Writing a business plan

If you are a young, aspiring entrepreneur, with an idea that will earn you millions (or at least enough money to pay for drinks on a night out), you are likely to eventually receive a speech from an older, more experienced entrepreneur on the importance of writing a business plan. A business plan describes the business, its objectives, its strategies and its market, allowing you, the entrepreneur, to give answers to the questions you are bound to have.

Is it profitable? What am I risking? Do I really believe in this or is it just another excuse to avoid revision? The research involved in writing up a business plan will allow you to give a realistic, objective answer to these questions, and will allow you to spot problems and work on them before they escalate or before any investment is made.

Business plans should start with a persuasive summary that entices the reader to take the plan seriously and move ahead with it. Investors, who read business plans every day, will be able to tell whether a business might have a future or not just by reading the opening paragraph.

Next, you will have to write a detailed description about your product or service. It is important for the reader to thoroughly understand the product you are planning to offer or the service you are planning to provide. At the same time, do not overwhelm the reader with technical explanations or words that he or she may not be familiar with (you never know, maybe they went to UCL). Make sure you also discuss any barriers that you face in bringing the product to the market, from development costs to possible legal issues.

Once you have explained how awesome your product is going to be, you have to talk about your target market

Once you have explained how awesome your product is going to be, you have to talk about your target market. You have to convincingly explain who you are aiming your product at and why those people will want to buy it. It will also allow you to evaluate whether the market you are aiming for is big enough to actually generate a profit; a product that improves the lives of Mech Eng students at Imperial might help your friends but is unlikely to land much money in your pockets. This section of the plan is extremely important, because if there is no need or desire for your product or service there will not be any customers. If a business has no customers, there is no business. This part of your plan establishes whether your idea is just a fun project or an actual business from which you can make serious money.

Once you have identified what your market is, you will need to explain your strategy for reaching it and distributing your product or service. Potential investors will look at this section carefully to make sure there is a viable method to reach the target market identified at a cost that does not jeopardize your potential for profits. Developing an innovative marketing plan could play a large part in your success, as investors look favourably upon creative strategies that will put your product or service in front of potential customers.

Another important part of the business plan is the part where you show that you understand who your competition is, and what its strengths and weaknesses are. You need to give arguments for why there is room for another player in the market, and why you think your product would be chosen by customers over your competitor’s.

No matter how good your product or service, it is very likely that someone is already offering something similar, so it is crucial that you explain why yours is better. Find flaws in the competition, and explain what your product has that prevents it from having those same defects.

Now that you have had an opportunity to really sell your idea and wow potential investors, the next question on their mind is what you need in order to get it on the market. What resources and processes are necessary to get the product to market? How much capital is needed for launch and what are the various upkeep costs?

If the goal of your business plan is to obtain financing, you will need to generate financial forecasts. The forecasts demonstrate the need for funds and, more importantly, why the investor would rather give the money to you than spend it on a new car or a bathtub filled with champagne (you can now see why your arguments must be very, very convincing).

Finally, end your plan by discussing long term growth plans for your product. Once you have triumphantly conquered your first customer segment, how will you grow your business? What new market or product will you develop that will allow you to further increase the now obscene amount of money you (hopefully) have?

Once your business plan is completed, you will have a much more realistic idea of what your business is and what it could grow to become. Your business plan should be constantly developed and improved together with your idea, and once you are swimming in your pool of money you will be grateful for having spent those few hours planning your business rather than improvising it on the spot. Or revising.