Business Plan: Step by Step Process of Business Plan
A business plan is a document that outlines the goals, strategies, and operational steps a business will take to achieve success. As Benjamin Franklin famously stated, “If you fail to plan, you are planning to fail.” This quote highlights that without proper business plan, businesses are at risk of facing unexpected challenges and struggling to grow.
This article will discuss the various important aspects of creating an effective business plan. You will understand the concept and purpose of a business plan as a strategic guide in running a business. Next, we will explore market and competitor analysis to identify business opportunities and challenges. You will also learn about marketing plans and sales strategies to attract and retain customers. In addition, the funding details section will review funding sources and ROI calculations. Equally important, we will discuss customer segmentation, logistics and operations, and financial plans to ensure your business runs smoothly and sustainably.
In business planning, many factors must be carefully considered. The primary objective of a business plan is to provide a clear direction for the business, support strategic decision-making, and attract potential investors or business partners.
Various studies have shown that a lack of business planning is one of the leading causes of business failure. According to data from the U.S. Bureau of Labor Statistics, about 20% of new businesses fail within the first year, while 50% don’t survive more than five years. A study from CB Insights found that 42% of businesses fail due to lack of market demand, and 29% due to lack of funding, both of which could have been avoided with proper business planning. If you want your business to fail, don’t continue reading this article!
Market Analysis
Before proceeding further, take a moment to consider what product or service you intend to offer. This will not take long; the key aspect to evaluate is whether your product will be well-received by the market.
Why should you think this through carefully? YES, you are here as a businessman, not a charity. no matter how good your product is if no one is interested, what’s the point?
To better understand this, let’s first define market analysis. Market analysis is the process of collecting and evaluating information or data regarding an industry, customers, and competitors to gain insights into business opportunities and challenges.
Why is this necessary? Conducting a comprehensive market analysis enables businesses to make informed decisions, mitigate risks, and enhance their chances of success in a competitive industry.
So, how can this be done?
Start from the easy one first, you often use social media, right? such as tiktok, instagram, X, youtube, and so on. the platform can be used as market analysis. Alternatively, the easiest method is utilizing Google Trends – simply search for the product you are interested in, and the platform will display data on its market performance, including the regions where it sells well.
Additionally, market analysis can be influenced by current events. For instance, the fasting month of Ramadan is approaching. What types of products tend to perform well during this period? Naturally, items such as food for breaking fast, dates, clothing, and other related products will see increased demand (you can explore this further on your own).
You can also be through industry report analysis data such as McKinsey Reports and Deloitte Insights for in depth industry data. Another effective approach is conducting direct surveys to gather first-hand consumer insights.
Competitor Analysis
Once you have identified the market and determined which products are selling well, you also need to identify your main competitors to assess their strengths and weaknesses.
You can conduct this analysis using a competitor analysis table, such as the example below:
Alternatively, you can search on Google with the keyword competitor table analysis. With that, you can determine what the Unique Selling Proposition (USP) is for your product so that it is different and remembered by the market that only your product has that point.
Marketing Plan
After you know your product’s USP, the next step is determining brand positioning and messaging. Here I will just give an example Muslim men’s clothing, millions of people also sell Muslim men’s clothing, but you can set your brand position by targeting a specific segment, such as millennial Muslim men who are looking for stylish but still sharia compliant clothing. Unique Selling Proposition (USP) that can be raised for example:
“Modern Muslim men’s clothing can be used every day with elegant designs, premium materials, and still in accordance with sharia.”
For brand messaging, you can use slogans such as:
“Look Classy, in accordance with Sharia.”
Additionally, build a brand story that reinforces these values. For example, a promotional video could depict young men socializing at a café while wearing your clothing, followed by them attending Friday prayers – showcasing both style and religious commitment. Communicate this message through social media, websites, and product packaging so that customers understand your brand identity and advantages.
When selecting a marketing platform, consider the shopping preferences of your target audience (decide for yourself). And for traditional marketing, you can rent a shop near a university so that it is easily accessible to teenage men who prioritize being trendy.
