Starting a business is not a one-way street. It involves different processes that require analytical skills and logical thinking. It is also never easy to establish without enough knowledge, hard work, and attitude that lead people to patronize your idea, and eventually, the business itself.
Many aspiring entrepreneurs are asking: is there a secret recipe to perfect the business world? There will never be an objective answer to this question because, in reality, it is a mixture of both objective and subjective aspects.
One particular part of the objective is the business plan - the powerful document that serves as the backbone of every business. For us to understand what a business plan is, it is necessary to define its meaning, and we have it prepared for you.
Table of Contents
- Business Plan Definition
- The Importance Of Business Plan
- Elements of Effective Business Plan
- Executive Summary
- Company and Management Summary
- Financial Plan
- How to write a business plan?
- Business Plan Vs. Business Model
- Failure Rate Without a Business Plan
- Business Plan Timeframe
- Pointers in Creating the Business Plan
- COVID-19 and Philippines Businesses
- Your Business Plan Amidst COVID-19
- Free Business Plan Templates for You
Business Plan Definition
Various sources and business organizations have defined business plans differently; however, when encapsulated in one thought, it refers to the written document that describes in detail the business’s objectives and goals, mainly, if it is a start-up company.
It also means laying out a forecasted roadmap that covers up the scope and limitations of every department in the company and bears different perspectives coming from the administration, marketing, financial, and operational standpoint.
The Importance of Business Plan
Knowing how a business plan works, it is now time for you to understand its importance and relevance in the business thoroughly. It is essential to know that a business plan is a gem for companies, and it is best if it is not misleading and confusing.
Simplified, a business plan is essential because it is used to attract investment, even if the company has no proven track record yet. At the same time, it guides the company to move forward in accordance with the set goals and expectations.
Elements of an Effective Business Plan
An effective business plan should not fail the stakeholders in providing complete information about the business. It must have all the necessary information needed so as not to mislead potential investors. Avoiding this problem can help you secure funds easier than usual.
If you do not know how to start creating a business plan, here are the six essential components of a well-done business plan that you should know.
The executive summary includes information that helps stakeholders understand the overall content of the business plan. In other words, it is an overview of the business, including the goals, objectives, mission, vision, projects, teams, and other departments. This section should be short and concise, usually around one or two pages. A typical executive summary is placed at the beginning of the document, but others prefer to put it at the end of the paper.
When you write the opportunity section, make sure that you answer these questions: What are you selling? How does this product help solve a problem in the market? Lastly, who is your target market and competition? It is necessary to provide comprehensive answers to these questions to address the audience and the market’s concerns right away.
The business plan's execution is focused on the steps you plan to undertake as you take the opportunity and turn it into a profitable business endeavor. This section must have the marketing and sales plans, including the operations, milestones, and critical performance metrics for success.
Company and Management Summary
At this part of the business plan, you are given a chance to showcase your teams. Most investors are also particular about the kind of individuals that comprise your team, so it helps a lot if you can explain each group in a very detailed manner. If you still need to hire additional people, use this chapter to define who you need to hire and why. It should also contain an overview of your legal department and other information about the business that is not common knowledge, mostly if you are already operating.
A business is not complete without a financial forecast and source of funds. This is one reason why a business plan should have a detailed financial section, wherein you can lay the foundations of your financial plan. Such a plan usually includes the following: sales forecast, cash flow statement, income statement, and balance sheet.
The business plan’s appendix should only include references, additional product images, and supplementary information about the business and other sections. You can also add here additional reports, tables, diagrams, or illustrations that can support your entire business plan.
How to write a business plan?
It is easy to take note and comprehend the overall idea of a business plan, but conceptualizing and writing one is not everyone’s cup of tea. Here are three fundamental aspects that you should consider in writing a business plan.
Keep it short but detailed.
Make sure that your business plan is not as thick as a law book. As much as possible, try to have at least a 30-page business plan, with up to 50 pages maximum.
Write it plain and simple.
Although writing a business plan seems like a technical task, it is best not to use jargon in your plan. If it is unavoidable, make sure you explain the terms in the simplest ways possible.
Observe proper grammar, spelling, and punctuations.
Just like any other types of documents, observing perfect grammar, spelling, and punctuations add plus points to your business plan. Ensuring that everything is well-written will prevent any misunderstanding between you and the stakeholders.
Moreover, if you think writing a business plan is not your forte, here are seven helpful tips that will help you:
1. Research thoroughly
Before starting your first draft, you must already have researched the business's necessary details, backed up by proven and correct data gathered through surveys and interviews or other methods available in the market.
2. Determine the purpose of your plan
It is also essential that you know the aim of the business plan. With this in mind, doing the plan will be a lot easier, and you will certainly be on track.
3. Create a company profile
Your company profile should also be ready so that you can input right away any necessary information from it. Having a detailed company profile also adds credibility to your business.
4. Document all aspects of your business
It is also suggested to document every process in your company so that it is already easy for you to write them down and elaborate when you write the business plan.
5. Have a strategic marketing plan in place
Every entrepreneur should consider this done as soon as possible since it is an excellent addition to the business plan. Having strategic marketing in place adds authenticity to the business since marketing approaches differ from one company to another and is considered a unique trait of your business.
