The 5 W’s of Writing a Business Plan
Posted by Shannon Suetos on August 17, 2010 in Business Start Up Advice [ 2 Comments ]
Writing a business plan is tough, it might be the single toughest aspect of starting a business from scratch, but it also might be the most important. A business plan provides you with a road map to help you in the development of your company as it grows, but more importantly, it will be almost impossible to find financing without one.
There is no exact formula to follow when writing a business plan, but it is usually done in sections starting with the business itself, a description of the business that discusses marketing, your key competitors, day to day operations and your employment estimations. The next section should detail out the financial data beginning with how much starting capital you are asking for and how and when you plan on making that back. The last section would be for supporting documents, such as your personal financial data as well as any other principals of the business. Also, any lease or rental contracts or relative licenses that have been obtained.
While working out the sections above, keeping in mind the 5 W’s (who, what, where, when, and why) can help remind you of the important things that need to be addressed while writing a business plan.
Unfortunately, you cannot just walk into a bank and tell them that you are going to make money by selling your product to anyone and everyone, and expect them to agree. Just about every successful product or company has a specific consumer they have identified as a likely candidate to spend their money on what that company is selling. Invest some time and money doing some market research that will support who you believe your target market should be.
This usually the most straight forward part of the plan, otherwise you likely wouldn’t go into business to begin with. Remember to be specific when discussing the what. If you plan to open a restaurant then discuss what you plan on serving. If you want to open a shoe store then discuss exactly what kind of shoes you plan on selling. The more detailed you are the easier it will be for lenders or investors to trust your financial projections.
Everyone has heard the statement of location, location, location, and it holds true for your business plan as well. Before your plan goes in front of an investor of any kind, a location needs (or at least potential location ideas) to be chosen. In your plan you should discuss why this location will be profitable for you, as well as how much it is going to cost. Costs, which would be detailed in the financial section, should include not only rent, but also estimated monthly utilities.
Wherever you find the finances to start your business, whoever provided them is going to want to know when they will see that money back. Your financial projections section should provide an exact breakeven point, where you identify when you believe your business’ revenues have equaled the amount money invested and you are now turning a profit. It is important to be realistic with this forecast, if not even moderately pessimistic. An investor would rather be told it will take a couple of years and see his profits sooner than be promised full return in a few months that they will never see, and chances are whomever you get funding from, it won’t be their first time at the dance. If your financial projects seem overly optimistic and unrealistic, it could hurt the credibility of the rest of your plan.
This section may be most important left out of many business plans. Having a great business plan and a great product to sell always isn’t enough to survive in a competitive market, so what makes your business stand out from the rest. Why are people going to come to your store in the first place? If want to make and sell sandwiches, then why will people come eat them as opposed to going to Subway or Quizno’s? What makes your sandwich shop so special it will lure people away from what they already know? No matter what your business is, chances are you are going to have direct competitors, so your plan needs to explain, convincingly, where your customer base is going to come and how you will keep them.