How to Craft an Effective Business Plan? Guide for New Entrepreneurs

Did you know 30% of businesses shut down in the first 2 years? The top 3 reasons for this are:

• Lack of funding
• Lack of skilled employees
• Lack of an effective business plan

The first 2 points are beyond your control, but not the third point. If you are a business owner or planning to become one, having an effective business plan is paramount.

Drawbacks of not having a Business Plan

Post-COVID, we have seen plenty of startups across the globe become unicorns. But many of them are struggling to become profitable. As investors are losing trust and withdrawing their capital, most are on the verge of bankruptcy.

The main reason for this is the lack of an effective business plan. Not knowing what to do and what not to do.

Price for not having a clear and effective business plan

• Get Funding

Following the pandemic, the startup ecosystem is struggling with a funding crisis. Venture Capitalists have become extra cautious before investing their money.

During such cases, a business with an effective business plan has more chances of raising equity. Because the investor will want to put the money where there is a higher chance of ROI.

A business with an effective plan has a 50% greater chance of receiving funding.

• Missed opportunities and wrong decision-making

If you browse through history you will come across many examples. Examples where businesses did not capitalize on the right opportunity.

For eg: PayTM the Indian Fintech giant rose to the ranks of a unicorn in a short span. But, during rapid growth, their business plans started becoming vague. Result? They failed to capitalize on the Demonetization wave. As their servers started crashing due to excess traffic.

This led to a severe hit to their revenue inflow.

Then this company ran into a legal dispute due to wrong decision making.

PayTM ran into a legal dispute with the global Fintech mammoth PayPal. It is about a trademark violation (their logos).

If Paytm's founder had prepared an effective business plan, they would be able to avoid this.

Running a business without a proper plan is like going to war without knowing your enemy.

Such businesses are following a scattergun approach.

These mistakes are enough to dismantle a business regardless of its size.

"The actions and decisions you take today will determine your future."

3 Rules for Preparing an Effective Business Plan

1. Keeping it Short, Crisp but Comprehensive

In Silicon Valley, the startup hub there is a popular saying.

If you cannot explain your business plan in 1 page, there is a high chance it will not succeed.

If you are presenting a dozen pages or more, this shows a lack of clarity. And there is no successful business plan without knowing what you are going to do. The do's and don't's of your business should be crystal clear from the word go.

Sure, you should leave some room for experimentation. But for the major part, there has to be a clear direction.

2. Knowing your Target Audience

If we tell you to make a list of the top 10 businesses across the globe, you will see this in their game plan. They are clear about the type of people they will pitch their products and services.

Take Apple for instance. The mobile mammoth is always targeting upper-class people. They do not rely on giving away discounts and cashback. It is because upper-class people do not like such features. You will never see people from a weak financial background buying iPhones iPad, Macs, etc.

According to PopupSmart, having a target audience creates 40% more chances of succeeding.

For this, you will have to do extensive market and competition research. The topic for some other day.

3. Having Faith

More than a step, it is an advice. When you are starting, you will face a lot of self-doubt. Your mind will throw many reasons for you to give up. Like:

• Lack of experience.
• Lack of support from friends and family.
• Lack of the comfort and security of a job and paycheck at the end of the month.

And so much more. It is not wrong to say, in the earlier days more than the competitors you are fighting your own will to give up.

Know this, the chances of startup success are less than 10%. This means failure is normal. So you should not beat yourself up for failing in the first attempt. But do beat yourself if you are making the same mistake more than once.

How do you write a Business Plan?

Remember, simplicity is the key. Geniuses are those who simplify complex stuff. An effective business plan comprises:

1. Executive Summary

This is where you talk about your company, covering the key aspects. They include the company's cash flow, mission & vision, achievements, etc.

2. Company Description

This is self-explanatory. Here you talk about your business in detail. This includes the business activity, culture, mission, values, etc.

3. Market Analysis

As discussed earlier, you have to do extensive research on the market. It includes the competition, and your target audience too. This is the most important step in this list.

4. Organization and Management

In this step, you talk about the teams in your company. The key players, their responsibilities and goals, etc.

5. Products Or Services

Talk about the products or services you are selling. Talk about its details like the audience it is catering to, its features, and benefits.

6. Marketing And Selling Strategy

Here you lay out your company's marketing plans. Talk about whether it is online or offline, which platform, and collaborations. Whether it is organic or inorganic, everything.

7. Financial Goals

Here you dive into your company's revenue history (if any) and the competitor's history. You also factor in the market size and future room for growth. This data will come in handy for coming up with a rough estimate for your company's income goals.

8. SWOT

SWOT stands for Strength (S), Weakness (W), Opportunities (O), and Threat (T). This is another crucial step. Here you are finding the areas your company excels and lacks. Both are important since you have to pick your battles practically.

9. Execution

There is a popular saying: Execution is the most underrated skill. Your planning cannot be perfect but your implementation can be perfect. It is the differentiating factor between businesses that crash and those that make cash.

10. Monitoring

Once your business is up and running, you have to keep an eye on the numbers. See if your business numbers are meeting the expectations or not. If you see your business is lacking somewhere, it is time for feedback to feed forward.

11. Risk Management

Whenever you are planning a trip, you carry a first-aid box. In the same way, when you are laying down your business plan, you should prepare for possible screw-ups. This includes changes in the market, new government laws, recession, competition, etc.

Write these 11 steps on a piece of paper and put it on a wall for your reference.

Back when we were starting Gryffin Capitalist, we did not have any guidance, But thanks to the mistakes, it took me so long to get to this point.

We will recommend you go through this article again. The points highlighted here will help you craft an effective business plan which is the cornerstone for your company's success.

Best Regards,

Nazir Mehrab