How to write a convincing business plan?

If your business is all in your head, it's hard to convince lenders and investors that you have a credible business. And this is precisely where a business plan comes in.

This highly recognized management tool is essentially a written document that describes who you are, what you plan to accomplish, how you plan to overcome the risks involved and deliver the expected returns.

Often people think of business plans as being limited to starting new businesses or applying for business loans. No, they are also essential to running a business with a clear, well-researched plan.

A compelling business plan provides concrete, factual evidence that your business idea is in fact sound and reasonable and has every chance of succeeding.

Who should convince your business plan?

First and foremost, your business plan must convince you that your business idea is not just a dream, but can be a viable reality. Entrepreneurs are by nature confident, positive and dynamic people.

After objectively assessing your capital needs, products or services, competition, marketing plans and profit potential, you will have a much better idea of ​​your chances of success. And if you're not convinced, that's fine: take a step back and refine your ideas and projects.

Who is interested in your business plan?

Potential sources of financing

Whether you need seed capital from a bank or from friends and relatives, your business plan can help you make a great case. Financial statements can show where you've been. Financial projections describe where you plan to go.

Your business plan shows how you will get there. Lending naturally involves risk, and a good business plan can help lenders understand and quantify this risk, thereby increasing your chances of approval.

Potential partners and investors

When it comes to friends and family, sharing your business plan may not be necessary (although it can certainly help). Other investors, including angel investors or venture capitalists, usually need a business plan to evaluate your business.

Qualified employees

When you need to attract talent, you need something to show future employees since you are still in the start-up phase.

At first, your business is more of an idea than a reality, so your business plan can help potential employees understand your goals and, more importantly, their place in helping you achieve those goals.

Potential joint ventures

Joint ventures are like partnerships between two businesses. A joint venture is a formal agreement to share work – and share revenue and profits. As a new business, you will likely be an unknown quantity in your market. Creating a joint venture with an established partner could make all the difference in getting your business off the ground.

But above all, your business plan must convince you that it makes sense to move forward. Now let's look at the first section of your business plan: the executive summary.

Summary of a business plan

The executive summary is a brief outline of your business purpose and objectives. Although it may be difficult to fit on one or two pages, a good summary includes:

• A brief description of your products and services
• A summary of your goals
• A solid description of your company's market
• A high-level justification for viability (including a quick overview of your competition and competitive advantage)
• A glimpse of growth potential
• An overview of financing needs

I know that sounds like a lot, and that's why getting it right is so important. The executive summary is often the decisive section of your business plan.

A great company solves customer problems. If your executive summary can't clearly describe, in one or two pages, how your business will solve a particular problem and turn a profit, chances are the opportunity doesn't exist – or your plan to take advantage of a real opportunity is not well developed.

So think of it as a snapshot of your business plan. Don't try to "hype" your business - try to help a busy reader get a good idea of ​​what you plan to do, how you plan to do it, and how. which you will succeed.

Since a business plan should primarily help you start and grow your business, your executive summary should primarily help you do the following.

Outline your goals

Providing an overview of your business can be tricky, especially when you're still in the planning stages. If you already have an existing business, summarizing your current business should be relatively easy; it can be much more difficult to explain what you plan to become. So start by taking a step back.

Think about the products and services you will provide, how you will provide those items. What you need to supply these items to, who exactly will supply these items to, and most importantly, who you will supply these items to.

Take the example of our bike rental business. It serves retail customers. It has an online component, but the core business is based on face-to-face transactions for bike rental and support.

So you'll need a physical location, bikes, racks, tools and support equipment, and other brick-and-mortar related items.

You'll need employees with a very specific skill set to serve these customers, and you'll need an operating plan to guide your day-to-day operations.

Goals

• Achieve the largest bike rental market share in the region
• Generate a net income of $235 by the end of the second year of operation
• Minimize rental inventory replacement costs by maintaining a 7% attrition rate on existing equipment (industry average is 12%)

The keys to success

• Provide high quality equipment, sourcing this gear as cheaply as possible through existing relationships with gear manufacturers and other cycling stores
• Use signage to attract visitors traveling to the national forest, highlighting our cost and service advantage
• Create additional convenience factors for the customer to overcome the perceived lack of convenience for customers who plan to travel roads and trails some distance from our store
• Develop incentive programs and customer retention to leverage customer relationships and create positive word of mouth

And so on …

Introduce Products and Services

In the Products and Services section of your business plan, you clearly – yes – describe the products and services your business will provide. Keep in mind that very detailed or technical descriptions are not necessary and certainly not recommended. Use simple terms and avoid industry buzzwords.

