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How do you write a business plan
In this article, we will review how to structure a business plan, what parts it should include (market analysis, financial planning, competitor analysis, etc.) and what questions you should answer.
When looking for corporate loans from traditional lenders who are banks, the lender may ask to see a business plan. The reason they are asking to see a business plan is simple; They want to ensure that you as an entrepreneur have thought about all aspects of your business and that you can clearly present it so that they can determine if they are willing to take the risk and give you a loan or not.
There are two reasons why you write a business plan; for your own sake and to present what is being planned.
When writing a business plan, you challenge yourself and your own planning when you write down what it's actually meant to do. For example, plans for sales that were obvious in one's own thoughts may become illogical when you get them in writing. Similarly, one's financial plan can suddenly show that you need more capital in the company if you are successful in launching your product or service. By writing a business plan, you therefore question your own planning so that you can correct and plan where needed.
The second reason for writing a business plan, maybe to increase the chance of getting a business loan, is that external parties may request one. As mentioned above, it is common for lenders who bank and Almi to request a business plan in their evaluation to give the company a loan or not. Even business angels and venture capitalists may be asking for a business plan to ensure if you thought about all the different pieces that will be required to make your business successful.
Regardless of whether you accept funding from lenders or business angels, it is therefore a good idea to make a business plan for yourself, as you learn a lot in the process of writing down your thoughts and plans. If you do not stick to the plan, ultimately, do not play such a big role as it is important to question your plans and ensure that you consider the most important pieces in their business model and planning.
What to include in a business plan
How you choose to structure your business plan is up to yourself. A well-established way that covers most areas is the structure below. By including all of these areas in your business plan, you can ensure that you have thought about everything.
- Product or service description
- Market analysis
- Competitor analysis
- Marketing and channel strategy
- Team or teams
- Financial plans and support
A business plan should always be initiated with a summary on a page that briefly reviews all the next sections. This gives a reader an overview of the business plan and gives it the opportunity to get a full picture before it appears on a specific area for which it is interested.
Market analysis and audience
In this section you describe what business opportunity you see that your business will strive for, what market it will work on, and defines who your target audience actually is.
When you describe a business opportunity that you see, there are a few different ways to do it.
Problem - One way is to describe what problems your intended customer experiences, why no one else solves these problems today / why today's actors do not solve these issues in a satisfactory way and how you intended to do it better.
Trends - Another way is to describe the business opportunity based on what trends you see in the market today and how you plan to utilize these trends for your company's winnings. The section on the business opportunity you see should therefore give the reader an overview of what the company is supposed to do with it.
In the market analysis you go through what market it is meant that the company will act, how big it is and whether you intend to narrow yourself to a particular market to maintain a focus. When you define a market, there are several different ways to do it, but you usually use the following 4 dimensions:
Product: The product / service you intend to offer Geography: within which geographic area one intended to do it Customers: To whom customers are supposed to offer the product Channels: through which sales / distribution channels After you have defined which market it is your business will be working on, it's a good idea to estimate the size of the market. There are generally two ways to go here; top-down or bottom-up.
Top-down - For example, estimating the size of the hairdressing market for children in a city through the top-down method could be such as to use data from some data information company for example.
Bottom-up - If you go bottom-up instead, you are based on an estimate of how many children live in Borlänge, how often they cut and what the price they pay per cut.
Finally, it is always a good idea to question if you focus enough on a particular market or if you go too wide. A common mistake many entrepreneurs make is that they go too wide with their company's offer initially and therefore do not get a boost on sales. On the other hand, you always need to keep an eye on the size of the market to make sure it is worth starting the company at all.
When describing their target group, it is always a good idea to be as detailed as possible. You should therefore use a fictional or real person to describe what your audience is like. An example of a buyer of a budget lawnmower could be "Nick, a new owner of Prixton, father of 2 children between the ages of 4 and 9, with a lack of interest in gardening but a burning interest in baseball".
Within one's target group, there are also three different parts to consider; who is the user of the product / service, who decides to buy the product and what the decision-making process looks like. To give a concrete example, we can use toys.
The user: The toy is obviously the child, why it's important to make a toy that he / she will like very much and tell her friends. Common questions are how will the user use the product / service? What value does it give to the user? How will the user talk about the product / service with other users?
The decision maker: On the other hand, the person actually takes a decision to buy the toy parent, why one has to take his point of view in mind. The decision maker may be the same as the user, but may also differ. Is it different, one should ask why this will make a decision to buy the product / service?
