Let us start with some introductory definitions and clarifications. By the end of this lesson you will learn, among other things, what a business plan is and is not, what makes a good business plan and some rookie mistakes to avoid while writing your business plan.
- What is a business plan?
- Why you should learn to write your business plan yourself
- Different uses of a business plan
- Some of the mistakes that could ruin your business plan
What is a business plan?
As the name suggests, a business plan is a document that details the comprehensive feasibility analysis of any business. It is one of the most comprehensive tools you should have as an entrepreneur.
A business plan is a documented blueprint of your company presented in standard business format; just as builders don’t build without a construction plan, an entrepreneur should not embark on a business without having a plan. It helps you identify your business’ areas of weakness and strengths, pitfalls to avoid, overall feasibility and helps you plan properly towards achieving your goals.
You can use a business plan for any or all the following purposes:
- As a personal guide to ensure the smooth development and running of your company
- To obtain loan from banks or investment funding from investors.
- To test the strengths, weaknesses and threats of your company
- To map out a strategy for your company growth
- An important tool for sound decision-making
While writing a business plan, note the following
A business plan, in and of itself, is worthless if you are not willing to put in the hard work required to make your business a reality. While it is important to have a business plan, it is equally important to note that a business plan is not the business. It is simply a map to guide the business development and management. I notice most aspiring entrepreneurs spend a great amount of time putting a business plan together without putting any efforts into running the business itself.
A business plan requires brutal honesty. You must be totally honest with yourself. This is especially true while analyzing your business strengths, weaknesses and finances.
While you can hire a professional to write a business plan for you, it’s always better you write your business plan yourself or at least, be very much involved in the research process. The reason is simple: a business plan makes no sense if you don’t understand it, or the processes that leads to it. Being involved in the research process lets you in on the bolts and nuts of your own business. You will even learn some important details and get some ideas in running your company.
Some business plan mistakes you must avoid
These mistakes will likely ruin the very essence of your business plan and hurt your chances of getting funding. A business is only as effective as the plan. You can’t build a great car using an ineffective blueprint. Here are some mistakes to avoid:
- Random assumptions: This is very common. We hear people say things like: my product will dominate the target market in 3 months. There’s nothing wrong with this statement, but a business plan is not a place you assume. You must present facts and figures to support your claim. Numbers don’t lie. If the numbers are not on your side, no wise investor would give you their money.
- Unrealistic goals: As I said earlier, you can make any statements you like or set any goals you want. But they have to realistic and achievable.
- Lack of strategy: “We wiI’ll be the biggest fashion designer in Africa” does not mean jack in a business plan. What matters is laying down a detailed strategy for achieving that status. Without a strategy, your business plan is just another useless document.
- Errors and typos: Having too much errors and typos in your business plan signals you don’t take it seriously. You should use a robust word editor software like MS-Word. This should flag some of the common typos and errors. If your grammar is not so good, consider letting someone else edit your plan for grammar errors.
- Zero details: As I said earlier, numbers don’t lie. When someone looks at the details of your business plan, they expect to see not just words but numbers. Don’t just say you expect to conquer the market, explain what percentage of the market your competitors currently hold, what percentage you expect to control within a given time and how exactly you intend to get there. This is where research becomes very important and this is why young entrepreneurs prefer to outsource the business plan writing process – they don’t know how to go about getting those numbers. We will discuss the process of getting these numbers when we get there.
To end this session, we will look at what makes a good business plan.
A business plan should provide 3 basic things:
- An understanding of your target market: You must show that you know who your potential customers are and how to reach them. You must also show that you understand the various pitfalls and challenges in the said market. Lastly, show that you know who your competitors are, what loopholes they present that you intend to cover and gain your share of the market.
- Focus: A business plan should be about one business, not many businesses. Granted, you may have different ideas, but an investor needs to see your focus on one and your determination to bring it to fruition. If your business plan is about cassava processing, don’t go talking about making a bakery in the process. Also, focus on one thing you are very good at; something that would convince an investor that you are capable of managing the investment. Don’t be a rolling stone.
- Understanding of the lender’s/investor’s needs: you may have different ideas, but an investor needs to see your focus on one and your determination to bring it to fruition. If your business plan is about cassava processing, don’t go talking about making a bakery in the process. Also, focus on one thing you are very good at; something that would convince an investor that you are capable of managing the investment. Don’t be a rolling stone.
- Understanding of the lender’s/investor’s needs: You have a great idea, no doubt, but why should an investor care? What is in it for them? What do they want out of the business and how can you deliver it to them?
Other things that make a good business plan include
- Evidence of research: I hinted on this under common mistakes – business plan is not an essay; it is a research. Anyone looking at your business plan should see that you have done your research. Nobody gives money to someone who has no idea what they are talking about. Even if you don’t need funding, without research, you are digging a large hole to sink yourself and your business.
- Be an expert: This also boils down to research. You need to be sure what you are talking about. Don’t guess or speculate. Speak with authority. Then again, that authority comes from having done your homework. So roll up your sleeves and start digging through information.