Researching on how to prepare a business plan? See all the necessary steps to start preparing your business plan!
When developing a business plan, you transform vague ideas into a written document, showing how to strategically reach each important point of the future business, which greatly increases your chances of success and of achieving it.
It is a common mistake for many entrepreneurs to neglect a business plan before jumping into any business, either because they do not know how to do it or because they think they are “apt” to create a successful business without it. Avoid this mistake.
Find out what are the 3 questions you must answer before starting a business to protect your investment and increase your chances of success.
In a few months these companies close their doors and accumulate bankruptcies.
Before starting a business, it is MANDATORY to do a market and feasibility study, to know the main suppliers in the sector, competitors, customer profile, market potential, growth rate, trends, breeds, sales forecast, financial and operational aspects; and all of this will only be possible by learning how to develop a business plan.
What Is A Business Plan?
A business plan is a tool that allows you to observe the real market situation for the product or service that you intend to go into.
Not only that. It also helps to develop a higher quality product and create an efficient relationship with customers.
Although the excess of dedication to the business plan is criticized by some authors, it is a tool that in fact can make a great difference between the success or failure of a new business.
Some people search the internet for a ready business plan, however a ready plan would not suit another business, since even being in the same industry there will be differences.
See, the product, employees, service, competitive advantages, value of the offer, are dozens of points that must be considered, even the location of the service provision.
So, DO NOT use a ready-made business plan, make yours! It is important for the success of your business and deserves your time to elaborate it carefully.
If you have difficulties, look for how to make a business plan step by step and prepare yours uniquely and carefully, thinking about all the details and possible future problems in your business or company.
What is the Purpose of a Business Plan?
Drawing up a business plan serves to create a new business, expand a functioning company or restructure an ongoing business.
It is used to monitor changes in the business environment and the external environment (government, demographics, etc.) in order to protect against threats and explore opportunities.
In a practical way, making a good business plan allows to create in advance the steps to be followed and followed by the company, to reorganize a business in crisis and even to find potential problems that will occur during the development of the company and to find solutions.
How Much Does It Cost To Develop A Business Plan?
You can make a business plan yourself, but you can also ask for help from a business consultant, who is the professional trained to develop a business plan. The cost of developing a business plan in Nigeria ranges from N 10,000.00 to N 50,000.00 Naira, which may be much higher depending on the complexity of the project. This amount is much cheaper for already made (pre-written) business plan than customized business plans.
Analyzing A Business Plan
People have ideas every day, some really good, however, ideas are just ideas. You need to analyze whether your idea is a business opportunity.
So before you even think about how to make a business plan, you need to analyze the idea. But how?
Think about whether the idea is viable or just a dream. Does it have market support? Is it possible to get it off the paper? Is the value too high? Does it require different employees?
See, having a business idea does not mean anything concrete, and I suggest, even before starting the business plan, think if your idea is realistic.
Is Your Business Idea An Opportunity?
To find out if it is worthwhile to continue and develop your business plan, answer these questions objectively and based on research:
- What is the total market size for the product or service?
- Is the market big or is it growing fast?
- Is the size sufficient to meet my expectations for the future company?
- What profit margins can be obtained in this market?
- Are there enough people to buy this product or service?
- Can I produce this product at a competitive price?
The positive answers to these questions begin to transform your business idea into a business opportunity .
On the other hand, if the answers are not satisfactory, it may not be worthwhile to elaborate the business plan and it is better to start to analyze another business idea.
How To Prepare A Business Plan (Step By Step)
A business plan is formed by smaller interconnected plans, which are:
- Marketing Plan: takes care of the market analysis, pricing, location, launching the business on the market, etc.
- Operational Plan: it will tell how the company will work by allocating material resources, people and money.
- Financial Plan: will deal with the business numbers such as sales forecast, costs, point where the business does not generate profit or loss, expected profit / loss, etc.
Drawing up a business plan is drawing up smaller plans in each area of the enterprise.
There is no rule for making a business plan. What exist are business plan templates with a sequence to be filled, but there is no need to do this linearly, you can fill in the data as you discover.
In order to save time and for practicality it is recommended to start with market analysis, which will determine how attractive the business idea you want to evaluate is.
