Nowadays, it’s hard to overlook the importance of a good business plan. As a matter of fact, it is one of the key documents to have when planning to start a new business.
As a document, a good business plan will do a lot for your business. It will set out what you want your business to achieve and how you intended to achieve them.
Starting a business is not as easy as ABC, and with a good business plan, you will be able to get your business off the ground with ease.
However, the fact is that writing a good business plan for potential investors is a daunting task that requires a lot of effort.
Today so many young entrepreneurs are struggling to come up with a business plan that can woo potential investors. There is always a question of what and what should go into the business plan.
It’s not just as easy as some people might think. So, are you considering starting a new business and you want to put together a convincing business plan?
So what are the key ingredients of a good business plan?
Writing a good business plan will not only help you capture the strategic operational and financial aims of the business you are writing about but also help you attract potential investors.
You wonder why so many startup businesses fail to succeed? Starting a business and making it successful largely depends on the ability of the entrepreneur to write a clear and convincing business plan because anything less is heading straight for the bin.
The main idea behind a business plan is to convince the intended recipients of such a business plan. People you need to convince include investors and lenders, family and friends, and anyone with capital to invest in the project or business.
Most business plans fail to make much impression on potential investors. This is because their shortcomings tend to be obvious even in a two-page executive summary. Largely, this is because they are written before enough real work has been done to create a solid foundation.
5 key ingredients of a good business plan
A good business plan should contain these 5 Key ingredients:
- [#1]. An initial executive summary, summarising the detail of the business proposal
- [#2]. A written overview of the business’ aims
- [#3]. Its product or service
- [#4]. Management team
- [#5]. Financial forecasts and appendices, such as the CVs of key management members, market research data or technical product information.
The body of your business plan should cover several areas in detail. Remember that you will need to give some good reasons for establishing the business.
You will need to briefly talk about the business goals, for example, whether ambitious growth is desired or a regular, steady trading level.
Furthermore, you will need to explain what your business will do in simple terms; highlighting any features that set it apart from rivals.
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Also, you will need to include market and competitor information. This will help to outline what part of the market you are targeting, key competitors, and what differentiates you from them.
This will enable your would-be or potential investors to understand your clear goal and intention to positively compete with your rivals.
Finance is an important aspect of any business plan. This is why you will need to think about your sales and marketing strategy.
You will have to include information on how the product or service will be priced, channels to market, advertising, and marketing plans.
Details of key personnel and their relevant experience are also important to be in the business plan.
Don’t forget to also include operational information like office location, special equipment, and expected employee headcount.
State the financing you need, based on your financial forecasts, and don’t forget to include details of any finance provided by the founder or management team.
Also, indicate the key risks to the business and any mitigating action you can take. Your plan should also include a sales forecast, cash flow forecast, and a projected profit and loss account for up to five years ahead.
Larger businesses should also draw up a projected balance sheet and ensure that the figures used are reasonable; avoid being over-optimistic. The involvement of a qualified accountant in preparing these forecasts is highly recommended.