What is a Business Plan?
Writing a business plan is an important part of ensuring you will be running a successful, lucrative business for years to come. Most business plans are comprised of several key elements, although it can depend on the use and audience. The most important thing to remember is to continually update your plan to reflect the state of your business. Business plans are not only important for new businesses but are key tools for growth and success throughout the lifecycle of a company.
Your business plan will ultimately outline your long-term and short-term goals as well as your sales targets and expense budgets through several common sections, but your language, format and formality level will reflect which audience you are trying to appeal to. Thus, with length, detail and presentation being variable, here are some common elements required to build a successful business plan:
– Executive Summary: this is effectively a snapshot of your business plan as a whole and touches upon most aspects of the company. It should be compelling and intriguing, but also just a quick overview on the main points.
– Company Overview: should provide information on what you do, why you’re different, and what markets you serve. This section is usually omitted from internal plans.
– Product/Service Information: What is it you will be selling or providing and how does it stand out from what is already on the market? How will it benefit your consumers and what is the lifecycle of the product or service?
– Marketing Plan: What is your sales/marketing strategy?
– Major Company Milestones: Where do you see your company going and when? How do you plan on getting there?
– Organization and Management: Money flows to people and not ideas, so make sure to emphasize the team members and their experience and credentials – how will they make the business grow and what expertise will they add to the operation?
– Financial Plan: Investors want to know exactly where their money will be, what it will be used for, and when they will get it back and make a profit. Provide projections to supplement your plans and crunch all the numbers meticulously to prevent misunderstanding and avoid ambiguity.
Some common plan types include:
– One-page Plan: this type of plan is quick, concise and to the point. It serves two purposes: to introduce your business to outside investors and/or outline the basics of early stage companies that are still unsure of the specifics of their operations. More detail and refinement can be added as the company becomes more defined, but one page plans are usually useful tools for outlining the entire concept of a company at a glance. Often times, these plans are the initial document issued to investors to ‘hook’ them in and should thus be efficient and effective in their overall presentation.
– Internal Plan: an internal plan is useful to companies because it can dispense with formality and focus on important points for company team members. It should address business strategy, milestones, marketing, plans, budgets, and forecasts and should omit any information on the company history and the team that would be surplus.
– External Plan: this is considered the “standard” plan and its main objective is to convince investors to fund the business. It should thus be well polished and pay close attention to language and formatting. Additionally, since cash flow is the most important issue for the investors, the plan should focus heavily on how funds will be distributed, used, and what profits will arise and when. A strong emphasis should also be placed on the team members and how they will contribute to the business operations.
Why do I need a Business Plan?
Besides the reasons that can be surmised from the above discussion, a business plan can be very vital for the following reasons:
A business plan is often required to barrow money for a business. Banks and other types of lenders may require a business plan as a part of the loan application process. In addition, a bad business plan or one that is missing key points may cause a loan to be denied.
A business plan can help you decide what resources and assets you need, and whether you should lease or buy them. A well thought out business plan should present concrete ascertainable and realistic goals and time frames. With this information, you can better plan what materials, supplies, furniture, office space, etc. you will need in the short and long term.
A business plan can help you set a budget and let you know when if you are getting off track. When you have real numbers and the business plan laid out in front of you can quickly see what is working and what needs improving. Maybe you will see that your plans are too ambitious and that you need to adjust your business plan and hiring to accommodate the market. And this in its self can lead to long term business success.
A business plan can help you establish goals and objectives for yourself, managers and sales people. A good business manager will set specific goals and objectives and then track the result and follow up. Without a business plan is it nearly impossible to establish what is supposed to happen and to determine how well things really went or how far the goal was missed. There is a tendency to just do business planning in the head. The problem with this is that the goals and plans have a tendency to morph daily depending on how the week is going and this does not instill standards or discipline in the business organization. A good business manager will have a written business plan that can be shared with investors, the bank, managers and sales staff.
A detailed and specific business plan helps you truly understand your business and to communicate it to others. Most business owners start a business with a good general understanding of the field they will be working in but fail to account for many things such as insurance, taxes, hiring, etc. A well written business plan will be very helpful in determining what areas of the business need more consideration and planning.