So you’re finally doing it, starting your business. It’s been in your head and heart for so long that you don’t even remember when you first imagined it. Now it’s time to make bold moves toward it. But what’s the first move to make? What’s the second? It can seem impossible to figure out. But a great place to start is with a business plan.
A business plan will clarify your thinking and help you to answer questions you didn’t even know you had. The organization of the document will organize your goals and objectives, and in truth, help you decide if your plan is viable.
Your business plan will be used to help you gain financial backing, and partners, and direct your actions throughout the business-building process.
Why a Business Plan is So Important
You might be wondering why you even need a business plan. It’s such a time-consuming piece of work – why can’t you just skip it? Taking the time to write a business plan is so important because it serves many purposes.
- It can aid in fundraising.
- It clarifies your goals and objectives for the business.
- It creates the organizational structure of your business.
- It’s a sales and recruitment tool.
- It’s a tool to measure your progress as you build your business.
Writing a business plan makes you look at all aspects of your business at once, evaluate it, determine how you’ll operate it, market it, and handle your finances, to name just a few things. Doing this kind of deep work will force you to fix problems before they occur, create contingencies, and build a stronger foundation.
Who Needs a Business Plan
So, who needs a business plan? If you’re considering a business idea and want to explore its viability, drawing up an in-depth business plan is the best way. Without a plan, there will be things that you don’t think of or risks that you underestimate. In short, if you want your venture to succeed, you should create a business plan.
In addition to all of the other benefits, a business plan will keep you accountable for your projections or proposals. While it takes time in the beginning to create your business plan, it will save you time later as you build your business.
Determine Your Goals and Objectives
When you write your business plan, you should first determine your goals and objectives. It will help clarify just how committed you are to this venture, how much you’re willing to sacrifice for its success, and even think about contingencies if things don’t work out.
Some things will immediately come to mind in determining your goals and objectives, but other ideas will be more elusive. It can help to ask yourself a few questions:
- How much can this business earn in annual revenue in the first year? In five years?
- What will be the company’s market share in that time frame?
- How many will (if any) employees be needed?
- Do I have plans for geographic expansion? Where? When?
- How hands-on will I be? Or what portion of tasks will I delegate to others?
- What outside expertise do I need to hire, or what can I learn to do?
- Do I want/need partners or investors who may wish to input into the company’s management?
- Will I like this startup to remain independent and privately owned, or will I eventually want it to go public or sold?
Try to go as deep as possible. Everything may not go to plan, but having some direction is never a bad thing.
Keep Your Business Plan Simple
Although you have to ‘dig deep’ to get your plans on paper, you still must keep it simple. You don’t need complicated language to describe your vision. Keeping it simple will help you continue to develop your ideas and easily present them to potential investors.
Here are some ways to simplify your plan:
- Let your business plan be easy to read. Many people will skim it rather than read it in-depth, so write it so they can gain the necessary details.
- Keep sentences short and forget the complicated language.
- Avoid jargon, acronyms, and buzzwords.
You may even consider graphics, i.e., charts. Show off your vital numbers, making them easy to read and understand. Summary tables, bar charts, pie charts, and highlighting are also excellent ways to make your plan a more pleasant experience for the reader.
Ensure that you don’t neglect the overall appearance of your business plan. Stick to two fonts, both simple like sans-serif, Arial, Times New Roman, or Century. Also, keep the fonts at least 10 points in size – 11 or 12 points, even better.
Use subtitles and page breaks to separate sections and space things out liberally. And please, please, please spell-check your work. Nothing is more unprofessional than a document full of spelling and grammatical errors.
How Long Should Your Business Plan Be
Although your business plan may have lots of information to be included, try to keep it short. There’s no reason to make it longer than necessary. Depending on your plans, you should be able to create 15 to 20 pages of text, with an additional 10 pages of other information. If your business plan is more than 30 pages, it is probably too long.
The Seven Components of Your Business Plan
We’ve just discussed the length of your business plan. Here are the components necessary to be included in your plan:
The executive summary appears at the beginning of your plan and is the most crucial part. This section convinces people of your vision and gets them on board. This is the only part some parties will bother to read in some cases. The information you include in this section has to hook your reader to gain finances, partners, and other support.
