What is a business plan?
Business plans are used to document an organization’s strategy and goals. They are also used in many cases to present to investors and lenders for funding.
Your business plan details your goals, and equally importantly, the strategy for attaining those goals. The process of developing your plan, and thinking through and choosing the best strategic options, is critical.
With regards to raising funding, business plans are also critical. Sure, not every investor will read every page of your plan, but many will. And all will read at least the executive summary. And, if the summary gains their attention, they will review the other key elements of your business plan.
While some “plans on a napkin” have been funded, this has generally only occurred when the entrepreneur sketching their plan has already achieved massive success such as starting and taking a previous company public. These special entrepreneurs can possibly raise funding without a plan, but the rest of us can’t.
If you are seeking funding, you need to update your business plan constantly as your business evolves. For instance, each time your business achieves new milestones, include this in your plan. It will make your business more appealing to investors, and thus improve your funding prospects.
If you’re not seeking funding, you should update your business plan annually as discussed above. State your 5-year and annual goals in this plan. And then detail how you will achieve your goals. Who are you going to hire? What marketing channels will you employ? What metrics will you manage to ensure you’re progressing towards your goals? These and other critical questions must be answered if you hope to achieve success.
Developing your business plan is a great opportunity to grow your business. It forces you to set goals. It makes you assess different opportunities. And when shared with your team, it gets your organization completely on the same page so everyone knows what he or she needs to contribute for the organization to be successful.
Writing a business plan is the first stop on the road to starting your own company. Although many other tools can help you evaluate and plan particular aspects of your business, a business plan provides you with both a road map of what you hope to achieve and a way to share how you hope to achieve it. A business plan also can help you secure credit, budget your time and money, and outline your goals for the future. Joseph Ferriolo, director of Wise Business Plans, said a well-written plan can deepen your insight and prevent future problems. "The reason for writing a plan is simple," Ferriolo told Business News Daily. "You don't know what you don't know."
Business plan formatting
Every business plan requires a few basic sections that outline your business, what it does and how it will be run. Here's what to consider when thinking about your plan:
1, Executive summary. This is usually the first section of any business plan. It gives the reader a condensed overview of what your business is all about and how you intend to accomplish your goals. Although the executive summary may be the most important part of a business plan, Ferriolo advised new business owners to write it last."Most people don't write a business plan because they are disciplined but because they need to get something —either a partner or financing," he said. "Once you have completed the other segments of the plan, you can write the executive summary in a way that is focused on reaching that goal."
2, Company description. Think of this section as an extended elevator pitch (That's business plan speak for a "quick" pitch of your ideas). You want to thoroughly explain the goals of your business and how you will satisfy the needs of your market. Your company description also explains the competitive advantages that you believe will make your business a success.
3, Market analysis. This section is where you explain your market research to readers, including your specific target market and why this market segment would be interested in your product.
4, Organization and management. The organization and management section tells your readers about the structure of your business and who in the company is responsible for different operations.
5, Service or product line. This section includes a description of your product or service and any associated copyright information or research and development activities.
6, Marketing and sales. The marketing and sales section includes information on market penetration and growth strategies for your business, as well as information about your sales strategies and activities.
7, Financial projections. This section outlines what your business will accomplish financially over the next three to five years. Potential investors, creditors and business partners may ask for this so they know they're making a good investment with your business.
8, Funding request. If you plan to ask for a loan or other financial assistance, then you'll need to include a formal funding request as part of your business plan. This section includes specifics about how much money you need now and how much you'll need in the future.
Keep in mind that while the sections listed above are the conventional elements of a business plan, your plan should reflect the kind of business you wish to start.
Making the most of your plan
If you are struggling to find the time to complete your plan, it can be tempting to hire an expert to help. However, Ferriolo cautioned that immediately outsourcing the task may deprive you of some of the benefit.
"I honestly think the best course is to try tackling it yourself," Ferriolo said. "You get familiar with what is needed, and you learn your own strengths and weaknesses. Then, if you decide you need help, you'll understand the value of what you're getting."
It is also critical to avoid the temptation to overstate numbers or expectations in an effort to help secure financing. While the ploy may fool some, experienced banks will do their own projections before offering you a loan. If your plan lacks adequate research or contains purely speculative numbers, it could hurt, rather than help, your prospects.
Finally, remember that the business plan should be revisited as your business grows.
"Don't just make the business plan and use it for funding —really benchmark your company against it, "Ferriolo said. "Reference the plan monthly and quarterly, and revise your research and estimates as you proceed. Being accountable to the vision you set forth will help keep you in line and successful."
Templates and resources
Additional templates and resources are available at the following sites:
• Bplans
• Entrepreneur.com
• SCORE.org
• Small Business Administration
• Liveplan
References: Dave Ravinsky, Elizabeth Palermo,
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