When launching a business, entrepreneurs are often so focused on getting things up and running that they overlook one of most important aspects of developing a business, the business plan. In many situations, a business plan is required before even putting money into starting a business. In other words, a business plan should be the first step. This plan is more than just a formality that you need to comply with, and to satisfy investors.
The exercise of developing a business plan forces you to strategically think about your business. It is used to set goals and provide benchmarks that will keep you on track as your business progresses.
“Business plans are critical to the success of any new venture. I believe that entrepreneurs should dedicate time to create them, regardless if you’re searching for investors,” Patrick Hull explains in Forbes. “Business plans serve as the framework for your company and provide benchmarks to see if you’re reaching your goals. In my experience, they are key to helping you think through your business and keep you on track.”
Good business plans are sophisticated and comprehensive documents that reflect a sound understanding of the market. Overall, they lay out a clear plan for success, in terms of a company’s positioning, the services or products it plans to offer, its marketing and sales strategy, and all relevant financial information.
The Executive Summary
The executive summary should be fairly brief, typically no more than one page. In a concise manner, you need to provide a compelling synopsis of your entire business plan, while stating its purpose. If your business plan is being sent out to investors as part of a fundraising push, make it clear that you are soliciting funds, or if the purpose of your business plan is to guide your business through a period of intense growth, then say that. The key to a successfully written executive summary is to clearly outline what it is you want.
The Market Analysis
This section needs to demonstrate your understanding of the particular sector that your business is in. The market analysis should also show familiarity with all aspects of the market to ensure that the company can successfully define and appropriately position itself in the marketplace. This includes the size of the market, its structure, growth prospects, relevant trends, and estimated sales potential.
The Company Description
Every good business plan needs to provide a high-level overview of your company. This brief company description should encompass any relevant information about your business, but also clearly delineate the critical factors that position your company for success and set it apart from the competition. When producing the company description, it is critical that you always keep your audience in mind.
“Your business plan is going to be presented to an audience, whether it’s a boss, a board, investors, employees or a group of your peers,” Mark Murphy explains in Forbes. “At that, it means that you’ve got to have your business plan packaged in such a way that your audience is going to be swayed and inspired to invest, support or approve your plan. It would be nice if every audience was the same, but they’re not.”
The Organization and Management
In this section, you need to briefly provide an overview of your company’s organizational structure, along with details about the business, including a description of your management team and their respective qualifications. The structure of this section is particularly important if your plan is geared towards investors.
“When describing your business, the first thing you need to concentrate on is its structure. By structure we mean the type of operation, i.e. wholesale, retail, food service, manufacturing or service-oriented. Also state whether the business is new or already established,” Entrepreneur.com explains. You will also likely want to offer up information pertaining to the legal form of the business, such as if the business is a sole proprietorship, partnership or corporation and who its principals are.
The Marketing and Sales Strategy
Without money coming through the door, your business will not achieve success. To generate revenue, a marketing and sales strategy is essential. Because of that, this component of the business plan deserves considerable attention. Be sure to define your marketing strategies, and outline the specific tactics and channels that have seen the greatest successes so far. This section should be routinely updated based on results.
The Service or Product Line
In this section of your business plan, you need to clearly explain the products or services being offered. Although it is helpful to provide descriptions, be sure to focus specifically on benefits.
The Funding Requirements
Readers of your business plan, especially if you are targeting investors, will appreciate a candid overview of how much money you need to get things off of the ground. Therefore, it is important to be realistic with your needs and expectations. Underestimating the amount of money needed, could hurt you in the long run. You might even consider including best and worst case scenarios.
Once you have analyzed the market and set clear objectives, it is time to assess the financials. In this section, you want to include projects for the future, as well as three to five years of historical data. Because this section needs to be detailed and data driven, make sure that you have the information needed.
As an entrepreneur, it is in your best interest to allocate both time and resources to the development of a comprehensive business plan. If you need help, never be afraid to ask. “You should take some time to work with mentors, business partners, and colleagues on your plan,” Hull insists. “Ask them to look for holes so you can adjust accordingly. Seeking input is a great way to get an objective view, so don’t forget this step; it’s way too important.”
Ideally, you should be soliciting input from your management team while working on your business plan. It should be a dynamic process that is both collaborative and creative. “It involves sitting around a table in an environment where people feel comfortable debating, disagreeing, and presenting different perspectives,” Darren Heitner explains in Inc. “This back and forth pushes the boundaries of what is possible, generating the best ideas from your team. This can be a lengthy process - you cannot force creativity.”
Creating a business plan can seem like a daunting task, but it is ultimately the key to the overall health of your business. Remember, it is a competitive world, so the more robust your business plan is, the better chance your business of succeeding.
If your company needs help executing your business plan, chat with 10twelve today!