Writing a business plan.


1st March, 2021

How to write a business plan: 5 questions to ask

You’ve decided to start a business. That’s great! But what’s next?

A business plan is a good place to start.

A business plan will help you craft a vision and direction for your business, as well as help you secure funding from potential lenders or investors.

A business plan doesn’t necessarily have to be too detailed or involved, but it does need to be thoughtfully considered to give you the best chance of success.

What is a business plan?

A business plan is a document that a business owner writes to set out the business’s objectives and how it plans to achieve them. It covers things like how the business will market its product or services, its financial position and how it will operate.

Business plans are especially useful for new businesses, but every business can benefit from a business plan. It should be reviewed and revised periodically to assess how the business is tracking.

Why write a business plan?

Business plans are used for both an internal and an external audience.

From the internal perspective, they help the business owner and leadership team get aligned on business objectives and agree on how those objectives will be achieved. Writing a business plan makes allocating budget and resources clearer, and helps the team understand the roadmap and their role on the business journey.

A business plan can also be used to help those outside the business understand its plans. For example, a business plan might be used to help investors feel assured enough to provide funding.

How to write a business plan

There are as many ways to write a business plan as there are types of businesses – no two are the same. An uncomplicated business might set out its objectives and planning in a page or two, while a complex enterprise might take dozens of pages. But while their format and length vary greatly, they should all have similar elements.

Essentially, the business plan needs to answer a number of questions about your business. Below are some of the key questions that a business plan needs to address.

1. What is the problem you’re trying to solve?

Businesses exist to solve problems for people, so your first step should be to define the problem you are solving. The simpler, the better. Think about the specific need that you’re trying to fulfill.

What is the product or service you’re offering and how is it going to solve the problem?

2. Who are your potential customers?

Keep in mind that businesses solve problems for people. So, who are they exactly?

Who will want or need your product or service? What will motivate them to buy it? This is where market research comes in.

3. Who are your competitors?

Chances are, there’s already someone selling a product or service that’s similar to your own. Figure out who they are and what they’re doing.

That will help you find your competitive advantage – that is, why your customers will want to buy from you instead of from someone else.

All this information will help you form your brand and market positioning.

4. How will your business make (and spend) money?

The idea of going into business is to make some money, right? That’s hard to do if you’re spending more than you make.

Before emptying your pockets, estimate how much it’s going to cost to get your business going.

The best financial plans cover the following three areas, as well as how these projections will change over three years.

How much will it cost to start your business?

Setting up a business costs a lot, from costs of developing your product and buying the tools you’ll need to start servicing clients, to the initial outlays of licences, permits and insurances.

Figure out your cost per unit/service, plus consider your initial outlays to get the business going.

Startup costs will vary from business to business. To get a better idea of how much money you might need to start your business, consult this handy list of costs that you might encounter as a business owner. You can also consider hiring an accountant or bookkeeper to help you figure these out.

It’s also important to consider commonly overlooked business costs.

How much will it cost to operate your business?

Once you’re up and running, you’ll find you have many ongoing costs. From cost of staff to rent, consider what costs will stick around for the long haul.

How much money can you expect your business to make?

The critical part: calculating how much money your business can make. Consider your revenue per unit/service sold and how this will increase as your business scales and evolves over the years.

5. How will potential customers find your product or service?

How are people going to access your offering?

Whether it’s through a website, on a digital marketplace (like Etsy or eBay) or a physical store front, figure out when, where and how you’re going to sell your products or services. Each option has pros, cons and different costs.

Top 3 takeaways

  1. Writing a business plan is important for creating a vision and providing direction for your business.
  2. It should consist of five key elements: the need you’re fulfilling, potential customers, your competitors, a three-year financial plan and your distribution channels.
  3. Consider your business plan as a living document. Updating it regularly can help to keep you focused on your business objectives.

READ NEXT: Funding a new business