Tips on how to write a business plan for a small business

The starting point of business is always the idea, the initial impulse, and the desire to engage in activities that generate revenue. The question which direction to choose and which business will be better should be answered before opening the business itself.

Enterprising people are not inclined to develop strategies on paper. Those who are familiar with drawing up the right business plan are very few. But in vain, after all, this financial and economic tool helps in advance, before the beginning of a business activity, calculate possible errors.

Most ignore the importance of developing an action plan, considering it superfluous. However, there are situations when the owner of his own business is forced to prepare a business plan. In an emergency, the plan is drawn up with ephemeral figures that are far from reality, but attractive for investors or, for example, for the bank’s credit department.

The entrepreneur, who decided to present his project in this way, should expect at best a simple refusal, at worst – a spoiled reputation. It is hardly worth underestimating the potential of a real, well-thought-out business plan. In fact, it is needed not for investors, but for the entrepreneur himself, so as not to burn out in the first months from the beginning of the opening of the business.

The procedure for developing a business plan for a small enterprise

In order to know how to write a business plan for a small business, you need to learn to plan strategically. Yes, it is desirable, even when opening a business. On the other hand, planning in the economy is a key moment and the key to success.

Therefore, business plans are developed not only by beginners, but also by firms that have worked for more than one year. For what? To stay afloat. As a rule, in large reputable companies the whole department is engaged in planning. Having ready-made figures of the company’s work over the past years, it is much easier to analyze and make plans than to pioneers.

So, let’s see where to start and where to finish. The business plan is used as a concept of business management. So, it is necessary to work out the following key points:
  • For what purpose is the business being created?
  • What is the result of expectations
  • Management capacity
  • Flexibility of the model
  • Exposure to external factors
  • Financial stability
  • Competitiveness

How to make a business plan for a small business

The company’s business plan contains goals and plans, for which a time frame is established. There is no need to hurry here, so as not get stuck. The tasks must be realistic and at the same time a little ambitious.

It is important for potential investors to see the potential of the business and the results of the company’s activities if it has been operating for more than a year. The more goals are achieved, the higher the reputation.

It is unnecessary to give specific dates for events in the plan because they will have to be linked to charts and set of goals. Lagging from the calendar will cause a negative impression.

For internal use, you can create more detailed charts, and simply highlight the important steps in the business plan.

Dates should be left only where they can be accurately calculated.

Refuse from the description of the main stages of business development is not the best option. The reviewer will criticize the empty plan. In the case of drafting a development project solely as a personal workbook, the phased implementation of the objectives will more clearly demonstrate the correctness of the adopted strategy or identify its shortcomings.

How to correctly make a business plan

Drawing up a business plan begins with a preliminary analysis of the current situation. Before proceeding to the formulation, description, and filling of sections, you need to collect all the information that you own, and if it is not suffice, then fill these gaps by using third-party sources or by contacting specialists. One of the recognized technologies for preliminary analysis before the upcoming business planning is the so-called SWOT-analysis. It is quite simple in understanding and clearly structures all the information you have.

What is SWOT analysis and how is it used in business planning?

SWOT is an abbreviation and it stands for:
  • Strengths
  • Weakness
  • Opportunities
  • Threats

SWOT-analysis is necessary in order to assess the internal and external factors of the company, making an objective picture for the upcoming business planning.

For example, in your case this could be the following.

Strengths:
  • Low production cost
  • High professionalism of the project team
  • The product (service) of the company has an innovative component
  • Attractive product packaging or a high level of service to the company
Weak sides:
  • Lack of own trading premises
  • Low brand awareness among potential buyers

Opportunities and threats are characteristics of the external environment that the company cannot directly influence, and consequently, they can influence the outcome of its work in the future.

Such factors can be:
  • Economic and political situation in the country or region
  • Social and cultural environment (features of the mentality of consumers)
  • Level of technology development on the territory of business
  • Demographic situation

According to the analysis of current conditions, it is possible to allocate potential possibilities of the future project.