Sales Strategy
After you determine the points above, of course you have to know how much the purchasing power of your market is, it is impossible for your market’s purchasing power to be $50 for 1 shirt, but you sell it for $250. of course it will not be in sync.
if as a new product, of course you need consumers to know about your product. this can be helped by digital marketing such as google ads, instagram ads, and others (you also need to know whether your market is on instagram, tiktok, or others). you can also work with influencers or affiliates.
To determine the price of a product or service must consider production costs, target market, and business strategy. therefore it depends on the product you are selling. There are several types of pricing methods, namely:
- Cost Based Pricing : Determine the price based on the total cost of production + desired profit margin.
- Value Based Pricing : Determine the price based on the value perceived by customers, not just the cost of production.
- Competitive Pricing : Adjust prices with competitors to stay competitive in the market.
- Penetration Pricing : Offer a lower price at launch to attract early customers and increase market share.
- Premium Pricing : Set a high price to create a perception of exclusivity and high quality.
After setting the price, you can estimate a realistic sales target based on the existing market and the purchasing power of that market.
Funding Details
We all know that, as a businessman will need funds to build the business. if you are someone who is able to realize your business with personal funds, then do it, with the note that you have considered the financial analysis and risk of the funds to be used. but if personal funds are not enough, then you can look for investors or bank loans by calculating financial projections and return on investment (ROI).
How to Determine Financial Projections
Financial projections help businesses predict future revenue, costs, and profits. Here are the steps:
- Revenue Estimate : Analyze sales trends, number of potential customers, and product prices to calculate monthly or annual revenue.
- Operating Cost Calculation : Calculate all fixed costs (rent, salaries, electricity) and variable costs (production, marketing, distribution).
- Profit and Loss Statement : Create a net profit projection using the formula: Net Profit = Revenue – (Fixed Costs + Variable Costs)
- Cash Flow : Make sure there are sufficient funds for operations by estimating income and expenses each month.
- Break Even Point : Calculate when the business starts to make a profit using the formula: BEP = Fixed Cost / (Selling Price per Unit – Variable Cost per Unit)
How to Determine Return on Investment (ROI)
A high ROI indicates a profitable investment, while a low ROI could be a sign of the need to evaluate the business strategy.
With clear financial projections and ROI, businesses can manage budgets more effectively, attract investors, and ensure sustainable growth.
Customer Segmentation
Identifying your ideal customer is a crucial step in developing an effective marketing and sales strategy. A well-defined customer profile helps businesses tailor their products, services, and promotional efforts to attract and retain the right audience. Below are several key considerations for determining your ideal customer profile:
Analyze Existing Customer Data
If your business is already running, use data from previous transactions to see your customers’ purchasing patterns, demographics, and preferences.
Identify Customer Demographics
If your business is already running, use data from previous transactions to see your customers’ purchasing patterns, demographics, and preferences.
Psychographic Analysis
Define the key characteristics of your ideal customer, such as:
- Age: Are they teenagers, young adults, or older individuals?
- Gender: Is the product predominantly used by men or women?
- Location: Are they based in metropolitan areas, suburban regions, or specific localities?
- Income Level: Are your target customers from the middle-class, upper-class, or luxury market segment?
Study Consumer Behavior
Pay attention to how customers interact with products:
- Where do they look for information? (Social media, Google, marketplace)
- What are their shopping habits? (Are they impulsive or do they do research before buying?)
- When do they shop? (Certain seasons, payday, Ramadan, etc.)
Create Customer Personas
After collecting data, create customer personas, which are fictional profiles based on their ideal characteristics. Example:
- Name: Ahmad,
- Age: 21 years old,
- Occupation: College student
- Behavior: Active on social media, looking for stylish and comfortable Muslim men’s clothing suitable for college and worship.
With a clear ideal customer profile, businesses can focus more on marketing, offer products that suit their needs, and increase customer loyalty.
Logistics and Operations
” A business without logistics and operational planning is like a ship without a compass, prone to drifting and struggling to reach its destination.” Without proper supply chain management, businesses can experience production delays, out-of-stock, or skyrocketing operating costs.
