If the phrase ‘business plan’ sounds ominous, think of it in its basic avatar – ‘a plan’. That’s all that it is. It’s your plan of how you want to start and do business. You make plans every single day for the simplest things that you do, shopping, vacationing. So why not for a business? A business plan can be written to fill a few dozen pages, or it can be a single page. The most important thing is to get started.
We will discuss the different sections and topics of a business plan later, but essentially you can start making a plan by thinking – what am I going to do and how am I going to do it.
Why Do You Need A Business Plan
Making a business plan will force you to think ahead, anticipate and eventually plan for events. That is why it is important to follow the prescribed format and sequence of making an effective business plan.
This process will force you to acknowledge the things you do not know as you ask yourself more questions regarding the business start up. This makes it a very effective learning process and therefore a very productive tool for someone starting something new.
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Without getting intimidated by the whole idea, start off in a very conversational tone and start writing only about your goals and aspirations. Here is a small example for someone wanting to start a sewing business from home.
A conversational beginning to a plan
Start with “I want to start a custom sewing business from home”. Then go on to…
- I want to specialise in making custom evening gowns.
- There is a healthy demand for the service in my area and I intend to service it by placing local ads in local medium like newspaper and flyers.
- I already know a few people who want to place orders with me which would also result in world of mouth publicity.
- I intend to hire more people as soon as i start getting more than 3 orders in a week.
- I also intend to design and make my own gowns that I will sell as ready-made products locally and online. Over the course of the next few months I want the ready-made section of my business to grow and become bigger than the custom tailoring as that would provide me with a greater degree of freedom.
- I need to start with choosing a company/brand name that reflects both these sides of my business”…. • and so on and so forth.
As you can see this was a pretty conversationally of writing a business plan. But it presents things in a systematic form. It also raises questions and brings a certain areas to light. For example you know that you will need to hire other people to work for you but do you know if you can find these people easily in your area?
And how much do you expect to have to pay them? All these things will filter down to the cost of running a craft business and the eventual pricing of your craft. Are your customers ready to be that kind of a price for your product?
In this manner you can tackle a lot of issues with a business plan even before they happen.
Tackling potential issues before they happen
A business plan can tell you when something is not a good idea and what changes you might need to make. For example in the above plan, if extra help is not available for hire you can change your product from evening gowns to some other garment that you can finish faster working by yourself.
We would like to keep reminding you not to be intimidated by what you read. We gave an example of a custom sewing business that almost always requires hiring others to process a sizeable number of orders.
On the other hand there is the candlemaking business. This craft business requires the absolute minimum in terms of investment, hiring help as well as the required workspace and equipment.
Handmade candles are an extremely popular craft. Quality home-made candles sell at an insane profit margin. It is not uncommon to find candles selling for three figures a piece.
Of course the price that you can put on your candles will depend on the quality for which you will need to invest in superior equipment, materials and perhaps even in a professional candlemaking course. Once again, all these things come out in a business plan.
A business plan can be formal as well as informal
Remember, you can make a formal or an informal business plan. Both will serve you well. Although the more formal plan is usually required if you are looking for an investment from banks, lending institutions or individuals.
Formal business plans tend to include more details such as the exact amount of investment required, expected income, marketing strategies etc. Even if you do not intend to take your business plan to a bank or lending institution, try and deal with as many details as possible.
Do not get impatient if it seems difficult to start. Getting started might take time. However, give yourself a few days to think of every aspect of starting and running a business and keep noting down whatever comes to mind. At the end of a few days you will be in a good place to start formulating the sequence of the things that you need to do.
Even small sized businesses need a proper plan
Remember, a business plan will always help you avoid costly mistakes before they happen. One of the commonest mistakes that people make is thinking – “I’m just starting small. I don’t need to make a business plan.” Just as commonly – “I’m just starting small right now. I will make the business plan later.”
a small business needs a business plan even more because of limited resources and the need to utilise the resources to absolute best efficiency.
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If you are making a big investment, you have every reason to do everything to protect it and to do your best to see that it flourishes.
