Ultimate Guide to Business Plans
The term business plan has entered relative use in books, alongside “venture capital” and “entrepreneurship”, in the early 1900s. At that time, the definition was more close to a “how to manage a business” course, and not strictly referring to the initial planning documentation like we encounter it nowadays. Nonetheless, there are many viewpoints and indications on how such a plan should be developed in our ever-changing markets and industries landscape. So you start off with an idea, but where should you go from there? What we propose here is an ultimate guide, from concept to written deliverable, which will help you develop a personalized plan, tailored to your needs and wishes.
In this article, we will explore the topic of the business plans. We will go through the following sections: 1) you have a great idea, but is that enough?, 2) writing the actual business plan, 3) spice it up and make it special, and 4) innovate your business plan.
YOU HAVE A GREAT IDEA, BUT IS THAT ENOUGH?
Growing your business is quite an endeavor, and preparing a plan for the growth is quite the task in itself. So even though writing that awesome business idea on a napkin over brunch with your friend is a good start, there are many aspects to be considered even before putting everything on paper and calling it a plan.
The question most often received is if a business plan is actually needed. But whether you are just starting your own small company or you represent an already established firm seeking support, the answer is always YES. And here’s why.
A common misconception is that a business plan is only used for attracting investors. While it is a very efficient tool for this purpose, a business plan first and foremost gives its owner perspective. The complexity of owning a business can be seen clearly when all aspects and variables are considered, structured and connected to form a running mechanism that is sustainable in a given environment. Thus what seems simple and viable as an idea will need much research and thought be put into before it can be the same on paper.
Drawing from this idea, we can also see how a business plan can be used as a means for managing yourself in the process. It will help you keep track of your goals and objectives, your needs and what it takes to achieve them and even where you stand after having started your business, compared to where you thought you would be at that point. Please be advised that it is of utter most importance to not do any estimation in your business plan without a basis. So when you’re saying you’ll have 100 customers in 3 months, make sure that the market where you can sell your home kit for milking silkworms holds that many clients in your reach. And as it gives a description of how your business will operate, the plan is also very useful in recruiting necessary talent.
In the end, the business plan makes you accountable for how you designed your future and the means by which you are ready to make it a reality. But when should you write it? Considering this is your own personal recipe for the future, you should have it before any other step is taken. You wouldn’t want to start cooking dinner and realize half way you had ingredients more suitable for dessert. So given that, are you set on what you want to do? While owning your own business does sound really inspiring, if you’re still changing your mind between that car wash, the diner you always dreamed of having and a travel agency with your partner, you might consider going back to the drawing board until you have decided. Afterward, make sure business is really there and you’re not just trying to re-invent the wheel in an already saturated market.
One aspect that is sometimes forgotten before starting this endeavor is whether you are ready and available for the time and effort that needs to be put in. Consider exams’ importance and timing if you are a student, and family needs and necessities if you are a caretaker. Do you have any business or hobbies that will have you tied up with other activities? Make sure you know how much you’ll be able to dedicate and plan accordingly. Not only that, but are you also ready to fail? Statistically speaking, even if you prepare everything perfectly, there is still a chance that your business might not work as planned. Do you have a backup? Are you prepared to lose any personal assets invested?
Did you take your time and ponder on all these questions? At this point it would be best to make a short re-analysis to see if your idea is still viable. So, in light of the above, think of why you are doing this once again. What are your personal goals and what skill do you bring to the table in order to put your plan into action. Is your product or service well defined? Would it survive in the current market? How will you differentiate from other competitors and what are your financial capacities?
If you have everything answered up to this point, then you’re ready for the next step: actually writing your business plan.
WRITING THE ACTUAL BUSINESS PLAN
There are many different styles of writing a business plan. While most have a cover, an introduction and a table of contents, the actual chapters might vary in name and structure. But all of them still refer to some core aspects that need to be explained. So your initial working draft for any and all types of plans should contain the following information, many of which might require you to do some actual research before having them detailed:
- What are your goals and objectives? Think of where your will run your business, what is the start point and the course you want for it.
- What is your market and who are your competitors? Do you plan on starting on a niche market? Is your product highly specialized or mass use? Where will you distribute and how does your distribution network overlap with your competitors’? These are some of the main questions that you should be able to answer based on your research.
- How will you organize your logistics? Check the availability of all necessary resources and plan for the possibility of additional services or suppliers being needed.
- Who will your clients be and what is your business’s marketing needs? The internet is full of helpful demographics and statistics to support you in getting a clear picture on your customers.
- What are the risks you and your business are exposed to? What could cause your business to fail? Whether it’s a supplier shortage in your area or insufficient marketing, consider all aspects and try to plan out a solution for the most probable ones.
- Where will you get capital from? Are you investing your own resources or partnering with a friend? Will you be using your business plan to attract investors? If so, how much will they need to put in and what will their return be?
- How will your business be structured? What skills do you have and where will you recruit other necessary talent? (The later needs to be answered especially if you’re going to use the plan as a means of recruiting new personnel). Will you be a hands-on manager or delegate to your sizeable staff? As a side note here, make sure that when doing business with family and friends, you avoid emotional responses to issues and foster alignment to what you agreed upon in the business plan. You are professionals nonetheless and a good organigram with roles and tasks will come in handy even in this case.
After having all this information written down, you might consider structuring it in one of the following ways.