Likewise, without a risk management strategy, small disruptions can have a major impact on business continuity. With proper planning, businesses can run more efficiently, reduce disruptions, and ensure customer satisfaction.
Supply Chain and Vendor Relationships
The supply chain covers the entire process from raw material procurement to the product reaching the customer. Establishing a good relationship with vendors (suppliers) is very important to ensure smooth supply. Some strategies that can be applied:
- Choose a Reliable Vendor: Make sure the supplier has a good reputation for quality and timeliness.
- Supplier Diversification: Don’t just rely on one vendor to avoid the risk of delays or out of stock.
- Clear Contract Negotiations: Determine prices, delivery schedules, and quality standards in a written agreement.
Risk Management Strategy
Every business faces risks in its operations. Here are some strategies to overcome them:
- Identify Key Risks : For example, delays in raw materials, increased logistics costs, or production disruptions.
- Create a Contingency Plan : Prepare alternative suppliers or backup shipping options in case of problems.
- Business Insurance : Protect business assets and operations from risks such as theft, natural disasters, or work accidents.
- Stock and Inventory Optimization : Use Just-in-Time (JIT) methods to avoid excess stock while ensuring sufficient supply.
- Regularly Monitor and Evaluate : Use operational data to continuously improve efficiency and reduce potential disruptions.
Financial Plan
As a businessman, of course you must understand financial reports and forecasts to ensure the financial health of your business. Financial reports include important records such as profit and loss statements, balance sheets, and cash flow , which provide a clear picture of the business’s income, expenses, and assets and liabilities.
Meanwhile, financial forecasts are future financial projections based on historical data and market analysis. With accurate forecasts, businesses can anticipate financial challenges, plan investments, and attract investors or strategic partners. Without clear reports and forecasts, businesses risk having difficulty in budget management and financial decision making.
You can visit this link to see an example
Budgeting Analysis
Budgeting is a financial planning process that ensures a business has the right allocation of funds for operations, marketing, production, and business development. Budgeting analysis helps businesses control expenses, avoid waste, and ensure profitability.
Steps in budgeting analysis:
- Identify Revenue: Calculate total income from sales, investments, or other sources.
- Calculate Fixed and Variable Costs: Fixed costs such as rent and salaries must be paid every month, while variable costs such as raw materials and logistics change with production.
- Compare to Financial Targets: Make sure the budget is in line with growth projections and business strategy.
Break-Even Point (BEP)
The break-even point is the condition where total revenue is equal to total costs, so that the business does not experience a profit or loss. BEP is very important to determine when a business starts to make a profit.
BEP Formula:
- BEP (Unit) = Fixed Cost / (Selling Price per Unit – Variable Cost per Unit)
- BEP (Dollar) = Fixed Cost / Contribution Margin
BEP Calculation Example:
For example, a men’s Muslim clothing business has:
- Fixed costs: $3,200
- Selling price per unit: $16
- Variable costs per unit: $10
BEP (Unit) = $3,200 / ($16 – $10) = 534 units
This means that the business must sell 534 units so as not to make a loss. If you want to make a profit, you have to sell more than that.
Summary
- The Importance of a Business Plan – Without a solid business plan, businesses risk losing direction and failing to survive the competition.
- Market and Competitor Analysis – Research industry trends, market demand, and competitors to find business opportunities.
- Marketing and Sales Strategy – Determine USPs, pricing strategies, and marketing platforms that suit your target customers.
- Financial Management – Understand financial statements, revenue projections, and break-even analysis to ensure profitability.
- Logistics and Operations – Manage supply chains, vendors, and risk management strategies to ensure smooth business operations.
Building a successful business is not just about a good idea, but also about careful planning and proper execution. By understanding the market, managing finances, and implementing effective marketing strategies, you can increase your business’s chances of success.
Now, it’s time to take the first step in designing your business plan! If you need further guidance, Samscope is ready to help you in developing the right strategy for your business. “There is no successful idea without the first step to make it happen. Start now, because big businesses always start from one small decision to move forward!”