Let’s suppose you want to set up a clothing store, doing a market analysis of the sector can show that the market is saturated and that there is no longer a company in your city.
This saves time by avoiding the elaboration of the complete business plan and only then verifying its feasibility.
On the other hand, an analysis with an encouraging result can motivate you to prepare the entire business plan.
1. Market Analysis And Marketing Plan
The market dictates the rules. There is no point in having an excellent product at an attractive price if there are not enough people interested in buying it.
It is easier to gain a share of a large, growing market than to dispute a piece of the market with entrenched competitors, prepared for war in a stagnant market.
In this step you should discover:
- The size of the market and whether it is expanding, stagnating or shrinking
- Who are the main competitors and what are their strengths and weaknesses?
- How will they react to the entry of a new competitor?
- Who is the customer for this product or service? Where he lives? How much do you earn? Family size? How to reach these customers, which channels are used?
- How does the customer make his decisions to buy this type of product or service?
- How important is location for your business?
- How much is the customer willing to pay for this product or service?
- What are the main suppliers in this market? What are the payment terms, minimum purchases, delivery time?
Enter any other information you deem necessary, in addition to addressing aspects related to product advertising, forms of disclosure, Return Of Investment (ROI), among others.
The questions we mentioned above are considered the minimum to be able to develop an efficient business plan in the sphere of marketing.
2. Operational Plan
Here you must ask yourself if you would be able to execute the necessary strategy to be able to stand out in the area you intend to enter. It is an operational feasibility study.
To discover this, some questions must be asked, for example:
- How many employees will be needed and what is the qualification level?
- Machines and equipment?
- Knowledge needed to operate the business?
- Necessary infrastructure for the company? What are the processes?
- What are the environments and sectors?
In the case of setting up a consulting company, for example, knowledge in business consulting would be required to offer the services.
Define the profile of employees, who will work in each area, methodologies to be applied, among other aspects are linked to the operational plan.
In the case of opening a pharmacy, it is necessary to know the health surveillance requirements for the organization of the physical space, to know the need for personnel, to elaborate procedures to replenish stocks, define tasks for each employee, etc.
In fact, many of these procedures are defined after the business is in operation, on a day-to-day basis, so you need to be able to discern what is most important to the business and concentrate your energies on it.
But remember, one of the goals of the business plan is precisely to outline the actions to be taken and to provide solutions for potential problems / errors. So avoid leaving “everything to decide and fill in the day to day business”.
3. Financial Plan
In preparing the financial plan of your business plan model, you must have a forecast of all the numbers of the future business, such as:
- Gross sales
- Forecast of fixed and variable costs
- Break-even point
- Initial investment forecast
- Need for stocks and values
- Payroll and social security charges
- Tax amount
- Among others.
Some banks for loan purposes request business plans with 5 years of financial projections.
In the case of new businesses, drawing up a business plan with detailed projections month by month for more than a year is an illusion and has no practical value.
The actions taken by the entrepreneur during the first year can change everything.
IMPORTANT: the projections and financial data must be based on “concrete” data, that is, it is not enough to “find” that you will spend at least $500 (N195,000.00) on raw materials. You need to call suppliers, quote and thus have a real price.
Tips For Developing A Business Plan
- Be honest with yourself. The more quality information, the greater the correspondence of your plan with reality.
- Always have the plan in hand. It is not enough to develop a business plan, it is necessary to follow it.
- Update the business plan. A business plan is not fixed and needs updating whenever something in the business and macro environment changes, be it a competitor, the dollar price or the approval of a new law that may interfere with the business.
- Simulate different scenarios, one pessimistic, one normal and one optimistic, so you will be prepared for whatever comes.
- Accept differences between what was planned and what actually happened. Although you have done all the planning, the real situation will certainly be different in some moments than planned, anyway it is the best you can do.
- Request a second opinion. After having prepared your entire business plan, reviewed and made 3 analyzes of the scenario, ask for the opinion of a specialist. Find an industry entrepreneur or business consultant and ask them what they think of your planning.
If your budget does not allow you to hire a business consultancy, it is possible to design your business plan yourself, with the help of a very good business plan template.
Did you learn how to prepare a business plan? What is your business type? Comment and we will help you out.