Business Plan Basics For Aspiring Bix Owners: A Comprehensive Guide
The time has now come. You have now made your mind up on your new entrepreneurial adventure. You no longer have doubt on your business ideas and you are ready to get your teeth in something that is more than just a concept.
Drafting and developing a business plan with this comprehensive guide has worked very well. On many occasions, this was the real blueprint for the success of ventures I worked on.
Its thorough and detailed outline contains several aspects and can be used both as a guide for your early plan or as a formal document to be submitted in case you want to get a loan or raise funds for your business.
Ready to dive in?
Table of Contents
- Video: Business Plan Basics for Aspiring Entrepreneurs
- The Basics of A Business Plan
- The Market Analysis
- Listing the Products or Services you want to offer
- Defining your Marketing and Sales Strategy
- Including a Growth Plan
- Estimating Your Financial Projections
- The Role of the Appendix
- Environmental and Social Impact of the Business
- Include A Risk Assessment with Mitigation Strategies
- Plan to Protect Your Intellectual Property
- Add a Market Validation and Proof of Concept analysis
- Include Your Exist Strategy
The Basics of a Business Plan
Let’s now try to understand the basic of the plan.
First and foremost it is a document (generally written or in digital form) that outlines your business’s vision. It Should be accessible to the biz owner and whoever is requiring it in a matter of seconds.
It contains plenty of information about your mission, goals, and strategies to achieve them. It can’t be a simple collection of thoughts hence, it must be written down.
usually it is divided into chapters and must include:
- An executive summary
- The management composition
- Your company description
- A thorough market analysis
- The list of products or services you want to offer
- A marketing and sales strategy
- A Growth Plan
- Your estimation for financial projections
- An appendix (if applicable)
Also, you might want to include some other aspects which can be relevant for the future. For example, you can:
- Include an Environmental and Social Impact of the Business
- Create a Risk Assessment with Mitigation Strategies
- Plan to protect your Intellectual Property
- Add a Market Validation and Proof of Concept analysis
- Define Your Exit Strategy
The Executive Summary
The Executive Summary has to be clear, concise, and technical. Make sure to include the most important key factors with a snapshot of your ultimate goal as a Business.
Your audience is made of potential investors, lenders, partners, or stakeholders. Make sure you business plan summary is compelling and able to capture their interest. Don’t forget that this is just a summary. Details will follow later.
This Section should include general information like your Business Name and Legal Structure as well as your business address.
Include all the other important points like the management organization and your history (if you have one). Finally, give space to two important pieces of information: Your Value Proposition and Your Competitive Advantage.
Whilst I would spend some more words on your Value Proposition to get more attention from investors, I wouldn’t delve too deep into details with your competitive advantage as this will be the core part of the following section, the Market Analysis.
If you feel that’s relevant you can briefly mention your growth plan too even if this will be a separate section of your business plan.
The Management Composition
Here you have a chance to detail your company’s management composition along with all the relevant executives and personnel.
Make sure to define how is the Founder and who is the CEO (They might be two different individuals) along with their relevant key responsibilities.
Apply this approach for each and every single executive, there is no need to give the list of normal employees at this stage, but if you want you can add the number of currently employed personnel as it will give a glimpse of the fixed cost you will have to face.
Include a section to list the eventual advisory board and everyone who has decision-making power.
Finally, you might want to list Proven track records and industrial expertise for each person you want to.
The Market Analysis
Now we are moving into the juicy stuff. In my opinion, Market Analysis is one of the most important activities that needs to be carried out. With this part, you are basically validating your idea and justifying why there is a chance of making money out of your business.
The idea is not to convince yourself, but convince other people (investors for example) that objectively, there is a good chance that your business will be resilient, economically viable and profitable.
Given the circumstances, you are capable of placing yourself into a specific market segment that has a specific trend or growth condition for which you might attract customers and benefit from it.
Get feedback on the market landscape and how would you thrive in it.
How to Structure the Market Analysis
Generally, here is an idea of how a market analysis is structured. I usually find it useful to split it into two different sections: Overall Consideration of the Global Market Landscape and Your Prospects For the Business.
I highly suggest you go through this other article where I talk in detail about Market Analysis and Market Dynamics.
