Business Plan – The Crucial First Step To Start A Company

Business Plan - The Crucial First Step To Start A Company

Until not too long ago, and today still to a certain degree, the drafting of a business plan was considered the crucial first step to start an enterprise. The writing of this hyper-detailed and long formal document was strongly recommended for anyone, not only to be taken seriously by (big) investors but also as an effective method to take stock of your situation before opening the business.

Business plans: yes or no?

The answer to this question is more complex than it might appear at first glance.

However, the new trend in the entrepreneurs’ world does not recommend “old school” business plans for small startups anymore. Dwelling too much on drafting an extremely detailed document in the early stages, accordingly, could even be a waste of time.

Of course, this does not mean that business plans are no longer useful. Rather, you have to understand what your concrete needs and priorities are and, moreover, keep in mind which audience you are writing the document for. We’ll sketch a few possible scenarios to clarify the situation:

Business Plan for bootstrapping a startup

If you are going to found a small startup by bootstrapping it and the plan is that only you and your closest collaborators will read the business plan, there is no need to write a hyper-detailed text. A few pages document will be more than enough to take stock of the context that you’re going to operate in, and to detail your vision, financial situation, and enterprise goals

Business plan for bureaucratic demands

Alternatively, certain bureaucratic procedures may explicitly require you to provide a business plan. For example, if you are an expat applying for a Startup Visa, or if you are requesting special permission concerning your zoning-plan. In these cases, you have to tailor your document in a more official way. Luckily, there are convenient prefabricated templates that you can simply fill in to complete these procedures. Remember, if you are applying for a Startup Visa, do not hesitate to ask your facilitator for guidance in this department.

Business plan for funding

Finally, it is quite common to need a business plan in order to raise funds. In this case, you have to write an official document that is still catchy enough to impress your potential investors. Hence, if this is your situation, make sure to be meticulous and detail-oriented in drafting your business plan.

How to Write a Good Business Plan

A business plan is a formal document describing the characteristics and the financial forecasts of a commercial venture. In this, special attention is given to the company’s primary goals, and to specifying how and when they will be achieved.

What type of business plan do I need?

If, in the past, a business plan had to be long and hyper detailed to be taken seriously, a more recent trend regards these kinds of “old-school” documents no longer as the best choice, especially for small startups. Of course, this does not mean that business plans are no longer useful or that you don’t have to be accurate when you write one, but the reasons why, when, and in how much detail you will have to write it now vary largely.

However, if the stage of your enterprise calls for this moment to get your business plan in order, here are some tips for writing a catchy business plan for startups that doesn’t give up on concreteness.

Clarify your ideas

Before you start writing, you have to make sure that you clarify your ideas and verify them. Thus, do your research: collect information about the market related to your startup, the competition that you will face, your potential customers and, above all, how you intend to make your venture profitable.

Be aware, if your idea is really brilliant, it is highly likely that someone has already though about it. This should not make you give up, though, because competition is not only good for the market and customers, it also gives you the advantage of being able to learn from your rivals in order to make your company more effective and innovative.

Organize the structure

A good business plan is easy to read and – especially for startups – should not exceed twenty pages. Thus, in order to optimize the drafting of your document, it is best to first lay out the structure. Make an index with a title for each paragraph, you can simply use headings and subheadings for this, so that whoever will read the document will immediately understand the highlights of your plan.

If you need some examples to get you started, search online for prefabricated templates in your industry that you can modify according to your specific needs. If you need some inspiration, on the other hand, have a read through business plans of accomplished companies that you aspire to be like. You can also use our list below we drew up specifically to detail all the main sections that a good business plan must incorporate.

Take care of the aesthetics

Do not underestimate the esthetical look of your business plan, because the font, margins, and pictures of your business plan can be much more important than you might expect them to be. The most common text editors such as Microsoft Word or Google Docs offer a wide selections of fonts – the design of your lettering. Choose one that is not too banal or – even worse – pretentious or odd. For a long time, “serif” fonts (fonts with small strokes added to the letters that make them easy to read on paper) have been mainly employed for the body of the text, while “sans serif” fonts have been used for headlines. Yet, the spread of internet and the possibility to read documents on screens has fostered the preference for sans serif fonts also for the body of the text. Given this premise, Helvetica, Arial, and Proxima Nova are all good font choices.

Don’t forget to pay attention to the margins too, because if you make them too narrow, your document will be hard to read and if it’s too wide, your document will have too many pages. Furthermore, it’s a good idea to use explanatory figures, models, and tables. Finally, especially for the more technical parts of your business plan (e.g. the financial plan or your market researches), giving visual insights can make your plan both clearer and more appealing to read through.

Refine, edit, and then… refine and edit again

Once you have written your business plan, keep in mind that this is not a document engraved in stone and that it is not meant to be preserved as a first draft for eternity. So, mentally prepare yourself for having to revise it many times, and having to modify and rewrite certain sections every time that the type of audience (e.g. collaborators, angels, banks, or the municipality) that it is geared toward changes.

Finally, keep in mind that in order to add new experiences and accomplishments or to define the new goals of the company, you will have to update your business plan document periodically anyways.

The Seven Most Important Components of a Good Business Plan

Are you looking for a guideline to write a good business plan? Do you need some tips to nail the most complicated sections of this document? Then you have come to the right place, welcome! Below is a list of the most essential parts that a good business plan must contain, but feel free to adjust this model as you prefer and adapt our suggestions to your specific needs.