The decision-making process: It is a good idea to review how the actual decision-making process for a purchase actually looks. For our example of toys, one can imagine that it used to be often in connection with visits to a shopping mall, but today, most of the process takes place at home and in front of the computer.
Product or service description
When describing their product or service, one can go deep into his description. Generally, you are expected to provide a summary that is easy to understand for the reader, no matter how complicated the product or service is. If you fail to provide a summary and instead look into the depths of technical details, you may risk lest the reader understand and lose interest. Click here!
How deeply you need to access the product / service depends on how complicated it is. If you have thought of selling a revolutionary product such as an electric powered aircraft, it might be a good idea to go into depth to show that this is possible at all. It's about a regular hairdressing salon you do not need to be as thorough.
In this part of your business plan, it is also a good idea to show what current options are available on the market. This is, of course, something you will do more thoroughly during the competition analysis, but it is a good reason to show how your product is different.
After reviewing the options available on the market today, you should show how your product or service is different. Here you should always take a point of view of your target audience, that is, the user and the decision maker.
Before starting to describe all of your competitors on the market, it's a good idea to return to your market definition, your intended audience and your product and service. Using these three parts, you should describe your core business (that is, what is the one that will account for the majority of your company's sales and how) from the customer's point of view. Defining your core business makes it easier for you to make your competitor analysis, as it shows who you will compete with and who you will not do. Read more here
In the competitor analysis you should briefly summarize what competitors you are in the market and how they differ in size and their offers. As a self-employed person, it is often easy to underestimate how talented many competitors actually are and how strong customer relationships are involved. Therefore, it is important to get a good picture of its competitors.
The most important part of one's competitor analysis is to describe how it was meant to compete in the market; that is, how will you differ from its competitors, why you have an advantage to differentiate in the specific way and how this will lead to a competitive business.
Marketing and channel strategy
The plan for marketing and selling its product is probably the most important part of a business plan, even though the banks tend to focus on the financial figures. The reason for this is that marketing and sales will drive revenue for the company and thus be decisive if you will succeed or not. A well-worked sales plan is often what distinguishes successful companies from bankruptcy companies.
In this section, you should begin with a repeat of what you have written in the section about your audience, but not at an equally detailed level, so that the reader is reminded of what customers you are aiming to sell to. Instead, you should describe how to best reach this audience. Is it through newspapers, Facebook, Google Adwords, or phone?
In this section, you should also include other audiences that you intend to sell, even if you do not plan to do so today. This way you can show that you can sell to multiple segments, but you are initially focused.
The pricing strategy shows how you intended to pay for your product or service and how much. Here it is important to once again check your customers 'ability to pay and how your competitors' pricing looks. In general, it's always a good idea to place your product / service as a premium product and then price it, since a price-based strategy based on a lower price is difficult to succeed in as it requires a lower cost structure.
The description of one's team is primarily a key factor for business angels and venture capitalists, as they largely invest in the team rather than the business idea itself.
In this section of the business plan you should review the skills and skills that will be required within the company in order to succeed. The knowledge and skills should be focused on the core business, that is, what is required to be able to produce and deliver a product / service to its customer. Needs about administrative issues are not as important as many do not have one's core business to do.
In the section about your current team, you should describe the different members and how they fit the required knowledge and skills. If you are so long, you should include a description of yourself, what you are good at and what you have done before.
In this section, you simply review which skills / skills are missing in the company and how you intended to fill the remaining needs, either by hiring or by using other business services. If you intend to hire employees, it's a good idea to go wherever you find them. Here, you should also describe the plan as a timeline, as it will determine how fast you can speed up your business.
Financing and business loans
Finally, a business plan should also contain a financial plan, reviewing who owns the company today, how it is financed until today and how you plan to do so in the future. In general, the financial planning should extend over a three-year period.
You should start the section on funding with a summary explaining briefly how the company has been financially up to now, how much external funding you are looking for and what conditions, how the external financing will be used and how this will give the investor / lender a return on his / her own capital. There are problems with small business loans, as well. More about that later.
Normally, the circle of shareholders consists only of a few people, so this section becomes relatively short. On the other hand, if you have left capital from business angels and venture capitalists, this part may be relatively long and complicated. The reason that the section should be included is that it is of interest to lenders to get a better picture of who it is that can appoint the board and CEO and thus decide on the company. It can also provide a certain amount of trust if it is well-known name on the shareholder list.
Describe if you have any business loans up to this date, if the loansto your business is active or if you plan to take a business loan in the future.
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