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How & Why to Write and Build a Strategic 5 Year Business Plan for Your Company

Business Plan Whether you’re running a multi-million corporation or a small home-based company, planning your business is one of the most important things you need to think about.

You should have a business plan for your company. This guide will show you how to make a 5-year business plan.

Failing to plan is like setting out on a journey towards unchartered territories. Without a roadmap, you’ll only end up losing your way and diverting your focus from your original destination.

As a business owner, it can be tempting to ignore the planning stage altogether. After all, if you’re already earning some decent profit anyway, what’s the point of pouring your time and effort into creating a business plan forecast? According to business experts, here are 3 reasons why you should have a business plan.

3 Reasons Why You Should Have A Business Plan

How & Why to Write and Build a Strategic 5 Year Business Plan for Your Company

1. It Gives You A Point Of Reference

A business plan allows you to clearly define what your business is and what you hope for it to be in the future.

Having this point of reference to look back to whenever you encounter trouble is a great way to motivate yourself and your team into action.

Going back to your business plan should inspire you to press on as you work towards reaching the business goals that you’ve set.

2. It Helps You Analyze Your Business Operations

Writing a business plan involves analytic thinking so having one will help you manage your operations better, even on a day-to-day basis.

It helps you recognize opportunities within your industry that you can take to increase your profit margin in the long run.

When you write down your goals and action plan on paper, it becomes much easier for you to come up with decisions that will allow your business to thrive.

3. It Shows You Which Direction To Take

And since businesses need to adapt to the changing times, developing a business plan helps you keep your operations relevant.

It allows you to plan for changes brought by industry innovations and market trends.

A business plan doesn’t just show you where you started, it also offers you a vision into the future.

Simply put, having a business plan helps you manage your business better, which is not only beneficial for your team, but also for your customers, investors, and potential partners.

” But not all business plans are created equal”

Some companies are quite content with a 1-year business plan, and there are others that choose to have a 5-year business plan.

As a business owner, it’s up to you to know how to structure a business plan that best represents your organization.

Whichever time frame you choose, here are 10 components of a business plan that you definitely need to keep in mind.

10 Components Of A Business Plan

1. Executive Summary

The first thing that people will see on a business plan. It’s a compelling summary of what you hope to accomplish with your business.

It highlights all the strong points of your business – your mission statement, products and services, and a brief explanation of how you started your business. Most business experts suggest that you write this part last.

2. Description Of The Company

This part includes all the vital information about your company. This is where you specify your goals (short term and long term), your target customers, and what factors differentiate your company in the specific industry that you’re a part of.

3. Description Of The Organization

This is where you outline your business organization and specify the details on the kind of business structure that you already have.

You can also include details on how you plan to restructure the company once you reach a certain milestone.

Don’t forget to introduce your upper management and give a brief description of their job responsibilities and skills.

You can also include a diagram of your company’s chain of command if you have it available.

4. Description Of Your Products And/Or Services

You can’t have a company without having products or services that you’re selling.

While you may have already briefly mentioned what you have on offer in the executive summary, this is the part where you give a more detailed description.

Always include features, benefits, and other relevant details that you think your readers would like to know. If you have suppliers, mention them as well.

5. Competitive Analysis

You should also give the lowdown on the competitors that you’re up against.

A good business plan will give information on where the business is positioned in comparison to their direct and indirect competitors. 

By knowing their strengths and weaknesses, you give readers, especially investors, the impression that you know exactly how your business stacks up in your industry.

6. Market Analysis

This part shows that you’re aware of the ins and outs of your industry. By using the data and statistics you’ve gathered in your market research, you can have a better understanding of where the market has been and where it’s anticipated to go.

You can then show in your business plan how your company will fit in the current market.

7. Marketing Plan

The marketing plan is one of the most important parts of a business plan because it lets readers know how you intend to get your products and services to your target market.

In this part, you can give a background on your target market and include opportunities you would like to take to get more people to recognize your brand.

8. Sales Strategy

In any business, marketing can only do so much. You also need dedicated sales reps to turn brand awareness into actual sales.

When writing down your sales strategy, be sure to be as specific as you can with the numbers.

Like how many sales reps do you plan to hire over a period of time and what are their sales targets.

9. Funding Request

If you’re writing a business proposal to get more funding, this part should clearly let investors know how much you need.

When writing this part down, make sure to be specific on how you plan to use the additional capital.

You should also disclose if you’ll need your capital replenished in the next couple of years.