Possibilities:
  • Introduction of new materials and technologies for the production of the company’s product
  • Obtaining additional funding for the project
  • Adaptation of the product design for the cultural and age features of the region
Threats:
  • High customs duties on raw materials for the production of goods
  • Strong competition in this segment of the market

After the SWOT-analysis is done, you can go on to describe the sections of the business plan.

What sections should be in the business plan?

In order to understand the structure of the business plan, you need to decide on its sections. Here is a classical variant for most business plans.

Sections of the business plan:
  • Introduction (summary)
  • Description of goods and services
  • Market analysis and marketing strategy
  • Production plan
  • Organizational plan
  • Financial plan (budget)
  • Expected results and prospects (final part)

Starting to develop a business plan, it is recommended that you conduct a small brainstorming, describing your idea on 1–2 A4 sheets. This is necessary in order to understand the picture as a whole and only then proceed to a detailed description of the above sections.

Before you fill out the sections in detail, gather as much information as possible on the topic of your project (business) such as:
  • Analysis of the industry with quantitative indicators
  • Ways to promote your products or services
  • Current competitors in the market
  • The amount of tax deductions for your company
  • Technologies used in the industry of your future business

In addition, assess the resources of the future project (monetary, intellectual, temporary, personnel, and so on).

All this will help you write the business plan as efficiently as possible and not to search for material at the same time for its sections. This way, you will save a significant part of the time and get good results.

Typical mistakes in drafting a business plan

Writing a business plan is a serious and responsible task and not everyone can deal with it perfectly, especially if the business plan is written for the first time. In order to know how to write a business plan for a small business professionally, you need to avoid typical mistakes. The specialists in business planning have collected a number of typical mistakes, which are most often allowed when writing business plans:
  • There is no indication of specific time limits, in which the set goals should be achieved. Any short-term goal should be drawn up with an indication for a quarter or a month, and a long-term goal for a year.
  • The business plan is written as an essay. Try to minimize the general descriptive information but describe it analytically as much as possible.
  • The analysis of the market is carried out on the basis of unreliable sources. Even if you take information from the internet, give preference to research conducted by reputable agencies, rather than incomprehensible nameless statisticians.
  • Financial indicators are too optimistic. Undoubtedly, every entrepreneur wants to believe in one hundred percent success of his idea, however, be realistic. Consider all possible risks and soberly describe the entire financial part of the business project.
  • A lot of unnecessary information. The investor, who took up the consideration of your business plan, wants to see clear concrete information about the business project, and nothing else. Try not to use useless information and do not oversaturate your business plan with unnecessary data.

Writing a plan by yourself

To organize work on drawing up a business plan, use special programs. The entrepreneur should not be embarrassed that he does not seem to have enough knowledge to make a good business plan. The most important thing is to understand the organization of the type of business you’re about to launch.

First, when drawing up a business plan, you need to soberly assess the costs for organizing this business. It is recommended to consider expenses with an increase of 10–15%.

Secondly, in the process of drafting a business plan, you need to think if there will be incomes for which the business is designed? It happens that an entrepreneur opens a business, copying someone, while counting on the same success. It is necessary to admit to yourself if are you well versed in the sphere of business in which you want to open your business. It’s great if you managed to work in the relevant structure and if not, then it’s worth taking a closer look at the competitors.

The third, the most important step in drafting a business plan is defining the payback. To determine the payback period in months, you need to divide the entire amount of expenses into the estimated minimum monthly income. The businessman should think if he can live without incomes the given time interval.

Conclusion

Entrepreneurship, even if it is small, requires knowledge of the fundamentals of the economy and tax legislation. The market mechanism works according to the long-established system of demand-supply. You can hope for luck, supernatural flair or chance but businesses like a pragmatic approach and clear planning.

Rejoicing the first profit, the main thing is not to miss the moment when the current costs of increasing the sales market, will begin to cut off revenues. The plan of activity is created precisely to avoid fatal errors leading to bankruptcy and the collapse of entrepreneurship. Calculate the risks with ready-made business plans and make the investment of funds reliable, guaranteeing income.

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