How to Write a Business Plan for an IdeaThis article provides information on creating a business plan for an idea. In it, you will learn the following:
✓ Learn what every solid business plan needs to include.
✓ Determine the best type of business plan for your situation.
✓ What investors want to see in a business plan.
✓ The importance of creating realistic projects.
So, you have a great idea? Now what? The next thing to do is to begin writing a business plan for your new idea and stating your goals including how you intend to reach them. The types of business plans boil down to two different categories. Which type you choose to write is based upon the objectives for your business plan.
1. A Business Plan to Show to Others
This would be one that you would show to angel investors, venture capitalists, banks, potential employees, etc.
2. A Business Plan for Internal Use
A business plan intended to be used for internal use will be more of a working document. It will be used to provide a benchmark for your idea and help you determine your progress. First, we will discuss a business plan that is to be created for presentations
If you are writing a business plan to raise capital, you want the plan to be an overall overview of your idea, your goals for the idea, the resources it will require to get to market, and what type of growth and return you expect. Potential investors will want to evaluate the goals, timeline, executive team, and the financial projections for the idea. With that being said, these are items you want to pay extra attention to in the business plan for your idea. The core components of the business plan will be an executive summary, a marketing plan, financial projections, and a description of the personell involved. Below, we will discuss each of these components in more detail so you can learn more about them.
The executive summary is where you summarize the purpose of the idea, how you will make money, and what you will be going into business to do. You will want to provide a general summary of your business plan and capture their interest for a full review. So, focus on the main points and benefits of the idea. For example, instead of naming the stores you want to sell your product in or the names of specific personell, you might say something like "We will utilize a strategy of discount store selling made possible by high-ranking personell in the retail field." A potential angel investor, venture capitalist, or business partner should be able to read your executive summary and have a broad understanding of what your business will do. We recommend that you write your executive summary AFTER completing the rest of the business plan so that you can provide a summary.
Your marketing plan is your war strategy on how you intend to reach potential customers. It is where you detail an ideal customer: say, 30-35 year old SUV driving males in the northwest with incomes of $70,000 per year or more. The person reading your marketing plan should come away knowing where your product will be sold and how. Details are crucial here. For example, do you have a relationship with buyers at Auto Zone or Pep Boys, if that's where you plan on selling? Will you be using search engine marketing, search engine optimization, or affiliate marketing if you will be retailing online? How much inventory does your initial budget allow for the first production run? How much will you sell your product for? What are the substitute products currently available to your customers? You should include anything connected to how the product reaches customers belongs in the marketing plan.
The number one question on the mind of any business partner is "How long is this going to take, how much money will it require, and what will my return be?" The financial projection sections are where you attempt to answer these questions. What is your product cost? What are your sale projections? What kind of profit margin do you expect? When do you predict the company will become profitable? After profitability, do you plan to pay distributions to shareholders or reinvest money into the company. Will any machinery and equipment be needed? A person reading your financial projections section will want to feel that you have taken everything into account and have realistic expectations.
Lastly, individuals reading the business plan will want to know that you have competent, experienced individuals on your team. In the executive team section, you want to list the names, achievements, and qualifications of the individuals who will be contributing to the success of the venture.
The other type of business plan is the one you write for yourself; for example, if you are growing an existing business without the use of outside funds. This type of business plan can be much more informal, since you will be the only one looking at it. However, you should still be thinking about the same questions. Too many business owners lose sight of why they are in business. A solid business plan is a great way to keep yourself and your team focused on reaching your agreed upon goals.
No matter how you choose to structure your internal business plan for your idea, it should have the following sections:
- Specific sales goals and time lines for achieving them.
- A list of methods you intend on using to market your product and the specific steps required to see it through
- Realistic projections on when you expect the business to be profitable.
Creating a sound business plan for your idea is the cornerstone for launching a successful business. Take time to create a solid business plan to increase your chances of success with your idea.