And Why You Need One.
Starting and sustaining a business take a lot of time and work. For many businesses of one, writing a business plan can seem like one more time-consuming obstacle to getting your business off the ground. Pssst... business plans will help you grow faster, they aren't that hard to create and they can provide you solid goals to help guide your decisions along the way. Have I convinced you to write a business plan? Let's do this...
Your business plan will outline:
Who you are
Why you’re in business
What you do
How you do it
Where you operate
How you will generate profits
Who your customers are
Why your business is important
Business plans will look different depending on your business:
Startups or businesses in the beginning stages should write a plan that communicates to investors, partners and/or employees about what you're going to do with the business - your vision, projected strategies and financial forecasts.
Established businesses will have strategy steps to reach their end goal, whether that is to be sold or passed on to the next generation. It will include tasks, deadlines, sales goals, expenses, capital, analytics of projections, expenses and costs.
Before you begin, ask yourself:
Where do you want to be in 3-5 years?
What service or product does your business provide and what need does it fill?
Who are the potential customers for your product or service and why will they purchase it from you?
How will you reach your potential customers? And,
Where will you get the financial resources to start or grow your business?
Business Plan Outline
This is the first section in your plan but typically the last section you will write. Include short, descriptive summaries of your company, the products and services your sell, mission statement, management and organization structure, target market + ideal customer, competition, future of your business and your industry, financial data and projections. It should explain what your business sells, how it fills a customer need, what your competitive advantage is, who your target customers are and your goals.
This section gives a general background and description of your company. It is generally no more than 5 pages long and includes:
Mission Statement - brief statement about who the company is and what it stands for.
Business Goals and Objectives - make them specific and attainable.
Products or Services - what makes your product different, new and exciting? Include descriptions of your service or product as well as pricing and the advantage over your competition. Keep this an overview.
Target Market - briefly describe to whom you will market your products
Industry - briefly describe your industry, including growth forecast, changes and comparison with competitors in your industry.
Management Structure - how is your company’s management organized? Who makes decisions? What are the values that drive your company? How many employees do you have, what do they do, and how are they paid? Do you anticipate this changing?
Organizational Structure - describe the leadership of your company and include an organization chart, if you have one. Who are the principal members of your company and what are their roles? This section of the plan should include a brief resume on each key manager.
Legal Structure: What is the legal structure of your business? What legal requirements does your business face, such as licenses and/or permits. Highlight special operating achievements or certifications your company has.
Research who might buy your product or service and what price they’re willing to pay for it.
Industry - describe the industry in which you operate, as well as the potential or prospects for your business within that industry. Include industry size, your market share, competitors, regulations, trends for growth, product development and consumer preferences, what advantages your business has over the competitors, show how you stack up against your direct competitors on price, product, service, etc. and identify barriers to entry (costs, tech, brand recognition).
Customers - find out what people want to buy, describe their needs (are they currently being met and to what degree), demographics of current or prospective customers, what do they buy and why, will they buy your product and for how much, do they prefer the competition and how to they provide value and what groups are most likely to buy your products.
Market Segment - divide your market into distinct segments, grouping people sharing one or more characteristics that cause them to have similar product needs. It is critical that you understand the value of defining your market.
Identify and describe all of the products and services your business sells or provides. Explain how the items are priced and how competitive they are. You may include photos in your plan. Make sure you answer these questions:
What product or service will you provide? For each product describe What is unique about it, its important features, what will it do for the customer, how it benefits them and why is it better for the customer when compared to the competition?
Describe your pricing structure.
Do you keep inventory? What kind and how much? How is your inventory turnover?
Who are your suppliers?
In which lifecycle stage is your product or service?
What research and development activities are you performing or planning?
What intellectual property rights do you have for your product or service?
Marketing and Sales
After you've conducted your market research to determine what customers want and what they will pay for, be prepared to include in your plan how to grow your business, how you will communicate with customers and how you will sell your product of service in this section. Page length for this section is up to 5 pages.
Marketing activities and strategies result in making products available that satisfy customers while making profits for the business. This is challenging as your business is dealing with people's wants, perceptions, feelings and behaviors which change due to many subjective factors.
Identify market segments your business can better serve than your competitors.
Tailor products and services to those segments.
Consider changes that are taking place, emerging opportunities and challenges.
Identify new markets.
The 4 P's
Place = distribution channel, i.e. online, physical location, mobile business)
Price = price, including discounts, compared to competition, how much will you sell at various price points.
Promotion = advertising, sales promotion, and publicity. What is your messaging, budget and how will you communicate?
Product = where your product fits into the market, specification of the product of service and how it relates to consumer needs.
Include a month by month projection based on historical sales (or market research if unavailable), industry and market research, and the marketing plan. Identify how these sales will lead to company growth.
If your business is seeking funding, you'll want o identify the amount of funding you will need to start your business in a Funding Request section.
Explain your revenue forecasts, how much money you have and need, and when and how the business expects to make a profit. Also detail what your marketing and operational processes and plans will cost. Typically this section will include a Projected Balance Sheet (assets minus liabilities, equals net worth), Cash Flow (projects the amount of incoming and outgoing cash during a given period (usually monthly) to gauge financial performance) Projection, and Profit and Loss Projection (all income minus all expenses = the amount of profit or loss generated by the business for the period, typically 6 months to a year).
New business financial statements should be projected one, two, and three years while an existing business should include the current an prior Projected Balance Sheets and P&L for the last 3 years, plus include projections for the next 3 years.
You should also include a Break-Even Analysis, which indicates when your business will be able to cover all of its expenses and begin making a profit.
To complete your plan, you can add a Cover Page, Table of Contents and add any Appendices (brochures, advertising, maps, leases, contracts, market studies, press coverage, etc.)
Get a copy of my FREE Business Plan Template here.