10. Financial Goals

Don’t forget to write your financial projections over the next couple of years.

In order to show that you’re a viable business, you need to create a report on your anticipated revenue based on market research.

Since you’re writing a 5-year business plan, you should disclose your projected earnings for the second to the fifth year of business.

Not all business plans will look the same so don’t get discouraged if your business plan looks nothing like that of another company.

As long as you have the key components that were mentioned above, this important business document should keep you on the right track.

But what if you’re still in the early stages of operating a new business? Is it practical to create a 5-year business plan if you have no idea what could happen to your business 5 years from now? Well, if you want your business to be growing in 5 years, then the answer is yes.

It may be hard to envision where your business is headed that far out, but that’s what a strategic business plan is for. It gives you the opportunity to plan for different scenarios that could affect your business.

Whether it’s a sudden drop in the stock market or a product’s failure to launch, having a business plan can help you prepare for any challenges that you might encounter along the way. Here are 7 steps to creating a business plan forecast.

Build a Strategic 5 Year Business Plan for Your Company

When you’re running a small business, every day is so busy that it can be hard to find time for long-term planning. Who can think years ahead while trying to make payroll in a week?

But creating a long-term business strategy has several advantages, for both your business and your personal finances. Let’s take a closer look at why a five-year business plan is a good idea and how you can develop one.

Why Make a Five-Year Business Plan?

Establishing a long-term plan can help you determine your priorities and goals for your business.

  1. Do you want to expand to new locations?
  2. Maximize sales?
  3. Transfer the business to a family member?

Each goal will involve different priorities for your time and resources. By mapping out a plan, you can make sure that you and your staff are pursuing these goals and not wasting resources on something else.

Additionally, a five-year plan can help you identify any potential obstacles, as well as the possible strengths that could help propel you toward your goals. This kind of strategic thinking can help prepare you for the unexpected so that you aren’t caught off guard.

Finally, if you ever plan to raise money from investors, they will want to see your business plan. Having a five-year plan can help prepare you for these meetings.

How to Develop a Five-Year Plan

A five-year plan should cover your business’s current functions and practices, as well as its goals. This includes your goals for marketing, operations, and finances.

Review your past financial results and sales data, and use that to help to predict future growth. If you think previous trends will change because of certain interventions, explain that in your projections.

For instance, perhaps you expect a growth in sales because of a new product launch.

Ask yourself specific questions about your business: With your current practices, how many clients can you gain in the next five years? How much could your revenue realistically grow? Do you need to hire new staff members, and how many do you plan on hiring?

By pinpointing where you’d like to be in five years, you can start setting milestones. If you’d like to earn a certain amount of revenue in year five, how much do you need to earn in year three to be on track? In year one? In six months? These considerations can help you develop action items.

For instance, if your priority is to grow sales, then you can set action items like increasing the number of sales calls you make and growing your marketing budget.

Identifying Your Business’s Strengths & Weaknesses

As you brainstorm, you may want to run a SWOT analysis on your plan. A SWOT analysis lists a company’s strengths, weaknesses, opportunities, and threats.

For example, a strength could be your dedicated and talented sales team that can help grow your revenue. A weakness could be an overreliance on a single person for product development.

With that information, you can start imagining how your business would handle different challenges. For example, how much could an economic recession lower your sales? What can you do now to make sure you’d have enough cash to manage?

Consider how you can capitalize on your strengths and opportunities while minimizing the potential damage from your weaknesses and threats. For example, you could hire a backup employee for product development and motivate your sales team with attractive bonuses.

Finding Solutions to Reach Your Business Goals

You should also consider some small business financial solutions to help bolster your strengths and offset potential weaknesses to help reach the goals you set in your five-year business plan.

If one of your strengths is your talented employees, your goal could be to reduce turnover. One way to achieve this goal could be to improve your employee benefits.

Consider providing your employees with life insurance or a workplace retirement plan.

Likewise, you and your partners could establish a buy-sell agreement detailing a course of action to take if one of you passed away, including a plan for the deceased partner’s shares.

By preparing for these potential events, you can keep your business on track with your projections even when something negative happens.

Life is unpredictable, and your business outcomes will likely differ from your current forecast. But by putting together a five-year plan now, you’ll be more likely to stay on track and be successful.

Article Referrer Source:

  • https://smallbusinessify.com/how-to-make-a-5-year-business-plan/
  • https://www.westernsouthern.com/learn/financial-education/how-and-why-to-build-a-5-year-business-plan-for-your-company