1. Introduction

A mandatory first step is to provide some essential information about your startup in a schematic and minimalist way: your business name, logo, name of the founder(s), and of course your contact details (address, telephone number, e-mail etc.). Think of this section like you would of your business card: an elegant display of your business and the people behind it.

2. Executive summary

The executive summary is a detailed overview of the business plan with the aim of arousing interest in the startup by highlighting its main components. In some ways you can see this section as a movie teaser: the executive summary must show all the strengths of your commercial project, be easy to read and understand and, above all, be catchy enough to impress your audience.

Given its introductory function, the executive summary must feature at the beginning of the business plan. However, since this section contains a detailed description of what the rest of the document features, you have to write it last, when your actual business plan is completed.

Keep in mind that a good first impression makes all the difference. The executive summary will certainly be the first thing that your audience will read, so dedicate time and attention to writing this section in the best possible way you can.

3. Company overview

In this section, you have to detail the main characteristics of your startup. What is its legal formIn which sector and industry does it operateHas the company already achieved relevant results? Another important aspect to highlight is the startup’s mission. If you have trouble defining this, try to answer the following question: why did you found this startup?

Keep in mind that all successful businesses have one thing in common: they identified a problem that is affecting a large (or rich) number of persons – the potential customers – and found a way to solve it. So, you have to explain what the problem is that you have recognized and in which ways your product or service is going to solve it.

Finally, this is also the section of your business plan in which you will have to explain what the main goals of your company are, and specify how and when you will achieve them.

4. Market, customers, and competition analysis

You cannot write a good business plan without doing some preliminary research. Accordingly, your document must have one (or more) sections dedicated to show the results of your research. The aim of these analyses is to define the market related to your product/service and its main characteristics. To get an idea of what you will have to write, try to answer to following questions:

  • How large is the market that you will potentially operate in? Is it local, national or international?
  • Is this market growing?
  • What are the latest trends within this market segment?
  • Are you able to make long-term predictions on the basis of reliable data?
  • Are there similar companies currently working in this sector?
  • If so, are they successful and growing? What are their strengths? And what their weakness?
  • Benchmark! Are there areas of the market that are not being tapped adequately?

Keep in mind that what you are going to write is the result of a research. It means that everything that you say or claim must be backed by verifiable data. Thus, make sure to cite your sources and use charts and tables to illustrate the information that matters.

5. Description of the product and/or service

Once you provided a comprehensive picture of the market and your main competitors, it is time to describe your product and/or service.

Be aware: do not confuse this section with the company overview (see point number 3). In the latter you have to explain the mission of your startup, the problem that you are going to solve, and how you will do this. Conversely, here you will have to show the very specific characteristics of the products and/or services that you are going to deliver and why they can make a difference for your potential customers.

To get an idea, here are some of the questions that you need to answer in this section:

  • What differentiates your product and/or service from your competition?
  • Is your product and/or service patented?
  • What pricing policy are you planning to use? Fixed prices, bulk discounts, subscriptions, etc.
  • What is the added value that you are offering?
  • Have you identified a section of the market that is not adequately tapped by your competition yet?
  • If so, how do you intend to use this to your advantage?
  • How does your product and/or service work exactly?

Make sure that you provide details and that you clearly describe the how your solution is a viable product and/or service that adds value to customers and/or clients.

6. The financial plan

This section, dedicated to the financial analysis of your startup, is the most crucial part of your business plan. It is easy to understand why: you can have the brightest ideas in the world, but if you are not able to make it profitable and profile yourself as a financially sound person, nobody will invest in you or your business.

The financial plan is thus a kind of test to verify whether you are a reliable entrepreneur. In order to bring this across effectively, we recommend to organize this section in the following way:

6.1. Financial budget

How much does it cost to start your businessDid or will you bootstrap itDid or will you get a subsidized loan to raise your initial capital?

6.2. Operating budget

The main question here is: is your business profitable (or when will it be)? Estimate your turnover and, then, subtract the company’s maintenance costs (or “operational costs”). The resulting number is the actual profit of your startup.

6.3. Cash flow budget

The earnings and expenses related to your company can fluctuate considerably over a year. Calculate all the incomes and expenditures per period (e.g. per month or per quarter). This way, you will be able to identify what time of year your business is most profitable and, accordingly, when you will have a surplus, and when you are in need of extra funds.

6.4. Personal expense budget

The question in this case is: how much personal capital do you really have? To find the answer, you must calculate how much you usually spend in a year for you (and your potential partner or family). Think of your fixed expenses such as rent or mortgage payments and your operational costs (see “operating budget”), but don’t forget to take your taxes into consideration too. Once you get the amount of these costs, subtract these expenses from your annual income.

7. Information about the owner(s) and the team

You can use this part to briefly introduce a biography of the founders/CEO’s and the other team-members. If the executive summary is comparable to a movie teaser, this final section functions like a kind of end credits. Be schematic and, above all, to the point in this section. So, make short summaries of each person’s career and add professional photos to complete your personal portrayals.

Final tips

In reality, your business plan will rarely be read from top to bottom with meticulous attention. Most readers will quickly browse the document, and focus on the executive summary and the financial plan. So, it is important to write these two sections with particular attention to detail. Finally, keep in mind that that you can always ask the help of specialists, especially when it comes to outlining your financial plan.