10 Tips for writing Business Plan

10 Tips for Writing a Business Plan

You may have heard of this famous quote from Warren Buffet: "Preparation is everything. Noah did not start building the ark when it was raining." Writing a business plan is one of the most important processes that every business owner must go through. When preparing a business plan, you should consider the following:

1. Why do you need a business plan and for whom is it intended

A written business plan is like drawing up a navigation map for your business. It gives you an opportunity to run through the business model before executing it. The business planning process helps to uncover weaknesses in the business so adjustments can be made along the way for continual improvements. A business plan also helps you to monitor and control the business more closely. Decide who the target audience will be before you start writing. Is it targeted at your employees to align them to your business goals, your shareholders to whom you are accountable to, or your financier whom you need to obtain funding from?

2. Explain your business objectives and highlight the achievements

The fundamental questions lie with the direction you want to take your business and what you want your business to accomplish. Clearly define the values that you wish to cultivate in your business to achieving the goals and draw up your vision and mission statements. Begin with the end in mind.

Assess your current capabilities and be realistic about the viability of the plan. Reviewing the current situation and communicating your achievements will help to convince your audience. Information like milestones, the products and services offered, background of management team, the unique selling proposition(s), and financial performance to date will give a current overview of the company's profile.

3. Demonstrate your knowledge of the market, competitors, and your product or services

You should demonstrate a firm grasp of market trends of your products and services. Find evidence to support demand for your products and services. Talk to your target customers to gain insights into sentiments on the ground. Understand how technological trends can impact your business. These factors will help you make an informed decision on the areas to focus on in your business.

Keep an eye on competitors by being updated of latest developments in the quality of rival's products, warranties and service reputation.

4. Discover yourself through SWOT analysis

What are the strengths, weaknesses, opportunities and threats ("SWOT") of your business? What is so unique about your value proposition that differentiates you from your competitors? Understand your weaknesses and list the things that you can do to overcome them. Evaluate the threats to your business and brainstorm for ideas to manage and/or eliminate them. Discover the opportunities and formulate strategies to tap on these opportunities to drive business growth.

Rank the factors based on what make the greatest impact to your business so that you can clarify your priorities and channel resources to where it matters most.

5. Shape your business strategies and future plan

A simple rule of thumb is to continuously strive to enhance your customers' experience when using your products or services - make it better, nicer, cheaper and faster. Adopt a business strategy that is in line with market trends and best leverages on your strengths to make your business stand out.

Articulate in your business plan what you intend to do in order to:

(a) intensify market penetration through expansion of channels or embark on business diversification (new activities, new geographical areas, etc);

(b) expand your customer base;

(c) expand your product offerings;

(d) enhance your capabilities and operational efficiency; and

(e) create awareness of your brand.

6. State your action plan and how you think you can deliver them

At this juncture, it is important to include what you would be pursuing in your action plan because it determines the "what", "how", and "when" of your plan. Follow the acronym S-M-A-R-T (Specific, Measurable, Achievable, Realistic and Timed) when setting the action plan to achieve your objectives. It is also important to assign designated persons to take charge of the tasks so that there is accountability for the delivery of the action plan.

Set priorities and motivate your team to execute the tasks by mentoring them along the way. Be ready to commit resources in order to help them accomplish the tasks.

7. Give facts and figures on profitability, cash flow, and funding

Financial numbers don't lie. Forecasts on cash flows, profit and loss, balance sheet based on certain assumptions will tell how robust your business will be. Include key performance ratios that track growth, risk, trading performance, working capital, and profitability to see how your business performs.

Consider your revenue generating capacity such as space, production machines, people or working capital. Revenue cannot increase perpetually if you do not have the infrastructure ready to support the growth, and expanding your capacity may require funding.

Run your financial model rigorously to ascertain how much funding is required. You will need to work on securing the financing ahead of time to ensure that you are able to take on opportunities without putting the business at risk.

8. Give it a stress test

Contingency planning is also imperative because it prepares you for unforeseen circumstances and helps you to manage risks better. In business, there is no guarantee of success and to survive, there must be a plan B or even C.

Subject your business plan to criticism and stress test your financial model to the strictest of standards. Never rule out any contingency. Increasing your awareness of what can go wrong can help reduce vulnerability and avoid painful pitfalls.

9. Go through your business plan thoroughly

Finally, run through your business plan with a friend or business partner and obtain feedback. At this point, there should only be minor adjustments to the plan. Refine your position by running through the hierarchy of goals - mission statement, objectives, tasks and action plans. Most importantly, you will now be able to draw up the executive summary of the business plan that should contain highlights of your plan with a summary of key financial forecasts.

10. Start execution. Review your progress against the plan and, if circumstances vary, start the process all over again

Now, get on with execution! Remember the PDCA (Plan-Do-Check-Adjust) cycle. Periodically review your performance against the plan. Celebrate small successes and be prepared to start the entire planning process again as the business environment does not stay stagnant. Being nimble and able to adapt is crucial to finding the right track to success.