Are you starting a new business or trying to get a loan for your existing business? If so, then you should know how to write a business plan. Business plans give entrepreneurs the opportunity to formally analyse and define every aspect of their business idea.
In this post you will learn how to write a business plan for your company. We’ll give you the best resources to make this challenge a breeze.
What is a business plan?
A business plan is a formal document that describes your company’s goals and how you will achieve those goals. Entrepreneurs who start with a solid business plan are 16 percent more likely to build successful businesses , according to the Harvard Business Review. It ensures sustainable success, supports you in the development of your company, provides the necessary legitimisation and helps you secure financing (among countless other advantages).
Why is a business plan so important?
Most financial institutions require that you submit a detailed business plan in order to obtain appropriate funding for your business. Since your drop shipping business is likely to require relatively little effort to begin with, you probably won’t need funding. Therefore, you may not feel obliged to write a business plan.
However, you may need to submit a business plan to receive an increase in the credit limit on your credit card or to open a business account. This varies depending on the bank.
As you grow your business, you can use a business plan to raise fresh capital, develop a growth strategy, identify new opportunities, or minimise risks.
If you’re just starting your business, you can use a business plan to identify the strengths and weaknesses of your business, share your vision with others, and develop accurate forecasts. Now let’s start answering the question “How do you write a business plan” in a very practical way:
What are the steps to create a business plan?
- Set your goals
- Understand your target audience
- Determine the format of your business plan
- Write everything down
Set your goals
There are two important questions to ask:
- What do you hope to achieve with your business?
- What do you hope to achieve with your business plan?
Approaching your business plan based on these questions will help you focus on the goal throughout the writing process. They also provide you with metrics that can be used to measure success.
Before you write your business plan, you should collect the data and information that will ultimately determine its content. This includes studying your market and your industry – from customer research to the legal issues to consider. It is much easier when you have all the information you need in front of you at the start than researching each section individually.
To help you, you can look at guidelines, business plan templates and another example of a business plan. Many countries have an official agency or service dedicated to providing information, resources, and tools to help entrepreneurs and shopkeepers plan, start, manage, and grow their businesses.
Below are some guides and helpful resources for creating a business plan:
- Business start-up portal of the BMWi : On the pages of existentialist, the start-up portal of the Federal Ministry of Economics for Energy, you will find checklists, structures and a lot more information about the creation of a business plan and much more on the topics of business start-ups.
- IHK Munich : The IHK Munich and Upper Bavaria offers comprehensive instructions for creating business plans as well as two templates.
These pages also provide a wealth of valuable information for entrepreneurs, including local and regional regulations, tax obligations, funding programs, market research data, and much more. In addition to the official positions, you will also find many resources on the subject of business plans from private providers. A quick Google search will give you plenty of relevant results.
Also, many local Chamber of Commerce websites have helpful resources for business owners, including guides and templates for your next business plan.
Banks that offer corporate finance also often have an area of resources for entrepreneurs. With a corresponding search on the web, you can find banks that offer business financing and advice on business plans. If your bank does not offer appropriate advice, you should look for the largest banks in your area:
- Business plan guide bank name
- Business plan examples Bank name
- Business plan template bank name
If you are looking for sample business plans , t3n offers seven templates for a business plan. Also take a look at the articles linked at the end for more helpful information.
Understand your target audience
Since business plans serve different purposes, you will not always present your plan to the same audience. It’s important to understand who is going to read your business plan, what you’re trying to convince your contacts, and what concerns they may have.
On this basis, you can then adapt your business plan accordingly. In this way, your counterpart also determines which type of business plan format you use. And that brings us to our next point…
Which format should you use for your business plan?
There are two formats that can be used as a guide when creating a business plan:
- The traditional business plan format is suitable for entrepreneurs who want to create a detailed plan for themselves or for corporate financing.
- The lean startup business plan format , on the other hand, is aimed at entrepreneurs who want to create a condensed, one-sided business plan.
If the business plan is only intended for you and internal employees, create a lean startup business plan or a tailored version of the traditional business plan. If you need a business plan for startups, funding your business, or any other official purpose, choose the traditional business plan with detailed sections and special attention to the financial projections.
If you are going to contact a bank with your business plan, you should clarify the exact format in advance.
