Why You Need a Business Plan and How to Write it?

Why You Need a Business Plan and How to Write it?
Stefan Ivanovic

Article by

Stefan Ivanovic

Apr 24, 2019

If you have previously realized that your product / service has its place and customer in the market, it's time to try to define your strategy for starting a business through making a business plan.

A business plan is a strategic vision of a business that provides a clear and realistic picture of the future.
Business plan is an easily understandable written document than plans for the long-term future of the company, which is used for internal and external use and precisely defines the order of all business activities to be undertaken when:

a) establishing a company;
b) starting a new business venture or
c) expanding existing business activities.

To start - try answering the following questions:

Do you have an adequate place to start your business? How will you solve the issue of space?
Where and how much will you work at the beginning? A few hours a week in addition to an existing job, full-time, 80 hours a week?

What are the areas in which you are not professional? Will you hire workers for this purpose or will you hire outside agencies?

Will you be looking for a partner who will be involved in your business development and how do you want it to contribute (financial support, know-how, machines ...)?

How will you reward your partners, share ownership, share profits, fixed remuneration?

Will you purchase the necessary equipment or will you take it on leasing?

In order to get you to analyze in the right direction the necessary finances, we will ask you to consider the following questions:

What is the amount of capital that you can invest at the beginning of a business?

What is the amount of start-up capital necessary to start a business?

How will you get the missing capital?

What is your rough assessment of the possible level of sales in the first year?

When do you think that sales revenue will start to exceed operating costs?

When answering these questions, avoid the optimistic scenario. Be conservative, because if the pessimistic scenario turns out to be profitable, your chance of success is invaluable. For example, if you consider that the sale in the first year can reach 100,000.00 $, and in the worst case scenario it will be 20,000.00 $, use 20,000 $ in your analysis when developing a business plan.

Why is it necessary to write a business plan?

A business plan is a document in which you will define your business idea and the way (strategy) of its realization. It is necessary to check the justification of entering a particular job. Its basic purpose is to obtain the missing financial resources, but it will also help you to sharpen your business idea before the market and reduce the risk of loss. By creating a business plan, potential mistakes are made on paper rather than on the real market. It defines real opportunities in the functioning of your business, you are looking at the degree of its acceptability by potential customers and the need for resources.

If this introductory business plan story frightens you, know that there is no reason for that. You have already started working on a business plan by developing your ideas. You just have to continue. The business plan will show you where to go and how to get there!

What do I need to know about a business plan before I start writing it?

The basic thing to keep in mind when writing a business plan is its purpose and to whom it is intended. Why do we emphasize this? Because a large number of potential users of your business plan:

Based on the business plan, the company sees the vision, business strategy and goals

Banks and other financial organizations - based on your business plan, assess how well you are able to start and manage your business

Management team - to monitor the realization, control and understanding of future company actions
Employees - to understand what is expected of them

Strategic partners - to evaluate whether your ideas coincide with their mission and plans

So, the business plan has several simultaneous tasks, to enable lending, to enable the investor to inspect the business of the company, but also to define all stages of business and point to possible shortcomings.

Be sure that a potential investor, before deciding whether to invest in your business, will read your business plan to the smallest detail. He wants to see the stability of your company's development in the future, and it needs to convince your business plan. A commercial bank, a potential creditor, before granting a loan, wants to see how it can recover the money invested. Therefore, be careful, the plan should be legible and as clear and simple as possible.

How long should a business plan be?

The average business plan has between 15-20 pages, but do not stress over it. The length of your business plan depends primarily on the nature of your business and the size of your investment needs. The more complex a business, the more competitive the environment is, and the bigger the investment, the business plan needs to be more detailed. It takes a lot of words to convince the investor that it is the right thing to invest a lot of money in your business and that it will not make a mistake. If it's a simpler business, the business plan will be simpler and shorter.

What should a good business plan contain?

Before we present to you the comprehensive content of the business plan, it is sufficient to say that the minimum that it has to cover:

A detailed definition of a business idea with an explanation of its advantages over the competition;

What is your product / service;

How will you produce it?

What do you need to sell a product? provide a service;

How will you bring your product / service to market?

How will you present your product / service?

How much money is needed to start and run a business on a sound financial basis;

When will the job start to generate profit with for the investor;

Why this job has a chance to succeed;

A list of the basic challenges your business faces in achieving success;

The way to generate revenue through marketing, sales, and promotional activities.

Before you fully focus on developing a business plan, we advise you to collect and organize all necessary documentation, verify the accuracy of the information and conduct all the necessary analyzes.

Define who the business plan is for, define the areas in which you need professional help, because the business plan requires each section to be professionally processed and that the presented information is accurate and credible, identify the management team, complete the market analysis and competition, and prepare all the documentation which you plan to put in favor of the business plan.

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