Four main parts of a business plan
- Introduction
- Company Plan
- Financial Plan
- Marketing Plan
Introduction
The introduction of a business plan covers the entire entity of the business as a whole. It serves as an overview of your business product, organisation and the strategies that you may want to implement.
The introduction can be short and brief or it can be a few pages long depending on how you want to build upon it. It can be a mere summary for your business, or an extended description of your business with personal notes aspirations, goals and dreams.
Company Plan
The company plan covers details of the business which are more formal in nature such as the description of the products or services, the research involved in developing your product, an overview of the market, the operational procedures and the organisational structure.
A company plan can also list the deadlines dates and objectives that you wish to achieve during a certain period of time. There can be benchmarks made in the company plan to help you determine the growth process.
Putting down details of how much you want to accomplish by when is also part of the company plan.
Marketing Plan
A marketing plan helps to determine which section of the consumer will be the most responsive to the product or service. Thousands upon thousands of products and services created every single year. Yours may either be something entirely novel or it might be a product that it faces competition from several other similar ones. Having a successful marketing plan shows you how to target and advertise to people who are most suited to your craft and likely to spend money on it.
Financial Plan
Whether you are starting a full-time or part-time craft business, you need to have a financial plan that helps you realise and manage your financial needs. Taking control and managing the effect of starting a craft business is an essential step. Making a financial plan will help you sort this out.
1. Making the Introduction (Business Plan Part I)
The introduction section of the company business plan is used for the purpose of summarizing the entire business and it’s different aspects such as the product/services, the operation and any goals or deadlines that you may want to achieve. It also lists the major benchmarks that you want to achieve in the given timeframe.
In order to make an introduction to your business plan you can have a simple cover sheet which lists the basic details of your business such as date of establishment, address and other of contact details and the objective of the business. You can further elaborate the introduction to include a sort of an index of all the other contents of your business plan.
- If summarizing the entire business plan, you can list the various different headings and subtopics in the introduction so that you know where to find what information at the time that you need it.
- You can further extend the scope of the introduction section by speaking about your business as a whole. Your aspirations, goals, and the strategy that you may want to deploy can all be listed here.
- The concept that you have for your business in terms of the product or service that you want to provide and how you visualize this service is growing over the years should also be a part of this section.
- Any important and key issues that are crucial to the establishment and growth of your business can be summarized here.
- Different aspects of your business such as details of your competitors, your marketing tactics and also the financial requirements can be mentioned in this section of the business plan. Any research that has been done by you in your field of business can be mentioned here for an easy future reference.
- Since this is a summarization of the entire business you can mention any and all important and relevant facts in this section.
2. Making the Company Plan (Business Plan Part II)
The company plan covers all aspects of the company that are intrinsic to its day-to-day operations as well as the past and the future. External factors such as the market and finance are not considered while making a company plan and the operations are described and spoken of as if not dependent on such external factors.
Product Profile Section
This section is used to describe the service of the product that you will be putting out into the market. This is a section where you outline the estimated sales and plan your inventory.
- If you have multiple products or services you can include details about their strength, weakness and a comparison as competing products with other such businesses in the market.
- Focus on what makes your product or service unique and different from your competitors person.
- Try and outline details about your product or service such as the pricing structure, technology used to make it and the infrastructure you will require to make this product will provide this service.
- The success of any product or service largely depends on it having a demand in the future. Described how you see the demand for your product growing in the future or how you intended to make it grow.
- Lastly focus on just your product and list all your suppliers, manufacturers, and dealers and retailers. You may have an extensive list in this section although you may choose to use only a few number of them for the time being.
- Mention reasons as to why you chose the ones that you did and file away the other names for future use.
- Any discount policies or sales offer and promotional offers that you may want to implement on the launch or on special occasions can also be mentioned.
Business Operations Section
This will cover how you see here business functioning to produce your product or service.
- Cover all aspects such as accounting banking and legal requirements.
- You may need certain permits to operate or you may require a certain kind of banking service for example in the case of an online store you may need a credit card processing service to be offered by bank.
- Make a schedule of your operations here. What are the steps that are taken to finish the final product, how long does it take and what bottom line targets of production are you looking to achieve.
- Outline the various stages that will be involved in order to meet these deadlines.
