The basic structure of a business plan
Basic Structure Of A Business Plan For Beginners
Out of all small businesses started in 2014, 80% made it to the second year (2015). 70% made it to the third year (2016). 62% made it to the fourth year (2017), and 56% made it to the fifth year (2018). A bit more than half of all startups actually survive to their fourth year. As of then, the startup failure rate is about 44%.
When it comes to the main reasons for failure, 42% of them fail because of a lack of market needs; 29% due to lack of cash and 23% because they hire the wrong team. 19% get outcompeted or face pricing/cost issues and 17% because of un-friendly product or lack of a business model. Poor marketing and relationship with costumers also have an impact on 14% of unsuccessful ventures.
If we read between the statistics, there is room for hope. Almost 50% of all new business make it through. And 82% of successful business owners didn’t doubt they had the right qualifications and proper experience to run a company.
Statistics indicate that experience plays a role in the success of a business enterprise. Founders of previously successful business have a 30% chance of success with their next venture. Founders who have failed at a prior business have a 20% chance of succeeding versus an 18% chance of success for first-time entrepreneurs.
However, successful entrepreneurs are increasingly encouraging new generations to start a business as soon as possible.
“Start as soon as you can: you can learn as you go and you have nothing to lose,” says Filipa Neto, managing director of Chic by Choice. “I have a three-skill motto: preparation, persistence, and no fear of failure. And preparation can come from everywhere.”
All experienced entrepreneurs had to start from somewhere. One place where to start from is the beginning: the business plan. This is the basic structure you can follow when you do not know how to go about it.
1. Cover page
Small but important, it should include the name of the business and your name and contact information.
2. Table of Contents
It should allow readers to quickly skim or flip through to get to the included topic they are most interested in.
3. Executive Summary
Brief and formal explanation of what your company is, how far is going to reach, and why it is going to be successful. In no more than one page, it should include the mission statement, the description of the industry and the market environment, an explanation of its uniqueness as well as competitive advantages. The financial potential and anticipation of risks, the core team and the stage of the business, especially for those ones that are not starting from scratch, are also vital. Finally, the capital that is requested should be concise and clear.
4. Business Description
An in-deep overview of the proposed venture. The final aim is to make potential investors quickly grasp the concept of the business and its value proposition.
5. Industry Background
Provide past and current data about the shape, size, trends, and critical features of the industry you are trying to get in. What is the industry? What is the industry outlook? Who is competing in this industry? What are the industry’s barriers to entry?
6. Competitive Analysis
Look at current and prospective rivals and competitors. Who are your competitors? Which are your competitors’ strengths and weaknesses? What distinguishes your business from theirs? What is the competitive outlook for the industry?
7. Market Analysis
Focus on your customers, their likes, needs, and demographics. The aim is to demonstrate that there is really an opportunity for your venture in the market.
8. Management Summary
Introduce your team and the description of how are they going to rock it together. Every business is a risk, especially when there are no precedents to evaluate. This is why the knowledge, skills, and ability of the team to work together as a capable unit, is one of the first elements that would be evaluated by possible investors. Friends and family, despite their love and trust in us, are not always the wisest choice.
9. Operations Plan
Focus on the daily business activities and the strategies that will support them. With the use of charts, graphs, or tables, you can show complex information such us your breakeven point, your sources of supplies or your manufacturing and distribution process.
10. Marketing plan
Or the detailed strategy of how are you going to sell your product or service. Focus on the opportunity that your business is bringing, and the costumer’s buying behavior are primary considerations of a successful marketing strategy. Closely followed by spotting the value that each customer is bringing to your business.
11. Financial Plan
The current and future projections of your business financial performance. In short, every financial plan should focus on the following key components. The capital requirements should reflect on how much money you need to raise, how are you going to use the money or how much you need from investors. Assumptions in terms of growth or internal components of your business should always be backed with strong evidence and experts opinions. The income statement as the forecast of your business for the coming three to five years and the balance sheet generally prepared by your accountant. And finally, the cash flow statement showing weather your company is successfully turning its profits into cash.
12. Attachments and milestones
And all those additional documents that can provide valuable, additional information to the business plan.