Writing a business plan: what are the main components?
What must be in a business plan? A traditional business plan will usually contain the following sections. Read the descriptions for each section and work through them in the order that is easiest for you.
- Executive summary
- Company description
- Products and services
- Market analysis
- Marketing and Sales
- Management and organisation
- Funding request
- Financial forecasts
- SWOT analysis
The executive summary is the first part of your business plan. So you have to win over the readers here. Every business plan begins this way – even a simple business plan template should begin with a corresponding summary. Summarise your entire business plan on a single page and highlight the details that will excite potential investors and lenders.
Explain what your company has to offer, your target market, what sets you apart from the competition, a little bit about yourself and the most important people in your company and realistic predictions of success.
Although this is the first section of your business plan, you should sign it only after you complete the rest. This part is relatively easy because you can use the sections that you have already written. It’s also easier to identify the best parts of your business plan, which you can then summarise on the first page.
In the business description, you should include the basic details of your business, including:
- Legal structure (sole proprietorship, GmbH, etc.)
- Business and Tax ID Numbers
- When the company was founded
- Owner information
- Number of employees
Your mission statement, your philosophy and values, your vision, your short and long-term goals and milestones as well as a brief overview of your industry, your market, your prospects and your competitors should also be included in the company description.
Pro tip: These are also the details you will use every time you profile your business on social networks, business directories, and other networks. Keep your information consistent to avoid confusion and build more trust with potential customers.
Products and services
In the Products and Services section you explain what you want to sell. For a business plan in the area of drop shipping, this section should explain which trending products you will sell, what problems your products solve for customers, how you will price your products compared to your competitors, what profit margin is expected and what production and delivery details are to be expected are to be observed.
Remember to include all unique selling points for certain products or product groups, such as: B. low operating costs, exclusive agreements with suppliers , the possibility of receiving products that are characterised by high demand based on your contacts, personalised customer service or other benefits.
For drop shipping companies that sell hundreds or even thousands of products, describe the main categories of products and the number of products you want to offer within each category. That way, it’s easier to visualise your offering as a whole. On this basis, you can then assess whether you need more products in a category to fully equip your online shop.
In the Market Analysis section of your business plan, you can present your research on your target group, the potential buyers of your products. Your contacts will want to make sure you have a solid understanding of your industry, the competitive landscape, and your potential clientele. It is important to show that there is a sufficiently large market for your product to be profitable and / or generate a strong return on investment.
To complete the market analysis component of your business plan, you should study resources for your industry, your market and your local economic area.
Statista can be a first point of reference. The website offers free and paid statistics and studies from over 18,000 sources, including industry reports, country reports, market studies, forecast reports, and consumer market reports.
Use these and other websites to find out more about the projected growth of your industry and your potential profitability. You can also use social media tools like Facebook Audience Insights to help you determine the size of your target market on the largest social network.
Google Trends is another way you can research your market and products. With this free tool, you can see how often people search for the products your company has to offer over time. Either way, you should be able to explain how your company plans to capitalise on rising and falling search trends.
Marketing and Sales
Knowing your target market well is half the battle. In the Marketing and Sales section, you can describe how you plan to reach buyers in your target market and sell products. Outline the marketing and advertising strategies you will use to promote your product to potential customers – search engine marketing, social media marketing , content marketing , email marketing, and other advertising channels.
If you are still unsure how to market your products, you can analyse your competitors and get inspired that way. Analysing your competition’s marketing tactics will help you develop your own strategy for building a customer base and ultimately taking your business to the next level.
With a simple Google search for your competitors’ company names, you can find the websites, social media accounts, and content they’ve created to market their products. See how your competitor uses each online channel to bring new customers to their online shop.
Also indicate how you plan to convert the people reached through your marketing and promotional messages into customers. For drop shipping companies, the conversion usually takes place on the website as this is where customers buy the product.
Management and organisation
In the Management and Organisation section of your business plan, describe the structure of your company. In terms of legal form, most companies are classified as sole proprietorship (one owner), partnerships (two or more owners), or corporations.
Create a condensed résume for each of the key members of your company. If you are a solo entrepreneur, you should indicate how your previous education and work experience will help you manage every aspect of your business. If you have one or more partners and employees, please also indicate their respective training and experience.
