person who knows nothing about it. Therefore, you must be elaborate in places that require it, and succinct in places that don't. Here are some tips that I found useful while writing out my business plan:

• Know everything about the market you plan to enter, the industry and the competition
• Know who you're writing the plan for
• Make claims that can be backed with proof
• Make credible assumptions for estimated values
• Be logical and realistic
• Discuss the benefit to investors

When writing out a business plan for the first time, make multiple drafts before making a final version. This way, you can write down everything that comes to mind, and cut down what's irrelevant. By following the tips I mentioned above, you will surely come up with a successful business plan.

Here, I have embedded my Business Plan for you to have a look at yourself.

Next post: https://thebusinessbot.blogspot.com/2021/06/how-to-conduct-market-research-for-your-first-business.html