Business Organization Section
This section has to do with the human factor involved in the business. A large part of running a business can be a delegation of duties and the running of various different departments in good synchronisation with each other.
There may be a lot of people working in your business or it may be just you. This section will list the duties and responsibilities for each and every person working for your business even if it is only you. You will also factor in future growth and hence the requirement for further personnel.
3. Making a Marketing Plan (Business Plan Part III)
Making a marketing plan for your home business involves covering all the details, which could influence your business sales. It has to take into account who your target consumer is, who your competitors are and how you will make new inroads into an already existing market.
It is like an initial framework on which your actual business will stand. It is a summary of all the plans, which will help you reach your destination.
Market Description Section
The target market needs to be understood thoroughly and the details regarding it form the basis of your marketing plan. An evaluation of the market trends over a period of time and how the trends will affect your profitability are included here.
The market place already has a host of products and services. In such a scenario it is important to determine the need for your own product or service and how you intend to go about fulfilling it.
Analyzing trends over the past couple of years as well as the predicted trends for the coming years along with certain demographics of the target market such as age and income are also essential parts of the plan.
Product Competition Section
The competition in the market place cannot be taken lightly. In order to make a good marketing plan it is important that the competitors be assessed and their strengths and weaknesses understood.
- Your marketing plan should include a detailed description of your competitors, what they are doing, how they are going about it and whether they have successful techniques to capture the market
- You need to assess what it is the competition is doing that gives it the competitive edge and what it is that you will do to compete successfully. Focus on what they are not doing which could in turn provide you with a competitive edge.
- Make a list of strengths and weaknesses of your competitor vis-à-vis yourself but be sure to have solid proof to back your claims.
Selling Strategy Section
The customer or rather your target market will ultimately decide how well your business does, so it is imperative that you outline your plans regarding how you intend to reach the customers.
- Describe how you intend to get them to buy your product or service. Give a detailed account of your advertising strategies as well as the promotional activities you intend to organise.
- Allocate a budget for all advertising and promotions. You should also have a yardstick to measure the success of your advertising.
- Outline your customer service policy, terms of payments and also how the product or service will be made available to the customers i.e. whether it will be through retail outlets or wholesalers.
- Mention the packaging of the product and how it will cater to the tastes of the customers. If you have already done some marketing in the past discuss the methods that you used, which methods were most successful and what were the costs incurred on them.
- The pricing structure should come next and here you may discuss the costs that you incur while making the product or service available to the customers.
- Work out the price at which it will be available to the customer after including a profit margin.
- Mention how the costs incurred relates to how you price the products, what is the lowest price you can sell it at after covering your costs and your profit and the maximum price that a customer is willing to pay, based on the current market trends.
Marketing Approach Section
- Summarize your entire marketing strategy, research and analysis here.
- Describe how you intend to create a niche in the target market and how you plan to satisfy the needs of the customers.
- Cover all the important parts of your marketing plan in this section.
- Focus largely on the needs of the target market, how your product will fill the gap and the profitability of the venture.
- The emphasis should be on what the customer requires rather than your product or the volume of sales.
4. The Finance Plan (Business Plan Part IV)
The financial plan for a home based business has to cover all of your financial needs at present and also in the future and it’s a very important part of planning a business.
This home based business plan or action plan is necessary even if you do not intend to apply for finance. It is useful to have all the information regarding your home based business in the form of a plan so that you can see where you are headed.
When you start a business it is important to know how much capital you need to get it off the ground. This is the start up cost and is the first thing that you need to calculate.
Make a list of your start up costs as well as operating costs i.e. the cost incurred in manufacturing and reaching the goods to the customers before getting any money from sales.
How much of the capital needed is available with you? It is imperative that you have enough to cover at least your start up costs. You may have to apply for a loan but even then the investors will need to see that you are making a sizeable contribution, in order to give you a loan.
If applying for a loan give a detailed account of how much is required, what you can offer as collateral, when and how it will be paid back. If possible back all this up with proof of purchase orders as well as any other document which will help prove your good credit history. Describe in detail as to how the funds will be allocated and the purpose for which they will be utilized.