On the other hand, it is essential to describe how the company's products and services will differ from the competition. The same goes for describing why your products and services are needed if no market currently exists.

Patents, copyrights and trademarks that you own or have applied for should also be listed in this section.

Depending on the nature of your business, your Products and Services section can be very long or relatively short. If your business is product-oriented, you'll want to spend more time describing those products.

If you plan to sell a basic item and the key to your success is, say, competitive pricing, you probably don't need to provide important product details.

Or if you plan to sell a product that is readily available at a variety of outlets, the key to your business may not be the product itself but your ability to market more profitably than your competition.

But if you're creating a new product (or service), be sure to fully explain what the product is, its uses, its value, etc., otherwise your readers won't have enough information to assess your business.

Market opportunities

Market research is essential to the success of a business. A good business plan analyzes and assesses customer demographics, buying habits, buying cycles, and willingness to adopt new products and services.

The process begins with understanding your market and the opportunities inherent in that market. And that means you'll have to do a bit of research. Before you start a business, you need to make sure there is a viable market for what you plan to offer.

This process requires asking, and especially answering, a number of questions. The more thoroughly you answer the following questions, the better you will understand your market.

Start by assessing the market at a relatively high level, answering a few high-level questions about your market and industry:

• What is the size of the market? Is it growing, stable or declining?
• Is the industry as a whole growing, stable or declining?
• What market segment do I intend to target? What demographics and behaviors make up the market I plan to target?
• Is the demand for my specific products and services increasing or decreasing?
• Can I differentiate myself from the competition in a way that customers will find meaningful? If so, can I profitably differentiate myself?
• What do customers expect to pay for my products and services? Are they considered a commodity or as being personalized and individualized?

Luckily, you've already done some of the legwork. You have already defined and mapped your products and services.

Make a sales and marketing forecast

Providing great products and services is wonderful, but customers need to actually know that these products and services exist. This is why marketing plans and strategies are essential to the success of a business.

But keep in mind that marketing is not just advertising. Marketing – whether advertising, public relations, promotional literature, etc. – is an investment in the growth of your business.

Like any other investment you would make, the money spent on marketing should generate a return on investment. (Why invest otherwise?) While that return may simply be greater cash flow, good marketing plans translate into higher sales and profits.

So don't just plan to spend money on a variety of advertising efforts. Do your homework and create a smart marketing program.

Step creation of your marketing plan

Focus on your target market. Who are your clients ? Where are your targets? Who makes the decisions ? Determine how you can best reach potential customers.

Evaluate your competition. Your marketing plan must set you apart from your competitors and you can only stand out if you know your competitors. Know your competitors by collecting information about their products, services, quality, prices and advertising campaigns.

In terms of marketing, what are your competitors doing that are doing well? What are their weaknesses? How can you create a marketing plan that highlights the benefits you offer customers?

Think about your brand. How customers perceive your business has a huge impact on sales. Your marketing program should constantly strengthen and expand your brand.

Before you start marketing your business, think about how you want your marketing to reflect your business and your products and services. Marketing is the face of your potential customers – be sure to put your best face forward.

Focus on the benefits. What problems do you solve? What benefits do you offer? Customers don't think in terms of products, they think in terms of benefits and solutions.

Your marketing plan should clearly identify the benefits customers will receive. Focus on what customers get instead of what you provide.

Focus on differentiation. Your products and services must stand out from the competition in some way. How will you compete on price, product or service? Next, focus on providing details and backups for your marketing plan.

Present your competitive advantages

The Competitive Analysis section of your business plan is dedicated to analyzing your competition – both your current competition and potential competitors who may enter your market.

Every business has competition. Understanding the strengths and weaknesses of your competitors – or potential competitors – is essential to ensuring the survival and growth of your business.

