Steps to Write a Business Plan
Story Views:- Comments(0)
Imagine, for a moment, that you're on a sales trip to an unfamiliar city. You arrive at the airport, you rent a car, and you know that you need to get to your hotel and your conference before a certain time. To do that, you'll need to know the streets; to know those, you'll need a map.
If you have a road map, you can work out exactly where you need to go, and at what time, in order to make your way to your destination. And even if something goes wrong--you hit a traffic jam, one of the streets is under construction--you'll have enough background knowledge of the now-familiar city to recover and get yourself back on course.
Trying to run your small business without a business plan is like trying to navigate an unfamiliar city without a map. You can do it, with some luck, but you run some serious risks.
Say your business starts to run into difficulties down the road. You won't have a clear picture of your ideal operating procedures handy, so you'll have a much more difficult time fixing the problem. If you want to convince a potential investor that your business will be successful, you won't have any evidence for them, and they'll be much more hesitant to invest. There's also the possibility that--like someone without a map setting out on random streets in hopes of reaching their destination--your business is heading in an unprofitable direction from day one.
So a sound business plan isn't just a nice thing to have; it's an absolute necessity. But just as there are good maps and bad maps, there are good business plans and bad business plans.
Your job, as a potential small business owner, is to make sure that your business plan will be an accurate guide to the operating procedures of your company, both in the short and long term, and that by following it scrupulously, you won't be leading yourself and your investors astray.
In order to write a good business plan, you'll need to think about two audiences:
- Yourself and your employees
- Your investors
If you don't cater to the first audience, you--or your employees--will be lost when either of you refer to your business plan in order to make decisions about purchasing, marketing, and hiring. And if you don't cater to the second audience, your potential investors or lenders won't understand how your business will become profitable. Without being able to see any possibility of getting a return on their investment--they won't invest.
Luckily, the interests for both audiences dovetail: if you know exactly how your business will function, you'll convince investors that your business will be profitable--and if you can convince investors of that, it means that you know exactly how your business will make that profit. So every good business plan needs two major features:
- Account of company operations
- Analysis of company revenues
In order to make sure that your business plan covers these features, first ask yourself these questions:
- What exactly are you selling: a product, a service, what?
- What's the market for your product?
- How will you provide that product to its intended market? Will you need a storefront? A website? A distribution or delivery service?
- How will you let your intended market know about your product? Will you advertise? Will you rely on word of mouth? Will you be located in a thriving urban area with plenty of foot or car traffic?
- What tools or assets will you need to provide your product to its market? Will you need office space, a web server, delivery van, factory floor, travel expenses?
- Will you have employees? Will you need managers or supervisors for your employees?
- How will you get paid for your product? Cash, check, credit, collateral?
Write down your answers to each of these questions. Then, try to picture exactly what each step will involve, down to the physical level: if an employee needs to type in a purchase order, make sure you're thinking in terms of purchase order forms, a computer keyboard, a printer, and printer ink (and, of course, that employee's salary).
For every question you answer, you should ask yourself at least five additional questions about exactly how your company will run. Don't ever say to yourself: "Well, I'll put off answering that one until I know more": get the information you need, and keep answering those questions. Once you run out of questions to ask, you'll know that you can stop.
Now that you have all of this information, you need to arrange it into a clear, coherent business plan. A good business plan will have (at least) the following sections:
Concept - This is where you give an overview of your operations, your market, your investors, and the relevant experience and skills of any employees you've already decided on. The Concept is an overview, in broad strokes, of exactly who your business is, what your market is, what you provide to that market, and why you expect to earn returns from that market.
Company Summary - Talk about who you are in more detail. Why did you decide to start this business? Why did you expect it to be profitable? Where is your company located--and what should you and your investors know about the market in that location? Who owns your company? Will that ownership change in the foreseeable future (i.e., will you take on additional investors, or make an IPO)?
Start-Up Analysis - Will your business require any special costs to get off the ground: taking out a lease on business premises, acquiring business permits, clearing copyrights? Provide yourself and your investors a detailed analysis of these costs.
Products or Services - Talk about exactly what you're going to do for your customers. What will you sell? How will you sell it? And what sets your business apart from all the rest in its niche?
Market Analysis - This is a crucial step, and one that's often overlooked by zealous entrepreneurs. How do you expect your market to respond to your product? What demographics do you expect to be your core market? What larger industry trends may come to bear on your business's success? Much of this will be speculative, but get as many facts as you can (market surveys, industry statistics) to back up your position.
Strategy and Implementation - This is the real meat of your plan. Here's where you talk about exactly how you'll reach your market, how you'll return on your investment--and how much you'll be spending every step of the way.
Financial - Talk about your financing. How much equity have you been able to accumulate between yourself and your business partners (or other investors)? How much of your money will you need to acquire through loans? What are your short-term and long-term financial goals? And, most importantly, how long will it take for your company to become profitable--and how soon will you be able to start repaying your loans?
Although you (hopefully!) amassed a great deal of information before starting to write your business plan, you shouldn't feel obligated to use every bit of it in the actual plan: investors probably aren't interested in knowing what store you plan to buy your hanging files or paper clips. What you do want, however, is a reasonable estimate of your costs (based on all of that information you gathered), a reasonable analysis of your business and its place in the market, and a reasonable expectation as to how soon investors and lenders will see repayment or profits.
If you have all of this information, and if you write it out in a clear, concise way, your business plan will be exactly what you need it to be: a map of the first few years of your business, both for yourself and for your investors. What's more, it'll be a useful map: you'll have a clear sense of who you are, what you do, where you fit into the market and why you'll succeed. And you'll know that, unlike many prospective entrepreneurs, you didn't skimp on one of the most essential phases of building a successful business. No, not all business plans are the same: some are clearly better than others. And yours--if you put the necessary work into it--will be among the best.
|
