You have products or services that you are passionate about and that customers want. You even have a nice chunk of start-up capital, but without a well-conceived business plan, your company is no more likely to get off the ground than would a building without an architect. Here is what you need to know in order to craft an excellent business plan that will be the foundation of your enterprise.
What Is a Business Plan?
Do the mere sound of the words “business plan” bring to your mind nightmares about intimidating, formal term papers and complex, flowery language? If so, put your fears aside. Today’s business plans do not usually need to be long and convoluted. Think of it as a road map that points out your goals and how you are going to accomplish them. If you want to be comprehensive, your plan should include:
- Executive summary
- Company overview
- Marketing plan
- Description of your products and services
- Description of company milestones
- Introduction to your management team
- Details about your financial plan
In addition to these items, one important part of your plan is the review schedule, which specifies when you will be looking at and modifying the document as your business and the market changes and grows.
Choose the Right Kind of Business Plan
As you might imagine, business plans vary widely according to the audience who will be viewing them as well as the type of company they describe. There are three basic types:
- The one-page plan is clear and concise and is a great tool if you are selling the idea of your company to busy investors who may not have the time to delve into a detailed document.
- The internal business plan is a management tool that stays inside your business and is shared among your staff. It focuses on important issues such as strategy, budgets, milestones, metrics and forecasts as well as the review schedule. This document is indispensable for owners who want to track progress and have an organized way of charting goals.
- The external business plan is seen by entities beyond your own staff and therefore may be more formal. If you want to entice investors to buy into your dream or if you want to get a business loan, you will need this more comprehensive framework. In order for it to succeed, the external plan needs to be polished and clear. It must communicate how you plan to use financial resources and highlight the educational backgrounds and skill sets of your entire team. Investors and financial institutions do not just throw capital into your lap; they want to rest easy in the knowledge that their money will be spent wisely and that they will get a decent return on their investment. A well-executed external business plan accomplishes this goal.
Construct Your Plan with All of the Key Elements
There are six important components of even the shortest and most informal business plan. They include:
- The executive summary. This is where you speak in general terms about your company and your plans for its growth. Just below your business name, compose a one-sentence summary that describes your company. Then discuss the problem you will be solving and how you intend to go about it. Specify your target market, introduce your team, describe your financial plan and funding requirements and talk about your progress so far and the milestones you want to reach in the future.
- Opportunity. In this section, you go into more detail about some of the most pivotal concerns that potential investors will have. These include several questions: Who are the customers you want to attract? What product or service are you selling? How will your business be different from and better than your competition? Don’t fall into the trap of believing that you don’t have rivals. Even if you are the only store selling a totally unique product, there is bound to be someone else out there who either has a brick-and-mortar location or a website with shopping cart credit card processing who is just waiting to steal your thunder.
- Execution. Opportunity is fine, but how are you going to transform it into a successful business? In this section, you set forth your marketing plan, your operations and what metrics you will use to determine your level of success. Readers want to know how you are going to get the word out to your potential customers, your strategies and pricing for selling your products and what partners you need who can help you accomplish your goals. In short, outline how your company fits into the business landscape, and specify your special positioning in the market that will convince customers to buy from you. Communicate how you will attract new customers and keep in touch with existing ones. Email strategies, content marketing, advertising, mobile phone promotions, print and social media are just a few avenues you can use.
- Staff highlights. In this section or paragraph of your report, you have the chance to wow potential investors with your descriptions of your staff. These are the people who will help to turn your goals and dreams into reality, so don’t be shy about singing their praises.
- Financial forecast. In this section, you describe how you are going to make a profit and manage your assets. In most cases, you will want to include monthly projections for the first year and annual ones for the next three to five years. Your financial section should include a sales forecast that predicts how much you will sell in the next few years. Your personnel plan will show how much you will be paying your staff. Your profit and loss statement shows income and out-flow as well as the all-important bottom line. A cash flow statement tracks how much money you have at any given time. Finally, the balance sheet lists your assets, liabilities and the owner’s equity and shows the financial health of your company.
- Appendix. This is the place where you add any images, charts, legal statements or details that would be of interest to readers and investors but did not quite fit into any other section of the plan.
Starting a new business is a lot like bringing a new baby into your home. In both cases, you simply will never be able to prepare for every eventuality. However, the main difference between founding a company and raising a child is that the former can come with an instruction manual, one that you actually compose yourself. That is the business plan. Whether it is one page or 30, you can use this constantly evolving framework as your North Star to guide you through the uncharted waters of entrepreneurship.