This is the 6 Tips to Writing Effective Business Plan. There is no course in the University curriculum that teaches students how to write an effective business plan. But, I learnt it while in school and today I have decided to teach you for free what I spent a fortune to learn.Hand drawing Business Plan flowchart with chalk
In my last post – avoidable mistakes entrepreneurs make, I stated that a business without a business plan is like a football field without a goal post.. The above statement underlines the importance of a business plan in the startup and survival of any business.
A business plan is an important tool for a business of any size. It contains the aims and objectives of the business as well as the supposed means of achieving them. It equally guides the management against derailing from the initial vision of the business.
To write an effective business plan, you must keep the following points in mind:
1. WRITE WITH YOUR AUDIENCE IN MIND
The starting point to writing an effective business plan is to write from the audience perspective. That is to identify who you are preparing the document for and your aim of doing so.
This is because if you are preparing the plan to secure funding from investors, the format should be different from when you are writing the plan to just serve as a guide to running the business.
For instance, a potential investor will be more interested in seeing detailed explanation on how you intend to make returns on his investment and the time frame.
2. DETAILED EXECUTIVE SUMMARY
This is perhaps the most important component of a business plan. It is written at the end of the planning process but presented as an abstract at the beginning of a business plan.
While writing an executive summary you should ensure that it is detailed, captivating and concise so that at a glance, a potential investor or a reviewer can understand what the plan entails.
It should contain a summary of the cost and revenue projections, the product description and so on.
3. CONDUCT A THOROUGH MARKET RESEARCH
Market research is not only necessary for writing an effective and realistic business plan but also important for successfully running a startup business.
I always advise my clients and would urge you to conduct a proper market research if you intend writing an effective and realistic plan.
This would enable you discover the market size, your competitors, nature of competition in the market, how to penetrate the market, likely growth path and so on.
All these details are supposed to form part of your business plan if you want to successfully run your business or even be considered serious by investors.
4. ACCURATE COST AND REVENUE PROJECTIONS
These are important components of any business plan. In fact, after going through the executive summary, these are the next components any potential investor would look at to determine whether to finance a project or not, ascertain the time it would take for him to recoup his investment and as well guide the entrepreneur in making cost and revenue decisions overtime.
In preparing the budget or cost component of the plan, you should outline all the cost needed to startup the business and keep it running for up to 6 months to 1 year.
This includes cost of securing land and building, acquiring equipment, personnel costs and other operational expenses.
Also, accurate revenue projection for 3 to 5 years is a must component of an effective business plan. Such figure shouldn’t be randomly generated but should be based on a thorough market research as I earlier stated and should be backed up by reliable data that indicates growth potential if your plan is to be taken serious by potential investors.
5. FOCUS ON OPPORTUNITIES
If your aim of writing a business plan is to attract investors, appeal to reviewers, or even guide you in running your business then you must identify the unique features of the product or service and opportunities that the business must leverage to grow and clearly state them in the plan.
This will enable you and potential investors to understand the unique features of the product or service that will enable it to strive even in the face of stiff competition.
6. MUST BE DETAILED AND CONCISE
A good business plan should be concise but detailed enough to contain all the necessary information to guide the running of the business as well as help an investor to make an informed decision.
In order to achieve this, I advise you to use spreadsheets and colour charts where necessary to convey the information.
This leaves the business plan as concise as possible as well as adds a bit of professionalism to the work.
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