“I will build a motor car for the great multitude. It will be so low in price that no man will be unable to buy one.” – Henry Ford.
In 1903, when owning a car was just a pipe dream for many, as it was only available to a wealthy few, Henry Ford, in his early 40’s, established Ford Motor Company. His goal wasn’t just to build a car but to build cars for the great multitude. To actualize this goal, Ford set up a valuable business plan — resulting in an outstanding system of production. His system of production was a great development in its day. Ford’s company workers were able to produce more cars in little time, drawing him closer to his goal day by day.
Today, Henry Ford, “the man who taught America to drive,” is being credited with revolutionizing the transportation and auto transportation industry and his net worth yet after death is equal to 200 billion US dollars.
A business plan is a key feature in business. It describes the business goals, reasons why they are achievable as well as smart strategies/plans for reaching them.
However, past these key elements, an effective business plan must include a plainly stated executive summary and a well-researched documentation that would clearly communicate your business’s strength and mission.
Crafting an effective business plan is an art. Every company may have a different purpose in mind for their business plan. Some plans exist to get investment. Some are supposed to support loan applications. But at the end of it, these plans must be effective in achieving the purpose they set out for.
Below, therefore, are six ways to make a successful business plan:
#1 Have a clear & concise executive summary:
When mapping out an effective business plan, the first and most important thing to start with is a clear and concise executive summary. It should be like an elevator pitch.
In the first two pages make sure all the important stuff finds a place. Start by communicating your value proposition: what the company does, how will it be making money and why your customers would be willing to pay for the product or service you offer.
If the purpose of the plan is to get the best investment, make sure to include the amount of money you need and state the plan of its usage.
#2 Establish market opportunity:
After you’ve clearly stated the executive summary, it is necessary to tackle these two questions -:
- How large is the target market? and
- What is its rate of growth?
Identify the opportunities and threats in the business, then create a step-by-step recipe on how to deal with them.
Highlight the company’s value proposition. Most of this market information can be easily found through chambers of commerce, industry associations, census data and even from other business owners. Make sure to source and provide an adequate reference for the information just to be prepared in case you need to back up your claim or need to update the business plan.
#3 Size up the Competition:
While it is normal for you to have convinced yourself that your product or service is unique, it is quite often a trap. Instead, it is important to get real and size up the competition. Answer: Who are they? What do they sell? How much market share do they have? Why will a customer choose your product or service instead of theirs? What are the barriers to entry into the market? This brings a lot of clarity in terms of how stiff a competition you might face in coming years and what are the strengths of your product compared to the competition which would help quite a lot when the going gets tough.
#4 Address the Execution:
Now that the idea has been established and the direction has been set, it is imperative to address the execution part. Specifically, addressing the qualities of your team. Identify the strengths and weaknesses. Address how they will handle the execution process.
Like Henry Ford; after addressing the execution process, he was able to intrigue his workers by reducing their working hours from 9 hours to 8 hours daily. As if that was not enough, he also went further to double their wages.
This generates a high degree of clarity and confidence in the executive role. It also becomes easier to address the deficiency (if any) on the execution front.
#5 Revenue Projection:
Having provided all of that, there are two major questions that you must answer -:
- Exactly how much money does the business stand to make?
- More importantly — When does the cash stand to come in the door?
You will need to attach a section containing past financial performance if your company is a going concern. Then add the financial projections. Three-year to five-year forward-looking profit-and-loss, cash-flow statements and balance sheet are a must. Also, the break-down analysis that will show how much revenue you need to cover the initial investment is also necessary.
However, for early-stage companies who don’t have bulks of money in the bank, the cash-flow statement is essential; comparing quarterly receivables to payables.
#6 Make it realistic and implementable:
Many times, a business plan is inflated, and assumptions are based on the higher end. It is therefore important that you make your plan as realistic and implementable as possible in other to avoid falling into the drought.
“Having an unrealistic and unimplementable business plan is like purposely adding to your company’s difficulties as you’ll spend all of your company’s lifespan on trying to achieve what is not,” says Nicholas Dutko, founder of Auto Transport Quotes Services.
A realistic business plan makes it easier to track your results against the plan and balance it accordingly.
Include deadlines, dates, quantifiable metrics, and forecasts. Make sure it gets people committed, it can be followed up, it can be reviewed and it allows course-correction by only authorized persons when required.
Crafting a meaningful business plan takes a lot of thought, time and money. Especially if it is aimed at attracting the interest of professional investors, who may only have time for a cursory glance at the numerous ideas that cross their desks.
Understanding the flow of these factors and staying true to ethics is key to make it an effective one. Many of these ideas are basic in nature but they are often overlooked or misrepresented and are not utilized to the best of their ability. Make sure you incorporate this process flow and the requirements in your next business plan.