Overall Consideration of the Global Market Landscape
Market Overview: Start by providing a general overview of the industry your business operates in. Highlight its size, growth potential, and any significant trends or changes that are currently shaping the market.
Market Segmentation: Divide the overall market into segments based on different factors such as demographics, psychographics, behavior, or needs. This helps you understand the diverse customer groups and tailor your strategies to their specific characteristics.
Target Market: Define your specific target market – the segment you intend to focus on and serve. Describe the characteristics of your ideal customers, including age, gender, income, interests, and any other relevant details.
Market Needs and Trends: Identify the needs, preferences, and problems that your target market is experiencing. Analyze the trends and shifts within the market that might influence consumer behavior, technology adoption, or demand for specific products/services.
Market Growth Potential: Explore the potential for growth in your target market. This can include discussing factors like emerging trends, untapped opportunities, or expanding customer segments that could lead to increased demand for your offerings.
Challenges and Barriers in the Existing Market: Highlight any obstacles or challenges that your business might encounter in the market. This could include competition, regulatory constraints, economic factors, or technological shifts.
Your Prospects For the Business
Market Challenges and Barriers: Highlight any obstacles or challenges that your business might encounter in the market. This could include competition, regulatory constraints, economic factors, or technological shifts.
Competitor Analysis: Identify and analyze your key competitors. Evaluate their strengths, weaknesses, market share, pricing strategies, and unique selling points. This analysis helps you understand your competitive landscape and find ways to differentiate your business.
SWOT Analysis: Perform a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) to assess your business’s internal strengths and weaknesses, as well as external opportunities and threats in the market. This analysis guides your strategic planning and decision-making.
Customer Behavior and Decision-Making: Understand how your target customers make purchasing decisions. Analyze their buying behaviors, preferences, factors that influence their choices, and the customer journey they undertake.
Market Entry Strategies: Discuss your approach to entering the market. This could include outlining how you plan to attract your target customers, positioning your brand, and gaining a competitive edge.
Market Size and Potential: Estimate the size of your target market in terms of potential customers and revenue. This helps you gauge the business’s growth potential and set realistic expectations.
Listing the Products or Services you want to offer
In this Section, you should describe at your best capability the type of products or services you want to offer to your clients.
Don’t get me wrong, you don’t have to list all the 30000 articles you want to sell in the hardware shop. The idea in this case would be introducing a classification to help you out with organizing this section.
be aware though that in case you want to sell services, these must be described to avoid any misunderstanding, You won’t get away with a simple “Digital Services” category. You will need to explain further in detail which services you want to provide (f.e. Social Media Marketing Management Service).
If this plan is meant to be for investors here is your chance to list all the good propositions they are associated with like pricing structure, intellectual property, licensing that you own, the technology used, and competitive advantages.
Also, if you are crowdfunding your business, make it very clear when you’ll be able to launch the product. Timeline is not something your can omit!
Defining your Marketing and Sales Strategy
Here comes another crucial part of the plan. Marketing and Sales Strategy are nothing but fuel for your success. Both are required to hit your ultimate goal: be sustainable and profitable with your business.
You might want to have two separate chapters in your biz plan, one for each subject.
Your Marketing Strategy
The idea of having a marketing strategy is to get your brand visible not to everyone, but to your targeted audience. It is a common practice for every business to constantly collect data about different audiences to perform what is called “Segmentation”.
This is this way, don’t want to advertise your brand new Virtual Reality Google to 70 years old clients. You want to hit teenagers as they might be interested as well as 25-30 years old men with interest in High Tech. Then, eventually, you want to get the results of your marketing campaign and analyze which one of the two was more profitable to ultimately invest in it.
I would subsequently split your marketing strategy into two more parts, one of which is more around marketing and branding and the second one that involves more contents and presence.
Marketing and Branding
You want to look at these aspects with a clinical eye:
Know Your Target Audience: Clearly define your target audience based on demographics, psychographics, and behavior. Understand their needs, pain points, and preferences to tailor your strategies accordingly.
Market Research: Gather insights about your industry, competitors, and market trends. Understand your competitors’ strengths and weaknesses to identify opportunities for differentiation.
Value Proposition: Define a compelling value proposition that communicates how your products or services solve customer problems or fulfill their needs better than competitors.
