What is a business plan? A business plan is a document that basically outlines your business. It is the products or services that you offer, it is the the target that you need to market to, it is a list of goals and how you can accomplish those goals for your business. If you have ever thought of starting your own business, you have likely already thought of these ideas. Without even knowing it, you may have already created a business plan and have begun the first steps of making your business dream a reality. It is said the most important plans you should start with when creating a business are the business plan, the marketing plan and the financial plan. If your plans are done right, a good business plan will cover all of the plans, making it a comprehensive plan for the whole business.
A business plan is crucial for the beginning phases of starting a business. If you don’t write a plan down, will it even happen? By writing plans down, it gives you direction of where to start and what needs to be accomplished. A business plan is actually needed if you are going to be applying for financing or looking for investors. The most popular types of business plans include start up plans, internal planning documents, strategic plans, operation plans and business plans that are designed to focus on the growth of a company. While these different plans are all designed for different purposes, they can all fit into one of two structures, the traditional business plan and a simplified business plan. The traditional business plan can also be called a formal or structured plan, while the simplified business plan is often referred to as a lean or one page business plan.
The traditional business plan is something most potential business owners dread. It can be a very long document that has mountains of information and can be very overwhelming to put together. To briefly summarize what a traditional business plan includes, we can highlight the following sections. The Executive Summary will highlight the most important items that are listed in your plan. Think of it as the back cover of the book. You have enough information there to intrigue the people, but also want to make it so they keep looking through the entire plan. The Company Description will list things like where the business is located, how many employees do you plan on having, what is the vision and mission of your business. You would also list what you hope your business will accomplish. In the Products and Services section you will simply list what you are selling and why your clients need or want your product. A Market Analysis will give your readers a detailed overview of the industry you are trying to get into. It will also highlight who you are marketing to and who you are competing with. Your Marketing Strategy is where you will outline how your business fits in with other similar businesses. This is also where you will list how you plan to promote and sell your product, as well as what price you will be selling at. The Management Summary is where you will breakdown how your business is going to be structured. Who is involved in your business and what are they bringing to the table. The Financial Analysis will allow people to see how you expect your business to grow. It will also go over the expenses the business will have.
As you can see, creating a traditional business plan is quite comprehensive. This is not something that can be created overnight. It will take hours and hours or work and research.
If your business can be started with a one page business plan, life may be a little easier. This business plan is considered a brief plan that can be used by itself, or can even be used to get you started on the traditional business plan. The one page business plans still has sections and a guideline, but it is just simplified. You start with your Vision. What is it you are creating. How do you expect your business be in one year, in five years. Next comes the Mission of your business. Why are you starting this business, what is your reasoning and purpose behind it. You will need to list your Objectives. What goals do you have set for your business, are they realistic and useful. What are some different Strategies that you will be using to grow your business. What makes your business unique. You will need to go over your Start up Capital. How much money are you going to need to get your business started. What are your Anticipated Expenses? How much money will your business need to operate every month. What is your Desired Income amount. How much do you want your business to be making in one year, in three years, etc. And what is your Plan of Action. It is helpful to list tasks that need to be accomplished immediately. What tasks will need to be completed in six months. How will you accomplish those tasks.
The One Page Business Plan answers a lot of questions. These are questions that hopefully you can address. They will be questions that future investors or financiers will want to know the answers to.
If you are ready to sit down and really put the time and effort into your business plan, you will be ready to get your business started. A business plan cannot be written in one night. It is something that will need a lot of work and research. The Harvard Business Review reported that the most successful entrepreneurs were those that wrote their business plan six to twelve months after deciding to start a business. Entrepreneurs who spent no longer than three months on their plan had a twelve percent higher success rate. (https://hbr.org/2018/05/when-should-entrepreneurs-write-their-business-plans)
The traditional business plan is covered more in depth with the following. You will need to make sure you sit down and really put the time and effort into your business plan. To start with, you need to write down a very clear summary of what your business entails. Try to keep it to the point, listing all of the important things. Sure every category and topic could have their own subcategories, but try to keep on point. You need to list things like what exactly your business does or offers. How will your business be profitable. Why will customers want to come to use your business. If your business plan is going to investors, include a section that shows how much money you are looking for from them. Clearly outline what their money would be going towards.
After you feel you have completed a thorough summary of your business, it is time to outline the marketing aspect. What kind of people are you targeting? Does your business appeal to the masses, or is it more of a selective group. Do you anticipate your business growing quickly, or is it more likely to be a slow and steady increase. Address your competition, how will you manage keeping customers coming back to your business. It is easy for new business owners to think that they are selling a product that is superior to other similar items on the market. Find out why customers will go for your products over the competition.
In your business plan it is important to include a section on the members who are involved in your business. This could include founders, partners, officers, etc. It is valuable to list each one individually and list their strengths, skills, qualifications, etc. What exactly are they bringing to the company. It is important for potential investors or financial firms to see what kind of people are involved in the business and how they are considered an asset.
Next comes the nitty gritty items. If a potential investor has made it through the previous sections, this is now where the real business model happens. You will want to list a description that is detailed concerning the product sales, services, advertising, licensing. You will also want to point out how the company’s cost structure is laid out. How will salaries, inventory, rent, maintenance be paid out. If your business uses suppliers and distributors, you will want to make sure you list out their information. Include what it is you are using them for, what your contract with them is, and how much cash flow is used between you and them.
Now the moment of truth, will your business make any money? This is what all investors and financiers are looking for. No one wants to get involved in a business that isn’t profitable. People want to know how soon the business will be making a revenue. Here is where you can put together a financial projection of different time periods for your business. Where do you project it will be in one year, in three years, in five years. While these projections can be difficult to put in writing, it will at least give an idea of a best case scenario.
As with any good plan or report, you don’t write it once and be done with it. Plans need work, they need to be adjusted, they need to be updated. A business plan is no different. It is something that you will have to keep coming back to. Adding and taking away items. Perfecting it. The more you make changes and try different things out, the more likely it is that your business will succeed.