The Business Plan Has Two Main Purposes
Throughout this site, you’ll see me mention the importance of having a business plan time and time again. Why? Because the business plan has two main purposes: to provide a roadmap for your company, and if necessary help you obtain the funding you need to get started or expand your business.
I often tell my clients they already have a rough draft business plan, it’s just tangled up in their brain. It’s up to them to extract those ideas and get them on paper, so they have a road map for their company.
Keep in mind, a formal business plan is more than a few notes jotted down here and there. A business plan has several key components you’ll want to address. LivePlan has an easy to use wizard-like program that’ll walk you through each part. However, if you feel ready to tackle it on your own, I encourage you to address each component thoroughly.
Though the executive summary is the first section of the business plan, I encourage my clients to complete this section last. The executive summary is a short and concise piece that gives an overview of your company. By the time you complete the rest of the business plan, you should be able to articulate your company’s products and/or services, mission, values, purpose and goals.
Your company description provides core information about your business and its products and/or services. Here, you’ll identify your business’s legal structure. That is, whether you’ll operating as a sole proprietor, limited liability company, corporation, or other entity. You’ll also want to provide background information about your company, as well as your business short- and long-term goals. This is the section where you have an opportunity to connect with the readers of your business plan on a personal level by sharing the heart of your business.
By the time you reach this section, you’ve already talked a bit about your products and/or services. Provide a detailed description of your company’s offering. This is a wonderful opportunity to talk about how your product and/or service is the solution to a particular problem. You’ll want to consider the life cycle of your product and future plans you might have for introducing other products or services. If your products or services deal with intellectual properties, this is the place to identify it, as well as any reach and development activities.
Often times, this is the section my clients dread completing. However, it’s an important part and understanding your market can help you position yourself effectively. In this section, you’ll identify your target market, including the size and demographics of the group. Take time to research your industry and gather data. Above all, don’t overlook your competition. Size them up and study the way they do business. Take note of their nuances and determine if there are areas you can approve upon. Remember, this should be a detailed evaluation of your market, so take your time. You don’t have to complete the marketing analysis or the entire business plan, for that matter, in a day.
Once you understand your market, you’ll be better equip to implement a marketing strategy. Consider how you’ll reach your customers and penetrate the market. For example, what type of distribution channels will you use? If you have a brick and mortar store, what hours will you keep and what staff will you need to keep those hours. Exactly how will to compete against other businesses, particularly those businesses already established in your industry. Often times, building your customer base is about differentiation. I caution my clients about using price as a way to stand out from the competition, as there’s always someone who can offer a product for cheaper. Take time to consider why your customers should shop with you rather than the competition.
Organization & Management
Running a business isn’t a one size fits all, so it’s important to understand how your business will operate. In this section you’ll introduce the owners, as well as their duties and responsibilities. Be sure to include background information about the owners, such as their skill sets, past experiences, and what they bring to the business. You’ll also want to identify the percentage of ownership.
Though many of my clients cringe at the idea of working with numbers, working through financials is one of my favorite business activities. Here you’ll include historical data, if you already have an established business. You’ll develop balance sheets, cash flow statements, and pretty much project your financial plan out 3 to 5 years. As part of the projections, you’ll want to identify funding sources for your business project and any assumptions you had when developing your financials.
Though there are a few parts that may require extensive effort on your part to write a business plan, I always strongly encourage my clients not to overlook this piece of starting their business. I continue to stress it’s not an overnight project. It takes time and careful consideration. However, working through a business plan can help you determine if the business is right for you. I always find it unfortunate when business owners come to me for the first time after their business is in distressed. Often the only business plan they have is the vague idea in their head of what they thought they wanted to do.
With that, be smart about starting a business… invest some time into a business plan!
If you’re struggling to write a business plan and don’t know where to get started, I encourage you to read my review on LivePlan, as it might provide you an easy start.
So… tell me… what type of company is your dream business to start?