HOW TO CREATE A FIRST DRAFT OF A BUSINESS PLAN

APA full citation: Filho, C. I. (2024, September 27). How to Create a First Draft of a Business Plan. EBS I&D Centre. https://www.ebscentre.org/business-and-finance/

Abstract

A well-structured business plan is essential for any entrepreneur seeking to establish a new venture or expand an existing one. It serves as a roadmap, outlining the business's objectives, strategies, market analysis, and financial projections. This article explores how to create a first draft of a business plan, focusing on the key sections and considerations needed to craft a comprehensive, professional document. Through a structured approach, entrepreneurs can present a solid foundation for their business idea, making it appealing to investors and stakeholders. The process involves strategic planning, research, and careful attention to financial and operational details.

Keywords: business plan, entrepreneurship, decision-making, executive summary, startup, strategic plan, pitch

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Brief View

A business plan is a critical tool for entrepreneurs, providing a structured framework for organizing thoughts, evaluating market opportunities, and developing a strategy for business success (Scarborough, 2014). Whether aiming to attract investors, secure loans, or guide internal decision-making, a well-drafted business plan clarifies the business's vision and lays out the path toward achieving its goals (Sahlman, 1997). This article offers a guide on how to draft the first version of a business plan, focusing on essential sections, strategic considerations, and best practices.

Key Components of a Business Plan

A standard business plan typically consists of several key components: the executive summary, company description, market analysis, organizational structure, product or service line, marketing and sales strategy, funding request, and financial projections (Pinson, 2008). Each section serves a specific purpose in conveying the viability and strategy of the business.

1. Executive Summary

The executive summary is the most crucial section of a business plan, as it provides a snapshot of the business and summarizes its goals and objectives. This section should be concise, engaging, and highlight the most critical aspects of the plan, including the business's mission, value proposition, target market, and financial outlook (Berry, 2018). Ideally, the executive summary should be no more than one to two pages, summarizing the rest of the plan while capturing the reader's interest.

2. Company Description

The company description outlines the nature of the business, including its legal structure, ownership, location, and the problem it aims to solve in the market. It also includes a discussion of the company's mission, vision, and core values. This section should clearly articulate the business's objectives and explain what makes it unique (Scarborough, 2014).

3. Market Analysis

A thorough market analysis is essential to demonstrate an understanding of the target market, industry trends, and competitive landscape. This section should include research on market size, demographics, customer needs, and competitor strengths and weaknesses (Kotler & Keller, 2016). A well-prepared market analysis shows investors that the entrepreneur understands the environment in which the business will operate and can navigate challenges and opportunities effectively.

4. Organizational Structure and Management

Investors and stakeholders are often keen to understand who is behind the business. This section should detail the organizational structure, including the management team, board of directors (if applicable), and key personnel (Barringer & Ireland, 2016). An organizational chart is a useful visual tool to show the company's structure and how roles and responsibilities are distributed.

5. Product or Service Line

This section describes the company's product or service offerings. It should highlight the benefits and features of the product or service, the problem it solves for the customer, and how it stands out from competitors (Barringer & Ireland, 2016). Additionally, the entrepreneur should describe the product life cycle, any research and development efforts, and intellectual property considerations if applicable.

6. Marketing and Sales Strategy

A comprehensive marketing and sales strategy is vital to illustrate how the business will attract and retain customers. This section should cover pricing, promotion, distribution channels, and sales tactics (Kotler & Keller, 2016). Entrepreneurs must demonstrate a clear understanding of how to reach their target audience and convert leads into sales, including any partnerships, digital marketing strategies, and sales processes.

7. Funding Request

If the business plan is intended for investors or lenders, this section outlines the funding needed to start or expand the business. It should specify how much capital is required, how it will be used, and the preferred terms of funding (Pinson, 2008). This section should also address any future funding needs, loan repayment plans, and potential exit strategies for investors.

8. Financial Projections

Financial projections are crucial for demonstrating the potential profitability and financial health of the business. This section typically includes income statements, cash flow projections, and balance sheets for the next three to five years (Barringer & Ireland, 2016). The projections should be realistic, based on market research and industry benchmarks, and include assumptions underlying the forecasts. Financial metrics such as break-even analysis and return on investment (ROI) are also helpful to illustrate the business's financial potential.

Steps for Writing a First Draft

Creating the first draft of a business plan involves a mix of research, writing, and revision. Entrepreneurs should follow these steps to ensure that the first draft is comprehensive and well-structured:

Step 1: Conduct Thorough Research

Before drafting, gather data on the market, competitors, industry trends, and target customers. This research is critical for writing the market analysis, formulating a marketing strategy, and making informed financial projections (Scarborough, 2014).

Step 2: Start with the Executive Summary

While the executive summary is placed at the beginning of the business plan, it is often easier to write it last, after completing all other sections. This allows the entrepreneur to summarize the key points and ensure that the summary reflects the plan's content accurately (Berry, 2018).

Step 3: Use Templates and Tools

Various business plan templates and software are available to help organize the plan and ensure that all essential sections are included. Tools like LivePlan, Enloop, and BizPlan can streamline the process and offer step-by-step guidance (Pinson, 2008).

Step 4: Focus on Clarity and Simplicity

In the first draft, focus on presenting ideas clearly and simply. Avoid jargon or overly technical language, especially in sections aimed at investors or non-expert stakeholders (Sahlman, 1997). The goal of the first draft is to organize thoughts and lay out the core components; refinement and more detailed financial data can come in subsequent drafts.

Step 5: Review and Revise

Once the first draft is complete, review it for coherence and consistency. Entrepreneurs should seek feedback from mentors, business partners, or consultants to identify areas for improvement (Barringer & Ireland, 2016). Revising and refining the draft multiple times is a critical part of the business plan writing process.

Conclusion

Drafting a business plan is an iterative process that requires careful research, strategic thinking, and clear communication. The first draft serves as a foundation for further refinement and should include all essential components such as the executive summary, market analysis, and financial projections. Entrepreneurs who approach the process systematically are more likely to develop a plan that resonates with investors, guides business decisions, and positions their venture for success.

Charles The Son Consulting Team

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References

Barringer, B. R., & Ireland, R. D. (2016). Entrepreneurship: Successfully launching new ventures (5th ed.). Pearson.

Berry, T. (2018). Lean business planning: Get what you want from your business. Motivational Press.

Kotler, P., & Keller, K. L. (2016). Marketing management (15th ed.). Pearson.

Pinson, L. (2008). Anatomy of a business plan: A step-by-step guide to building the business and securing your company's future (7th ed.). Out of Your Mind and Into the Marketplace.

Sahlman, W. A. (1997). How to write a great business plan. Harvard Business Review, 75(4), 98-108.

Scarborough, N. M. (2014). Essentials of entrepreneurship and small business management (7th ed.). Pearson.