Think of this as a great way to evaluate the strengths of every single person in your company. The self-assessment can help you identify the aspects of your business that are easier to manage and that you can delegate to freelancers, contractors, employees, and third parties. This also makes it easier to maximise each individual’s strengths with a view to business growth.
You probably won’t need to apply for funding for a drop shipping startup. Because the great attraction of drop shipping is the low initial investment and the low proportion of fixed costs. However, if you are looking for a loan, this would be the section where you outline the amount of money needed, what to invest in, and how to estimate the return on your investment (ROI).
Another way to use this section is to analyse the investment you want to make when starting or expanding your business. This should include everything from the computer used to run your website to the monthly fee for certain marketing and business services.
In the financial forecast section, you outline your projected income and expenses for the first or next five years of your business. The idea behind this is to demonstrate that the income you expect will easily translate into a return on an appropriate investment, be it from your personal finances or an investment loan.
When looking for funding, you need to go into detail about the planned income statements, balance sheets, cash flow statements, and investment budgets. Even if you’re not looking for funding, it won’t hurt to do these types of financial projections so you can realistically plan for the future of your business.
The appendix to your business plan contains all additional documents that are required in the individual sections of your business plan. This can include Include the following:
- Credit history
- Product brochures
- Legal forms
- Supplier contracts
When submitting your business plan for funding, you should first contact your lender to find out which documents they need for your funding application.
In addition to the sections above, some business plans also include a SWOT analysis. This is a one-page summary of the strengths ( Strengths), weaknesses ( Weaknesses), opportunities ( Opportunities) and threats ( Threats) of your company. The strengths and weaknesses are internal factors, while the opportunities and risks are external.
In the SWOT analysis, you first work out the strengths and weaknesses of your company and weight them accordingly. In the second step, you look at the opportunities and dangers that arise from your market environment.
Opportunities arise, for example, from unique products, a real niche in the market or very special sales channels. Risks could be an unpredictable market development, problems with suppliers abroad or increasing competitive pressure.
In the last step, you explain how you want to maximise your strengths and opportunities and minimise the risks and weaknesses.
Depending on the disclosures in this section, you may be able to incorporate the SWOT analysis into the formal submission of your business plan (if it is not required anyway).
Business plan template from our partner Shopify
Okay, now you already know what belongs in a business plan and how to go about writing a business plan. Nevertheless, templates can make the whole thing a little easier and more vivid. We therefore recommend the business plan template from our partner Shopify, which you can find here.
Although it does not correspond 100% with our structure, it will certainly be of help to you when creating your own business plan.
Create a business plan: 7 helpful tips
- Put yourself in the reader’s shoes: Right from the start, you should always have the recipient of your business plan in mind. Ask yourself what will matter most to him. For example, financing banks will be most interested in the financial outlook and the corresponding figures.
- Optimise your layout: The external appearance is also important for a business plan. Make sure your business plan is well formatted and easy to read, create an appealing cover sheet and include appealing visualisations if possible. The outline should be clear and your font style should make it easy for the reader to get to the key points of your plan quickly.
- Pay attention to consistency: Check whether the text part corresponds perfectly with your number part. Inconsistencies are an absolute no-go for banks and lenders.
- Be realistic: of course you are enthusiastic about your idea. Nevertheless, you should remain realistic when developing the business plan and plan more conservatively. This applies to your sales and cost forecasts as well as your time milestones. Don’t forget that your lender will measure you against the statements made here later.
- Define your target groups: Work out the target customers who are likely to use your product or service. Be as specific as possible about this. Take a look at our article on developing buyer personas.
- Become an expert: Read studies, articles and anything else you can find about your industry or market segment. In this way, you will be able to answer any questions in a well-founded manner and present yourself as a competent founder.
- Get feedback: Have your finished business plan read by friends, acquaintances and ideally an experienced founder and give you feedback. In this way you will uncover any form errors, ambiguities or inconsistencies in your calculation.
Summary: How do I create a business plan?
As you can see, creating a business plan for your drop shipping business is a great way to validate your business idea, uncover your company’s strengths and weaknesses, and create a plan for your future as an entrepreneur. If you haven’t already, take the time to create a business plan to start or grow your drop shipping business in 2021!