Marketing Channels: Identify the most effective marketing channels to reach your target audience. This could include social media, content marketing, email marketing, SEO, paid advertising, events, and more.
Branding: Develop a strong brand identity that resonates with your target audience. Position your business in a way that highlights its unique qualities and value.
Contents and Presence
Here is where you shift the focus to these other subjects:
Online Presence: Don’t leave this part of the business out from the plan. The world wide web has the biggest pool of customers ever and sales are constantly growing. Excluding this aspect might made your business appear weak in front of your investors
Content Strategy: Create valuable and relevant content that educates, entertains, or addresses customer pain points. This can include blog posts, videos, infographics, and more.
Social Media Strategy: Develop a social media plan to engage with your audience on platforms where they spend time. Tailor your content to match the preferences of each platform.
Email Marketing: Build an email list and develop email campaigns to nurture leads and build relationships with potential customers. Provide valuable content and offers through email.
Search Engine Optimization (SEO): Optimize your website and content for search engines to improve your online visibility and organic traffic.
Paid Advertising: Consider using pay-per-click (PPC) advertising on platforms like Google Ads or social media to target specific keywords and demographics.
Partnerships and Collaborations: Explore partnerships with complementary businesses or influencers to expand your reach and tap into new audiences.
Your Sales Strategy
Why your sales strategy you define how you will lead into sales. Leveraging all the marketing tactics you have up and running you are ideally generating leads.
But generating leads is not enough, you will have to convert those leads into recurring customers keen to spend money on your business. On top of this, still need to focus on some other aspects like Customer Relationships and Discount/Promotion techniques.
Here is a list of the aspects you want to include:
Sales Funnel Development: Design a sales funnel that guides potential customers through awareness, consideration, and decision stages. Provide appropriate content and offers at each stage.
Lead Generation Tactics: Implement lead generation strategies such as offering valuable content in exchange for email addresses, hosting webinars, or providing free trials.
Customer Relationship Management (CRM): Utilize a CRM system to track leads, interactions, and customer data. This helps manage relationships and improve customer experience.
Sales Team Training: If you have a sales team, ensure they are well-trained in product knowledge, objection handling, and customer communication.
Pricing Strategy: Determine your pricing strategy based on factors like costs, market demand, and perceived value. Consider offering tiered pricing or bundle deals.
Promotions and Discounts: Plan occasional promotions, discounts, or special offers to incentivize purchases and attract new customers.
Including a Growth Plan
This part can help you in two ways:
- Showing to your investors or lenders that you did your homework. You are acting more professionally with clear and developed plans. This will help to get more funding as well as get more consideration
- You have a plan to follow. Putting this section together will eventually make you think about strategy and success. It will highlight obstacles and challenges and give you time in advance to think about solutions.
Consider also the fact that a growth plan is never static. Rarely, businesses are growing exactly in the way they have planned. The future is full of uncertainties.
No one knows what is going to happen but at least you are prepared more than others. Stick to the plan if everything goes fine but don’t be afraid to change if the context requires so.
Estimating your Financial Projections
There is another aspect that I didn’t include in the previous chapter on purpose. Financial Forecast. Let’s break that down together.
First of all, I think this is quite clear for you but the main concept is to evaluate the amount of cash flow you’ll be able to generate through applying your marketing and sales strategy. I have mentioned cash flow because it is a direct outcome of other two important Financial Metrics that are Income and Expenses.
You might realize that your business won’t have positive cashflow at the beginning. This is totally normal, many others are in the same position when they are starting out. Just make sure to follow your growth plan and cash flow generation will follow.
Here the subject gets more boring but you want to go through several aspects, from your Cost of Good Sold to Gross Profit and Margins. Here is a useful list of the most common terms.
List of Finance Related Metrics for a Business Plan
- Revenue Forecast: Estimate the amount of revenue the business expects to generate from its products or services. This is often broken down by different revenue streams or product lines.
- Sales Assumptions: Detail the assumptions and factors that influence the sales forecast, such as market growth rates, pricing strategies, and expected changes in demand.
- Cost of Goods Sold (COGS): Estimate the direct costs associated with producing or delivering the products or services. This includes materials, labor, and any manufacturing or production expenses.
- Gross Profit Margin: Calculate the difference between total revenue and COGS to determine the gross profit margin. This indicates the profitability of the core operations before accounting for other expenses.
