What is a Business Plan?
When you’re establishing, expanding, or reenergizing a business, the best way to start is by writing a business plan. The task may seem a little daunting, which is why we bring this article to the rescue. Having a business plan - which means writing a business plan - the best way to turn a good idea into a thriving company.
Your business plan is the blueprint for how you plan to build a successful enterprise. It’s a comprehensive document that covers a lot of territory and addresses all sorts of issues. To help focus your efforts, consider which groups of people will have the greatest impact on your success. Those groups will be the primary audiences for your business plan.
For example, if you need capital investment, investors will be your primary audience. If you need to build strategic alliances, you want to address potential business partners. After you know who you want to reach with your business plan, you can focus on what those readers will want to know and what message you want them to receive.
Why you Need a Business Plan
The process of creating a business plan forces you to take a realistic, more or less detached look at your business in its entirety. Why is it so important to see your venture as a whole? Most people who have business ideas deal with them in an unorganized marner. Putting a business plan together and wiiting down specifics provides you with the opportunity to evaluate your business in its entirety so that you can proceed to implement it.
A finished business plan becomes an operating tool that will help you manage your business and work toward its success. The final, completed plan is the chief instrument for communicating your ideas to others - businesspeople, bankers, partners, etc. If you seek financing for your business, the plan will become the basis for your loan proposal.
The time you invest in your business plan will pay off many times over. Following are some of the most obvious benefits you’ll gain from business planning:
- A clear statement of your business mission and vision
- A set of values that can help you steer your business through times of trouble
- A description of your business model, or how you plan to make money and stay in business
- A blueprint you can use to focus your energy and keep your company on track
- A clear-eyed analysis of your industry, including opportunities and threats
- A portrait of your potential customers and their buying behaviors
- A rundown of your major competitors and your strategies for facing them
- An honest assessment of your company’s strengths and weaknesses
- A road map and timetable for achieving your goals and objectives
- A description of the products and services you offer
- An explanation of your marketing strategies
- An analysis of your revenues, costs, and projected profits
- An action plan that anticipates potential detours or hurdles you may encounter
- Benchmarks you can use to track your performance and make mid-course corrections
- A “handbook” for new employees describing who you are and what your company is all about
- A “résumé” you can use to introduce your business to suppliers, vendors, lenders, and others
How to Write a Business Plan
Written business plans are as varied as the companies that compile them. Some plans run almost 100 pages, whereas others barely fill a few sheets. Some plans start with executive summaries, and others plunge right into detailed descriptions of products and services. Some companies print their business plans on paper, and some publish their plans exclusively on the Web. Some plans include page after page of financial projections, and others list only anticipated costs, expected revenues, and projected profits.
Every business plan is written for a different reason and to obtain a different outcome. Still, some plans are better than others. The following components, presented in the order they generally appear, are common elements in most business plans:
Table of contents: This element is a guide to the key sections in your business plan and is especially useful if your plan exceeds ten pages.
Executive summary: This section is a summary of the key points in your business plan. You should incorporate it if your plan runs more than ten pages and you want to convey important information upfront. Because many readers dig no deeper than your executive summary, you want to keep it clear, captivating, and brief - in fact, try to keep it to two pages or less.
Company overview: This section describes your company and the nature of your business. It may include your company’s mission and vision statements as well as descriptions of your values, your products or services, ways your company is unique, and what business opportunities you plan to seize.
Business environment: This section includes an analysis of your industry and the forces at work in your market; an in-depth description of your direct and potential competitors; and a close look at your customers, including who they are, what they want, and how they buy products or services. Think of this section this way: It describes everything that affects your business that’s beyond your control.
Company description: In this section, include information about your management team, your organization, your new or proprietary technology, your products and services, your company operations, and your marketing potential. Focus on areas where you have real advantages over your competition.
Company strategy: Here’s where you detail your road map to the future. This section brings together the information about your business environment and your company’s resources and then lays out a strategy for going forward. Included in this section is your analysis of the opportunities, threats, and uncertainties that your business faces along with the ways you plan to avoid pitfalls and take advantage of opportunities.
Marketing plan: This section is where you describe how you plan to reach prospects, make sales, and develop a loyal clientele. Because customers and sales are essential to your company’s success, this section is a major component of your business plan.
Financial review: This section includes a detailed review of dollars and cents, including the state of your current finances and what you expect your financial picture to look like in the future. It typically contains financial statements, including an income statement, your balance sheet, and a cash-flow statement.
Action plan: In this section, you detail the steps involved in implementing your business plan, including the sequence of actions and how they align with your goals and objectives.
Appendixes: This section includes detailed information that supports your business plan. It may include analyses, reports, surveys, legal documents, product specifications, and spreadsheets that deliver a rounded understanding of your business plan but which are of interest to only a small number of your readers.
