When writing a business plan, the main objective is results. Every business has an aim and through that aim to make a profit. A business plan should be unique to each business and match the purpose. It should help the business look ahead, focus on key points, allocate resources and prepare for opportunities and problems. One of the main purposes of a good business plan is to show potential investors that there is a solid base for moving forward. It will also show a bank that a requested loan is a good investment.
In addition to that, any business needs a plan in order to optimize growth and development and to do it according to priorities. If the points of what, why, how, when and who are made in relation to the business, every question should be answered. The market will continue to change and a well-crafted business plan, with your hands on the wheel, can steer you through the changes successfully because it keeps the interrelationships with the proper reference points so that change can be managed effectively.
For a new business a startup plan will tell invertors and employees where the business stands. It includes a summary and mission statement as well as keys to success (everyone needs to see this) market analysis (to show where the new business fits into trends in the market) and a break-even analysis (how long before expecting a profit). A start-up plan is good to see if the new business is viable, but is not enough on which to run a business.
There are some standard points that should be on any business plan, but each plan should match its purpose. For example, investors want to see a description of the management team and banks want to see the financial history. Added to that, the plan needs to have a description of the company, product or service, market analysis and forecasts.
Cash flow analysis is one of the most important parts of a business plan and one of the hardest to follow. Cash flow is not the same as profit. Profits don’t necessarily mean cash in the bank. Implementation is another very important part of any plan. Theory isn’t enough. There needs to be action items with assignment of responsibility with budgets, dates and follow-up including tracking results. Results are the main aim of any business plan.
A business plan format is a systematic assessment for each of the components of the plan. You may not build the plan in the same order that you present the finished document. In the first section of the document will come the Executive Summary but this will only be written when the whole plan is completed.
There is not one right way to put these in order but a plan should include:
Vision Statement—should be a very concise description of the purpose and goals of the business.
Description of the Company—the legal establishment, start-up plans and history
Service or Product—a description of what you are selling and how it benefits customers
Market Analysis—clearly show that you understand your customer needs, how to reach customers and how you fulfill those needs
Implementation—strategies should be specific with management responsibilities and dates and budgets
Management Team—a resume of yourself and each person involved. Don’t exaggerate, this is one of the most important parts of a business plan; the people who will make it a success
Financial Plan—cash flow is very important, profit and loss, balance sheet, break-even analysis, business ratios and assumptions about the future
Before you begin to write your business plan there are a few things you should consider first.
Is your basic concept clear? Do you understand the business you want to enter? Is your understanding based on facts, for example, have you worked for someone else in the same business or is it based on an abstract concept? Are you sure you have a realistic understanding of your planned endeavor?
Do you understand the market? The best way to do this is to test market your product or service. If you are selling salad dressing, give it away for free and see if anyone comes back ready to purchase more.
Is your industry stable and growing? Business is based on good economics not necessarily on good products. The service industry is always growing but the technology industry changes overnight.
Do you have good managers? You need people who are smarter than you who have enthusiasm and good ethics. You have your strengths but you need people who are strong where you are weak.
Do you have good financial people? You need to understand the accounting and cash flow management of your business. This can’t be left in the hands of someone else. They may do the work, but you need to know and understand what they are doing.
Is your business focus consistent? Specialization is the best for success. Focus on something you can do better than anyone else and you won’t have to worry about price wars.
Are you flexible? Be fluid in your thinking and be ready to make revisions as circumstances expand and change. This will come as your knowledge increases.
Are you ready to take your business online? Online sales are expanding exponentially in the coming decade. If your business is not online, and often it needs to be on social networks too, it will be nowhere.
Never be fooled by people who tell you that a business plan is a thing of the past. Some say that investors don’t read plans. They may not read every plan they see but the more interested an investor is in your business, the more important the plan is. Another wrong notion is that a pitch is more important than a plan. This is like saying “you don’t need a recipe, just make the cake.” Your pitch should be based on and backed up by your business plan. Some people may also tell you that planning is a waste of time. If you make a sound plan, and are prepared to update it as you learn and use it to manage your company, it will be time well spent. Some successful companies didn’t have a business plan to start. Does that mean you don’t need one? Maybe not, but you do need strategy, calculated starting costs and planned cash flow, prioritization of strategies, market analysis and good management, all of which is in any good business plan. Finally, don’t let your plan stop flexibility. The plan is not the destination, a successful business is the destination. The plan is the map, at one particular moment in your business life, that shows the way forward. You can follow it, find shortcuts and change destinations, but only if you know where you are going.
There are templates online for business plans. They have instructions for filling them out and are a good way for a beginner to learn what a business plan is. Remember, there is no one-size-fits-all business plan because each business is as unique and the people involved. And, be flexible. The goal to success will not change, but the path may get rocky, smooth or diverge and you need to be ready.