- Operating Expenses: Project the various operating expenses, including salaries, rent, utilities, marketing costs, administrative expenses, and other overhead costs.
- Net Income (Profit or Loss): Sum up the gross profit and subtract all operating expenses to arrive at the net income, indicating the overall profitability of the business.
- Cash Flow Projection: Estimate the incoming and outgoing cash flows over the projection period. This includes operating cash flow, investing cash flow, and financing cash flow.
- Balance Sheet: Present a snapshot of the business’s financial position at the end of each projection year, detailing assets, liabilities, and equity.
Also, you want to share your estimate on Return on Investment (ROI) to show how much your investors can expect in return and Perform a Break Even Analysis to see when your total revenue will meet be equal to the total cost.
Finally, one last comment from my side: be as much realistic as you can. Altering the results won’t bring any value and actually will increase the risk of going busted along the way.
If you are not familiar with all the terms above, make sure to read this article on the 5 most important financial aspects that every entrepreneur should know.
The Role of the Appendix
Consider it the placeholder for anything that everyone wants to deep dive into which is not directly listed in your plan.
For example, you can add some charts and references to studies conducted in your Market by Universities or relevant authorities.
This section should be considered as a support for whatever could raise additional questions on the source of information listed in the main chapters.
Environmental and Social Impact of the Business
I personally think this is an important addition to the old-school business plan. Nowadays, considering the Environmental and Social of your business are aspects you don’t want to miss.
Incorporating sustainable practices and social responsibility in the business plan can enhance the brand’s reputation and attract socially-conscious customers. On top of this, investors might also be more attracted by opportunities that includes Social and Environmental aspects.
Include A Risk Assessment with Mitigation Strategies
One of the most crucial and less considered aspects of all, including a risk assessment with mitigation strategies for your business plan can only bring benefits to your biz adventure.
Risk Assessment is a complex subject with the aim of predetermining, validating, and classifying risks with the aim of mitigating them beforehand.
To keep it simple, your wear a helmet when riding a bike, to prevent hitting your head. This way you are identifying the risk of riding a bike which comes with a probability of falling but you are mitigating the outcomes of a head injury whilst wearing your helmet.
Same concept applies to your Business. There are both common and specific risks you can consider and include in the Business plan with their respective mitigation strategy. Some you have mitigated already by performing research.
Examples of Common Risks for Your Business
Risk: The market may not have sufficient demand for your product or service, leading to low sales and revenue. Mitigation: Conduct thorough market research to validate your business idea. Identify your target audience, analyze competitors, and gather feedback from potential customers before launching.
Risk: Insufficient funds or mismanagement of finances can lead to cash flow problems, affecting operations and growth. Mitigation: Create a detailed financial plan with accurate projections. Secure enough initial funding and establish a budget to monitor expenses. Consider seeking financial advice from experts.
Risk: Economic downturns or fluctuations can impact consumer spending and business growth.
Mitigation: Maintain a diverse customer base and consider a range of pricing options. Build financial reserves to weather economic uncertainties.
Examples of Specific Risks for Your Business
Risk: Relying heavily on a single supplier, customer, or technology can make your business vulnerable to disruptions. Mitigation: Diversify suppliers and customer base. Have contingency plans in case a key partner is unable to deliver.
- Intellectual Property (IP) Risk:
Risk: Failing to protect your intellectual property (e.g., patents, trademarks, copyrights) can lead to competitors copying your innovations. Mitigation: Consult with legal professionals to safeguard your IP. File necessary
Plan to Protect Your Intellectual Property
Yep! We are talking about theft!
The concept of Intellectual Property is older than you might think. It was mentioned by ancient civilizations where artists and inventors were looking for a way to protect their creations from unauthorized use.
Whilst at the beginning the only protection possible was under the form of concessions, is with the creation of the modern press that we started talking about copywriting and its legal framework.
Society has now evolved and these are the most common forms of protection you can choose, depending on your Intellectual Property:
- Copyright: Protects original creative works, such as literary, artistic, musical, and dramatic works, by granting creators exclusive rights to reproduce, distribute, and perform their works.
- Patents: Provide inventors with exclusive rights to their inventions, preventing others from making, using, selling, or importing the invention for a specific period.
