In our previous article on this series about starting a business, we looked at the various ways to refine your business. Today, we look at your business plan. A good business plan is one that guides you through each stage of your business. It is a plan that stipulates how best to handle growth, how to manage unforeseen circumstances, and how to respond to pressures both from with and outside the organization. As an entrepreneur, you will need this business plan and you will use it as a roadmap for how to structure and run your business. In addition, a business plan will guide your growth and provide some key performance indicators for which to measure your growth.
A business plan, simply put, is a way aiding business people to think through the key elements of their businesses. Furthermore, a well-thought-out business plan will help you get additional funding for your business as well as help you tap the best talents in the market when it is time to expand. Investors will want to feel confident that there will be a good return on their investment. A business plan is a tool that you will use to convince them to take a chance on you.
It Is More Than A Document
Most entrepreneurs do not realize that this plan is more than just a document. It is a guide that helps in outlining the goals and objectives of the business for a certain period of time. It is a powerful management stratagem that when used correctly will help entrepreneurs analyze results, make strategic decisions, and also showcase how the business will operate, and finally scale up. While not all businesses need a business plan, at times it helps to have one. And while your plan may not be as elaborate as large companies tend to have, having just a simple business plan helps a lot. A plan that outlines the basics of how the business will operate.
What deters most business people from writing a plan is the popularized idea of what it actually is. In fact, most people will tell you that they do not like writing the plan because it is complicated. It doesn’t have to be! What you need to understand about writing a business plan is that there is no right or wrong way to write it. What is key is making sure that your plan meets your business needs. Today, with advanced technologies, it has become so easy for start-ups to write plans. There are tons of downloadable business plan templates that will guide you through the process.
Why Do You Need A Business Plan?
Carl Schramm wrote a book called “Burn the Business Plan” wherein he says, “If you look at all our older major corporations—U.S. Steel, General Electric, IBM, American Airlines—and then you look at our newer companies like Amazon, Apple, Facebook, Microsoft, none of these companies ever had a business plan before they got started.”
But, according to the U.S. Small Business Administration, it doesn’t hurt to have just a simple plan that outlines your interests and objectives. I think of a business plan as a way to keep business on track. A business plan will help you realize growth faster than you think. It establishes your formal foundation setting you on a very specific path. With this kind of a plan, you will not be making any guess works, but working through the core strategy of your business and this focus will help you grow.
A business plan is never meant to be perfect, it is designed to be redesigned and readjusted more than once through the lifetime of the business. Without a business plan as your baseline, it might be difficult for you to track your progress, or make any adjustments in regards to your business.
Furthermore, these plan makes you confident about your strategic decisions. More often than not, the biggest decisions a business person makes are during the business’s volatile periods. These are marked by abrupt growth, declines, or external changes. These are very uncomfortable situations and force an entrepreneur to make highly consequential decisions far more quickly. With no information about the day-to-day planning and forecasting, these key decisions may be far less certain than they need to be.
A business plan will allow you to regularly review your progress and setbacks so you can make confident decisions.
Make a Business Plan That You Are Comfortable With
In most cases, a business plan will fall into two main categories; traditional business plan and lean start-up. A traditional plan is far much common as they use a standard structure. They are complicated and allow the business person to go into details about each section of their plan. A typical traditional business plan requires more work upfront and can be long.
On the other hand, a lean startup business plan is far much less common and also tends to use a standard structure. Unlike the traditional formats, the lean format tends to focus more on summarizing the important elements of your business. They are not long and typically will be a page long.
If you are a detail-oriented entrepreneur, you may prefer to use the traditional plan format. This will give you a comprehensive plan. In most cases, if you are looking to request funds, this is the format to use. A traditional format will include the following sections; 1) Executive Summary, 2) Company descriptions, 3) Market Analysis, 4) Organization and Management, 5) Service or product line, 6) Market and Sales, 7) Funding requests, 8) Financial projections, 9) Appendix.
If you are looking to explain your business quickly, what is it that you, and how you plan to achieve your goals and objectives, a lean start-up business plan would be ideal for you. Where your business is relatively simple or where you plan to regularly change or refine your business, a lean start-up plan will come in handy. These business plans are charts that only use a handful of elements to describe your company’s value proposition, infrastructures, customers, and finances. A lean startup business plan extremely useful where you want to visualize tradeoffs as well as sell the fundamental facts about your company.
The key components of a lean startup business plan are; 1) Key Partnership, 2) KeyPartnerships, 3) Key Activities, 4) Key Resources, 5) Value Proposition, 6) Customer relationships, 7) Customer Segments, 8) Channels, 9) Cost Structure, 9) Revenue Streams.
What Entrepreneurs Must Do When Creating A Business Plan
When creating a plan, there are some rules that you must ensure that you are adhering to. Remember, the goal is not to have a perfect plan, but to have a plan soon enough so you can focus on what’s important. When creating your plan, make sure that it is short and precise. Whether you choose a traditional format or a lean startup business plan, make it short and concise. Remember, you want your business to attract eyeballs. Not many people will want to read a 100-page plan. And though at times it is good to attach supporting documents, make sure they are in the appendix.
In addition, when working on your business plan, it is always good to start with a one-page pitch that will help you test the viability of your business idea. This in the long run will help you avoid so many hustles in the end long before launching. Remember as you work through the main elements of your business plan from branding, to your mission statement, the best thing that you can do is to try and get some feedback in regards to your business. It too doesn’t have to be a complicated process, you can have the mentor review elements of your plan or even conduct market research and speak directly to your consumer base.
What you will soon realize is that the more tests you take about the key areas of your business, the more comprehensive your plan becomes. After you have tested the various parts of your business, it is time to work on your goals and objectives. Successful execution of your business has to come from a familiar space. You should know what you want out of your business upfront. At times, you may not have everything figured out, do not beat yourself up and that is the beauty of a business plan. It will help you spot the metrics of your success, flesh out the goals and further develop the elements of your business to help you attain the specific goals.
A business plan is an excellent tool to keep you in line with your business. However, you have to understand that writing a plan is not a one-time thing, rather a continuous process that can help validate your business ideas set some elaborate goals, manage your goals as well as successfully pitch your business. If you are not sure about your starting point with the creation of a business plan, it is good to first view some of the already completed business plans. This will give you a solid idea of what you need to do.