Although you don't need to hire a private investigator, you should evaluate your competitors regularly, even if you plan to only run a small business. In fact, small businesses can be particularly vulnerable to competition, especially when new companies enter a market.

Competitive analysis can be incredibly complicated and time-consuming, but it doesn't have to be. Here's a simple process you can follow to identify, analyze, and determine your competitors' strengths and weaknesses.

Profile of current competitors

First, develop a basic profile of each of your current competitors. For example, if you plan to open an office supply store, you may have three competing stores in your market.

Online retailers will also provide competition, but a thorough analysis of these companies will be less helpful unless you also decide to sell office supplies online.

To make the process easier, focus on analyzing the companies you will be directly competing with. If you are considering starting an accounting firm, you will be competing with other accounting firms in your area.

Again, if you're running a clothing store, you're also competing with online retailers, but there's not much you can do about that type of competition other than work hard to differentiate yourself by other ways: great service, friendly sales people, convenient hours, really understanding your customers, etc.

Once you've identified your top competitors, answer these questions about each of them. And be objective. It's easy to identify your competitors' weaknesses, but less easy to recognize how they can outperform you:

• What are their strengths ? Price, service, convenience, and a large inventory are all areas where you might be vulnerable.
• What are their weaknesses? Weaknesses are opportunities that you should plan to take advantage of.
• What are their fundamental objectives? Are they looking to gain market share? Are they trying to capture premium customers? See your industry through their eyes. What are they trying to achieve?
• What marketing strategies do they use? Look at their advertising, PR, etc.
• How can you take market share away from their business?
• How will they react when you enter the market?

Identify potential competitors

It can be difficult to predict when and where new competitors may appear. To get started, regularly research news about your industry, products, services, and target market.

But there are other ways to predict when the competition may follow you into a market. Other people may see the same opportunity you see. Think about your business and your industry, and if the following conditions exist, you might face competition:

• The industry enjoys relatively high profit margins
• Entering the market is relatively easy and inexpensive
• The market is growing – the faster it grows, the greater the risk of competition
• Supply and demand are down – supply is low and demand is high
• There is very little competition, so there is plenty of “room” for others to enter the market

In general terms, if serving your market seems easy, you can safely assume that competitors will enter your market. A good business plan anticipates and takes into account new competitors.

Establish your business model

Building a compelling business plan involves determining the business model of your business. This part lends itself particularly well to the development of financial forecast tables.

Two tables must imperatively appear in order to present its economic model: 

Table of minimum expected turnover

This table must realistically present the expected turnover. For this, it is necessary to estimate:

• The number of sales achievable per day and the average basket of a consumer.
• Costs related to the creation and operation of his business (rent if renting premises, cost of manufacturing the product or providing the service, cost of purchasing raw materials, repayment of a loan, taxes, salaries, executive compensation, etc.). 

Finally, comparing its economic model with those practiced in the target sector makes it possible to assess the relevance of its business model. 

Table on the financing plan

Again, it's about being realistic. Voluntarily minimizing your financial needs to obtain financing more easily would be a mistake. This would be interpreted as bad anticipation on the part of the management team.

The financing plan must describe:

• All the needs necessary to launch its activity;
• Resources already mobilized (internal resources).

Result: the difference between the two makes it possible to determine its need for external financing.

Choose the legal form of your business

The choice of the legal form of your business will play a role in the development of your business model and business plan. Depending on the legal status chosen, the applicable tax and social regimes and the related expenses (tax regime, social charges and administrative costs) will be different.

These costs must be taken into account in the forecast of the expenses for the creation and operation of his company.

In addition, at this stage, it is important to have an idea of ​​the place of residence of the future company (with one of the founders, in a coworking space, with a domiciliation company, in a commercial premises, etc. .).

Find financing for your

At this stage of writing his business plan, the entrepreneur has in hand all the key elements that will characterize his business and that will allow him to reach, in the long term, the break-even point.

To finish building a business plan, all that remains is to detail the external financing solutions for your company.

To set out to conquer external financing, necessary for the launch of its activity, having a business plan is essential. Presenting a solid business plan makes it easier to obtain financing from potential investors, banks or even state aid for business creation.