- Trademarks: Protect brands, logos, and symbols used to distinguish goods and services, preventing unauthorized use that may cause confusion among consumers.
- Trade Secrets: Protect confidential and proprietary business information, such as formulas, processes, methods, or customer lists.
- Industrial Designs: Cover the aesthetic aspects of a product’s appearance, protecting the visual design elements.
How to Protect Intellectual Property
You might be surprised to know that this aspect is more complex than you think. We are dealing with international applications that have to be scaled down to both global regulations and specific local restrictions.
In case you find yourself in need, the best thing to do is get hold of some expert in the subject. Depending on your case, here is what you can generally do to protect your intellectual property:
- Apply for Copyright Registration: Register your creative works with the relevant copyright office to establish a public record of your ownership and facilitate legal action in case of infringement.
- File a Patent Application: File a patent application with the appropriate patent office to protect your inventions. There are different types of patents, including utility, design, and plant patents.
- Opt for a Trademark Registration: Register your brand name, logo, or symbol as a trademark with the relevant trademark office to gain exclusive rights to use and protect your brand identity.
- Apply for Trade Secret Protection: Implement strict security measures and confidentiality agreements to protect sensitive business information. Limit access to trade secrets on a need-to-know basis.
- Record Contracts and Agreements: Use contracts like non-disclosure agreements (NDAs) and licensing agreements to define the terms under which others can use your intellectual property.
- Perform Monitoring and Enforcement: Regularly monitor the use of your IP to identify potential infringements. Take legal action against infringers to protect your rights.
Add a Market Validation and Proof of Concept analysis
When it comes to Market Validation and Proof of Concept you literally want to make sure there is demand for your product or service.
In this section, you are going to demonstrate to your investors or lenders that you have conducted thorough research, gathered evidence of customer interest, and tested the feasibility of your idea. Remember that your investors seek quantitative data on what you are offering, so make sure to have plenty.
Once you have stated the problem or pain point your product or service is aiming to solve, you can validate your market in different ways:
Customer Research: Share insights from interviews, surveys, or focus groups conducted with potential customers. Highlight their feedback, needs, and preferences that align with your product or service.
Market Trends: Provide data and information about market trends that support the demand for your solution. Show how consumer behaviors and industry shifts validate your business concept.
Competitor Analysis: Present an analysis of your competitors and how they address the same problem. Highlight any gaps in their solutions that your product or service can fill.
Early Interest: If you’ve received pre-orders, inquiries, or letters of intent from potential customers, mention them as indicators of market interest.
Proof of Concept
Product Development: Explain the steps you’ve taken to develop a working prototype or minimum viable product (MVP). Describe the key features and functionality.
Testing and Iteration: Share insights from testing your prototype with potential users. Discuss any feedback received and how it influenced iterative improvements.
- Technical Feasibility: Address any technical challenges you’ve overcome to demonstrate that your concept is feasible from a technical perspective.
- Validation from Experts: If you’ve received positive feedback or validation from industry experts, mentors, or advisors, mention their input in this section.
Include Your Exist Strategy
Listing an exit strategy might be a choice depending on what you want to achieve. Even if you are trying to get a loan to expand and finance your business you might want to include this section.
Other than defining an exit strategy for an entrepreneur with the aim of creating a business and then selling it, including an exit strategy in your business plan can help you in different cases.
For example, you might include the possibility to pass down the business to your children or simply, have a plan for the future. Consider also that you can plan for exit strategies in case of an emergency whilst maintaining control of your life.
This is not meant to be the section where you list excuses to quit your business. This is the section where you plan for your life and retirement with the peace of mind of a successful entrepreneur.
Even if this is probably one of the hardest tasks an entrepreneur will go through, I still think there is a lot of fun in it.
Overall, crafting your business plan is like carving your path to success. In addition, you are immensely increasing your knowledge simply by doing all the research required to validate your idea of business.
Also, a well-drafted business plan also acts as a business card. Reactions triggered by this document will give you a hint of how your journey is going to be.
If I had money, I would invest in a business presented with a solid plan rather than investing in something that’s just a collection of thoughts. Think about what would you want to read on someone else’s Business Plan and add it to yours. Use this guide and consider this last principle and you will be halfway through your journey of crafting the plan.