If you are starting a business, one of the first things you need is a business plan. While business plans are nothing new, some new entrepreneurs feel that they aren't necessary or even outdated. It may be tempting to dive into your venture without a plan with the idea of making adjustments as needed. However, there are some compelling reasons to create a business plan.
Purposes of a Business Plan
Why take the time to create a business plan? Here are the top benefits.
Clarify Your Objectives
The primary advantage of a business plan is that it helps you get clear about your goals and stay on track. The modern trend toward agile business strategies might seem to make the need for a business plan obsolete. However, being agile and adaptable doesn't mean that you don't need a plan. You may have a general idea of key factors such as your target customers, marketing plan, budget, the timeline for growth, and your competition. Writing these points down, however, helps you clarify them and gives you a convenient document to reference at any time.
If you are applying for funding, a business plan is essential. Potential investors are not going to be satisfied with verbal assurances of your plans or informal correspondence. You need to show them solid data written up in a professional business plan. Whether you are relying on traditional bank loans or alternative business funding such as angel investors, crowdfunding, or peer-to-peer lending, you'll need a detailed business plan. Typically, funding decisions are made by a group such as a committee and they will want a business plan they can study, share, and discuss to make an informed decision.
Identify Obstacles and Challenges
Entrepreneurs are, by nature, optimistic. Seeing the upside of every opportunity is a trait that helps to keep you motivated. However, the downside is that you may not always recognize obstacles and challenges until they've cost you time and money. A business plan forces you to look at potential challenges such as customer demand, competition, and wider trends that may impact your business. Seeing such challenges may cause you to rethink certain aspects of your business before you invest in it.
A business plan has a timeline that lets you aim toward specific goals and lets you know when you've reached them or fallen short of them. You may want to acquire a certain number of customers or reach certain sales metrics in one year, three years, and so on. You may not always reach every milestone, but it's always good to have a specific objective to work towards.
What to Include in a Business Plan
While business plans differ according to industry and the needs of the particular project, there are certain elements that should be present in every business plan.
The executive summary gives the reader an overview of your business and its goals. You should include crucial points such as who you are, what you're selling, and your target market. You will need to elaborate on these areas in other sections, but the executive summary lets readers get a good general idea of what your business is about.
Description of Your Business
This is a fleshed-out version of the executive summary, where you specify the key elements of your business. This should include:
- What is your company's USP (unique value proposition) that sets you apart from the competition?
- Your business's legal structure.
- The demand for your product.
- Your business model -for example, will you be selling from a storefront and/or a website?
- Your projected growth and how you intend to achieve it.
This is a key aspect of your business plan, both for yourself and any potential investors. You want to outline the market opportunities and challenges, including your main competitors. What are the main strengths and weaknesses of your competition and how do you intend to achieve your share of the market? Who are your customers and what qualities do they possess? Creating one or more buyer personas can help you flesh out your customers.
Company Structure and Management
In this section, you go into detail about the structure and leadership of your business. You can mention your company's legal structure including any changes planned for the future, such as incorporating. For larger organizations, it's helpful to include a diagram of the company's structure and leadership.
A Description of Your Product or Service
This will be a more detailed description of what you'll be offering. What products or services will you be selling and what are the main benefits to customers?
If applicable, include how much funding you need and what it will be used for.
Financial Outlook or Projections
For existing companies, include income statements, balance sheets, and cash flow statements. For startups, provide your projected financial outlook for the next five years.
When to Create Your Business Plan
Once you embrace the advantages of a business plan, it may seem like the best time to create one is immediately. However, research shows that there's an ideal timeline, not too soon and not too late. Harvard Business Review advises that before you begin working on your business plan, you should have done some market research and spoken to potential customers. If you write your plan too early, you could risk leaving out important data and having to make substantial changes later.
A Business Plan is Just as Valuable as Ever
Even if you don't think you need a business plan, you should seriously consider the many reasons financial experts recommend creating one. If you need further evidence, the Business Advice website shares some compelling evidence. They quote a study that shows creating a business plan makes it 250% more likely that you will actually start your business. There's also a 250% greater chance of obtaining funding with a business plan. Once you do get your business off the ground and obtain any necessary funding, having a business plan to consult helps you to stay focused.
Create a Business Plan With Our Template
Creating a business plan from scratch is difficult. It's much simpler to use a proven template that will guide you through all the steps and ensure that you don't leave anything out. Kickstart your business with our downloadable business plan template.
Tim Hatari helps businesses improve performance, creating strategic development plans and establishing structure via the 5PX Executive Business Coaching System. As CEO and Founder at TMD Coaching, he oversees the vision setting process with clients, leading on sales acquisition, the drive for operational excellence and market leading innovation. For Tim, helping others is the most rewarding part of the role. Follow or connect with Tim on Linkedin - www.linkedin.com/in/timhatariView All Articles
Topics from this blog: Business Planning, Strategy