The executive summary should include:
- Your mission statement. State the goals and purposes of your business,
- Company Information. Introduce the founders and their backgrounds.
- Products/Services. Describe what your business is all about – what do you sell or do?
- Growth Projections. How do you expect to grow your business?
- Financial Information. How do you expect to earn money, and how quickly? This is especially important if you’re seeking financial support.
Although the executive summary includes a brief version of your company description, you’ll need to create a section that goes into more detail. The company description should outline how your business will function and what it will do. You should go into as much detail as possible about your vision, potential customers/clients, competition, and niche. Don’t forget to include your company’s formation.
The market analysis section is all about how your business will function within its industry. You’ll talk about your target audience or customers in as much detail as possible. Describe the size of your market, who (precisely) your goods or services are for, and how you’ll serve them. You can add in this section your pricing and the pricing of your competitors.
Organization & Management
In this section, you’ll describe the structure of your business. How many founders are there, and what role(s) will they occupy? Will you have any employees, and if you will, how many will you need? Who will be responsible for which tasks? Visual depictions of your organizational structure could be helpful in this section.
Goods & Services
In this section, you can fully describe the nature of your offering. Is it a good or a service that you provide? You may want to explain how your offering differs from your competition’s, and maybe any special offers you may have to encourage more clients or customers. It’s essential to find some aspect of your business that is unique and makes it stand out among the rest.
This section is important to you because, without a marketing strategy, your business will never be found by its potential customers. If your company remains invisible, it can never succeed.
Here, you can build an ideal customer profile. This will describe, in detail, the person your business is meant to help and how you will do it. You’ll answer questions like, what size is this demographic? What are their habits? How do you reach them with your product or service? You can also answer the question of growth and brand recognition. What kinds of advertising will you use?
Show that you have done extensive research into your industry’s trends and trajectory. It’s not enough just to know what’s happening right now; you will need to show that you’re aware of where things are going. Is your industry growing or shrinking? What is likely to be happening with your target customers in the next 5 and 10 years?
Don’t be afraid of making educated guesses about your industry and the hopeful impact of your marketing strategy.
Within this component, you may include an analysis of your competition. No matter how innovative your product or service, you will always have some form of competition. So, how do you deal with it? Here are a few areas you may differentiate your business:
- Differentiation. Find a way to distinguish your offering from what’s already on the market. Consider any extras you can add or differences in delivery.
- Cost Leadership. One of the most obvious ways to make a difference between you and your competition is with lower prices.
- Segmentation. You could try to be distinct by focusing on a smaller or very specific target market before you broaden out.
For any business, this is an essential part of the business plan. Without healthy cash flow, your business cannot survive. Depending on your industry and if you’re looking for investors, you can determine how much detail to go into in this section. This is also where you talk about your goals and objectives (long and short term) and how they will eventually produce a profit.
You can describe your prospective financial information here, projecting how you expect your finances to be invested in the business and how those investments will pay off. This section can also include:
- An income statement
- A balance sheet
- A cash-flow statement
- Any other financial data and projections you want to include
Mistakes to Avoid
Don’t waste your time producing a business plan that won’t hit the mark. Here are a few common mistakes you should avoid:
- A bad business idea. Every idea that comes to your mind won’t be a winner, and that’s okay. Hopefully, as you do your research, you’ll discover that a bad idea won’t float before you put in too much time or money.
- Too light on the financial details. Profit is the life’s blood of any business, and potential investors or partners will need to see the financial viability of your business. If you’re too vague or it’s clear you haven’t researched thoroughly, your business plan will be a fail.
- Spelling and grammatical errors. In the days of editing software, there is no excuse for spelling or grammatical errors. If you want your business plan to look professional and impressive, leave out the mistakes.
- No exit strategy. Of course, you want to demonstrate commitment to your startup, but investors may also want to see an exit strategy that protects their investment if trouble strikes.
Producing a business plan is no small task, but it is worth its weight in gold if you get it right. Take the time to do your research, compile the information, and present it in a pleasing way. It will help you get investors and partners, and it will help guide your decisions as you grow your startup.