Option 1: Key components type structure
- Executive summary
- Business description
- Market strategies
- Competitive analysis
- Design and development plan
- Operations and management plan
- Financial factors
Option 2: Analysis and plan type structure
- Company Analysis
- Industry Analysis
- Competitive Analysis
- Customer Analysis
- Marketing Plan
- Management Team
- Operations Plan
- Financial Plan
These are not set in stone. As long as you have all essential information and structure, your business plan should represent how you want your company to be seen. Make sure you also write it using a style that addresses your key audience. If you will be using it to attract investors, you might want to emphasize your projected cash flow and profits in the financial section and talk about your commitment to deadlines in the executive summary. If you wish to recruit more specialized personnel, include a detailed development plan and how your management team will interact with employees.
Even though we’ve already discussed many aspects that need to be considered and questions that should be answered, try and keep your documentation brief. Pin point your key goals and objectives and create interest in their details. You can include appealing descriptions and elements to gain investor interest, just make sure they are realistic and you’re not over selling your idea.
Here are some presentation essentials that can help you achieve this:
- business charts: gross margin, net worth, market segments or milestones – any numerical data that can be stacked will be more appealing and easier to understand if presented as a business chart;
- straight forward language: avoid complicated long sentences, full of buzzwords and jargon. Keep your message simple and straight to the point;
- bullet points: this simple, underrated method can help make the information you are presenting a lot easier to digest;
- a polished overall look and feel: use a basic san-serif font and a standard text one, spaces wherever needed and page breaks. This will make your text look neat and easy to read. And of course spell check and proof read at least once.
Make sure to add a cover, a table of contents and an appendix section if necessary to keep everything clean and structured. Though these may seem simple additions to your business plan, they can sometimes be the key details that make yours a very successful one.
SPICE IT UP AND MAKE IT SPECIAL
We’ve discussed the importance of a business plan and all the necessary aspects it needs to address. But some people are more analytical and like to see additional pertinent information backing up their ideas; some are more creative and would like to start the innovation directly in their documentation; or some would want simply to walk the extra mile to make their business plan bullet proof. So we’ve come up with a list of extra content that you can add for you to safely stand out in front of your potential stakeholders.
Some of the supporting documents you might consider adding if you’re looking to fund your start-up are:
- A letter of intent to preface your executive summary;
- Documentation regarding the space where you want to run your business , such as blueprints or diagrams for spaces you own or quotes from builders for spaces you want to rent or buy;
- Credit reports to attest to your eligibility and good status;
- Census or demographic data to support your statements;
- Any legal documents that concern the object of activity, such as patents or functioning licenses;
In case you have an already running business that you want to expand or re-finance, you might want to add:
- Income statements;
- Cash flow statements;
- Balance sheet;
- Financial projections;
In more recent years, the afflux of new business has risen considerably, partly due to sites such as kickstarter.com or indiegogo.com, which promote crowd funding and fundraising for various industries and markets. This has led to new sections being commonly added to all business plans as a form of responding to modern needs of current businesses. Psychographics are added to customer analysis to provide deeper insight on consumer needs and wants by presenting their lifestyle, habits and interests on the concerned segments. Social media strategies complete marketing plans by adding the virtual aspect of a business as a much needed strategic advantage nowadays. Contingency plans go hand in hand with success plans, where you assure your stakeholders that an unexpected success will be put to the same good use as an exit plan would. Especially when wanting to recruit in hi-tech specialized environments, an Employee engagement plan is a must if you want to keep up with the latest trends. And last but not least, an Innovation statement will likely soon become a critical component of business plans, as our culture increasingly promotes innovation as an intentional, important developmental process for the long run.
The way we do business changes exponentially each year. Long standing companies have learned to adapt quickly to their environment and thus survived and even thrived. Even if you are a seasoned veteran in your market, make sure not to neglect the needs of potential new customers or investors and don’t be afraid to try out some of these non-traditional approaches to business plans.
INNOVATE YOUR BUSINESS PLAN
As we were discussing new trends in developing business plans, it is fair to say that we absolutely must discuss the technology available to make this development process easier.
Some complete packaged solutions come in the form of software programs (such as Business Plan Pro Premier Version 12 or Quicken Legal Business Pro 2014). These programs are equipped with sample plans, industry profiles, templates, and the possibility to export to a variety of formats or even import your own figures. Licenses may be considered quite expensive though and financial samples are most often dated.
There is also the possibility of using sites especially designed to help you with creating business plans. Both LivePlan and Trello work as platforms where you can upload all necessary information in a given structure and create value propositions, cost structure or even business pitches. You can always update the data and generate new forecasts, easily share your strategic goals on a dashboard or cross-check your plans with your overseas partner, all in a user friendly interface. The end result is a dynamic adaptable business plan to fit your needs.
But if you’re preparing for a startup accelerator or simply need support in developing a simple and straight to the point plan, a more lean solution would be better for you. Two such tools are LeanStack’s Lean Canvas for concise business plans and PlanCruncher’s one-page business summary. Both offer a simple solution for getting your business essentials boiled down to easy to read key points. A notable mention that might fit this category is Leanlaunchlab’s business models. While this too helps mostly to outline your business idea and structure its main points, the added value of this is the possibility to test, tweak and update your business model in a swift manner, helping you make sure that it ultimately works.
The list doesn’t have to stop here. New tools become available each month, peers are ready to review them and a surprising number are actually free. And even older platforms and sites can come in handy in different ways, like using Pinterest as a visual business plan or setting deadlines and planning deliverables with Google Calendar. The only limit thus becoming our willingness to innovate.
Even though there still is defining criteria requested when developing a business plan, recent economical culture has made it less rigorous in construct, more widely accessible and easier to put together. But whichever way you choose to personalize it, your business plan will be the first business card for your future company. Make it count.