6. Make it adaptable based on your audience
You do not want to write a business plan that your stakeholders cannot understand, especially for the investors. Hence, it is your responsibility to ensure that they recognize the plan’s importance at a glance.
7. Explain why you care
Most of all, a business plan should include information that expresses why you care about your business. At times, people may think you are only after income and fame. Hence, it will help a lot if you can explain well in the business plan why you are creating the business in the first place.
Business Plan Vs. Business Model
While most entrepreneurs do not get confused any more with a business plan and business model, some may still have this dilemma, especially when they are always about to start their entrepreneurial journey.
So, here is a quick differentiation between a plan and a model. A business plan practically lays out all the necessary information about a business, including those related to its administration side. Most of the time, the plan is used for funding purposes, while a model is mostly used to attract potential clients for the business.
On the other hand, a business model is the structure of the business itself. It explains how the company operates daily, what processes are used, and what protocols are followed.
There is an apparent difference between the two concepts, so you should not have difficulty differentiating both ideas. However, it would help if you remembered that the two could go hand-in-hand as soon as the business starts operating.
Failure Rate Without a Business Plan
The likelihood of a failed business caused by having insufficient or no business plan has been discussed and supported by some studies performed by university students from universities worldwide. At the same time, although not in the Philippine setting, data from the Bureau of Labor Statistics in the United States of America revealed the following:
- 20% of small businesses most likely fail during the first year
- 30% of small businesses fail in the second year
- 50% of small businesses fail after five years in business
- 70% of small business owners fail in their 10th year in business
Moreover, it is emphasized the other reasons why businesses fail aside from not having an effective business plan. Among these reasons are the following:
- There’s no market need for their services or products.
- The business ran out of cash.
- It does not have the right team to make the business run smoothly.
- It has pricing and costing issues.
- There is no business model.
- It has poor marketing and customer service
Business Plan Timeframe
In general, the timeframe in business planning refers to how far you are willing to go for your business’ future. Of course, it is given that you envision your business to grow and last for years, but sad to say, a business plan does not last forever. Instead, each plan covers only a certain planning period.
Business planning is an ongoing process that requires massive and in-depth research and benchmarking. Before thinking about the timeframe, it is essential to know that this continuous project does not simply end by completing it before launching the business.
Here are some factors to consider when scheduling your business plan’s timeframe.
You need to define how far out your planning horizon goes. At the same time, you must commit to achieve it within that set timeframe, but it should also depend on the kind of business and the pace at which your industry is moving. Remember that some businesses only need six months to prove their worth in the market.
The nature of the business itself is a defining factor that affects a business plan timeframe. For example, nonprofit organizations usually have a five or ten-year timeframe. For the rest, they can choose to adopt one-year, three-year, or five-year benchmarks.
For something that is not fixed at all, you should condition your mind that a business plan will constantly have revisions over time. You must consider it as a schedule only to follow so you can stay on track, but me mindful enough that it can be subjected to reviews and changes.
We know that setting goals and establishing measurable objectives are critical points of a plan. However, knowing these are not enough. planning. You have to be accountable in including specific milestones along the way. You can do this by month or weekly, but the former is more preferable than the latter.
Pointers in Creating the Business Plan
Now, let us talk about the pointers to include.
Basically, you should be able to inform the stakeholders the purpose of the plan in a clear and concise manner - straightforward and substantial. It helps if the plan can provide answers to the following questions:
- What is the type of business?
- What is your main funding source?
- What are your other planned fund sources?
- What does the business need to stay operational?
- How much is your operational budget?
- Who are your customers?
- How can you reach them?
- What is your unique selling point?
- How will you handle competition?
- Do you have a prepared SWOT analysis?
- What do you think are the major challenges?
- How will you measure the success of the business?
COVID-19 and Philippines Businesses
The year 2020 has been a rollercoaster ride, especially when the coronavirus pandemic broke out. It wreaks havoc not only in our country but worldwide, affecting most of the countries’ economies.
With not much of a stable economy, the Philippines has been struggling to revive the dying economy and the businesses have started already to fall apart, with some of the entrepreneurs giving up against their will.
It is for sure that the implications of the pandemic in the country is devastating and it will take time to recover completely. Those businesses that have managed to survive should consider the following:
- Continuously work on business plan
- Adapt the “new normal” protocols
- Focus on customer satisfaction
- Continue being innovative
Your Business Plan Amidst COVID-19
This time, it is important to know that a business plan is of equal importance and significance in helping you thrive in the business world.
So, what should your business plan look like during this pandemic? Here are some suggestions:
- Understand that the aim of the plan is to guide you through an economy that is affected by pandemic.
- Set realistic goals and objective insights.
- Consider the pros and cons of starting a business at this time.
- Consider the limitations that can affect the business.
- Check and research if some border restrictions can affect your supply chain and other supplies needed for the smooth operation of the business.
- Define who are your target customers.
- List your competitors.
- Your action plan in relation to the “new norm.”
- Follow the other points as indicated in a normal business plan.
Free Business Plan Templates for You
Indeed, it can be a lot easier to have a ready business plan template in place, but we still recommend you to have your own outline. If this does not sound feasible to you, we have listed some downloadable templates you can use.
In a nutshell, a business plan is a company’s important document that provides clear and specific information regarding the business and its operations. It has different essential parts to include, so always ensure that your plan has all of them; otherwise, it is only a document without any meaning at all.
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