If you have been considering starting your own business, it is probable you know what a business plan is, and have heard a time or two that you will need one. When first starting, most entrepreneurs don’t truly understand the purpose of a business plan. You may be a little puzzled. Is it really necessary that you have one for a small business? How do you go about designing a small business plan that will be useful? This article will help lay the groundwork for building a successful business development plan for your new venture.
What is a Small Business Plan?
To put it simply, a business plan is an outline that lists the basic details regarding your business, products, and services you provide. It will also include your target market, your business goals, and how you plan on reaching your goals.
A plan is just one of a few strategies you need to have laid out when starting a business. The other two are your marketing plan and financial plan. The plan should draw all three of these plans together, combining portions of your marketing plan and your financial plan into a cohesive document. Consider your plan as the master plan that will lead your business through the process from start-up through the establishment.
Why is a Business Plan So Important?
There is a whole list of reasons why you are going to need a business plan. Even though the reasons will differ according to the type of business you are opening and how you implement the business plan. Regardless, all businesses need one.
Some of the reasons you need a small business plan that may apply to you include:
- A business plan is needed if you plan on applying for a bank loan, seek investors, or add a business partner.
- To successfully start out, you must understand your target market, research the competition, and conduct a feasibility analysis. These are all included in the business plan.
- An ideal business will detail where you are currently and where you plan to be. It will also help you identify the specific path you need to follow to get there.
- The plan could provide important background info on your business, strategy details, and company dynamic to employees, including managerial staff.
- The financial segment of your business plan can be the foundation of your company budget and a helpful tool for monitoring cash flow monthly.
Simplified Plans vs. Traditional Business Plans
There are several forms of business plans, which include start-up, internal documents, operational, strategic, and plans that focus on growth. Each of these plans serves different purposes, but all primarily fall into one of two main formats. The traditional business plan, which many refer to as structured, or a simplified business plan.
A traditional business plan is the one that usually comes to mind when business owners hear the phrase “business plan.” It is usually a formal document that is very thick, containing an enormous amount of information. It can be quite overwhelming to many new business owners.
A traditional business plan typically includes the following sections:
Your Company Description: This includes location, company size, services provided, your goals and vision for the company’s future, and what you hope to accomplish.
Your Products or Services: What you are offering or marketing, with emphasis on the overall value you plan to offer your customers or clients.
Market Analysis: An in-depth review of the industry you intend to market your product or service to, and an overview of your target audience and competition.
Your Marketing Strategy: A breakdown of where your business fits into the competitive market and how you plan on pricing, promoting, and selling your product.
Company Management Summary: Describes how your plan is designed, persons, involved, and how the business is run.
Financial Analysis: Contains details for current financial needs, the type of finances needed for future growth, along with a calculation of your operating expenses.
As you can see, this type of business plan takes quite some time and research to complete. Luckily, not every business requires a traditional business plan. The logical solution for most small businesses is a simple or one-page business plan.
One-page business plans are brief business strategies that you can use as a standalone, or as an introduction for a traditional business plan. While this is a condensed version of the traditional business plan, you must still collect information that is specifically related to your business in order to create a true strategy.
The following sections should be included in a one-page plan:
Mission: Explain your mission. What is your reason for starting this business, and what is its purpose?
Vision: How do you envision your business after one year, three years, and five years in?
Goals: What goals have you set for yourself as a business owner? How do you plan on achieving your goals?
Creating a Cash Flow Projection
A cash flow forecast is considered by some to be the most important piece of a business plan. Regardless of how much you strategize, it won’t be good enough if there are not enough funds to cover your expenses. Include the following in your cash flow projection:
Your Strategic Plan: How will you build your business? What do you plan on marketing? What makes your business stand out among the competition?
Your Projected Start-up Capital: What is the total amount of cash you will need to successfully launch your business?
Your Anticipated Expenses: What do you estimate your business’s monthly payment will be?
Executing Your Business Plan
Once you complete these final steps, you will have a working plan that you can implement to start moving forward with your new business. Once you have this plan in place, consider it a working tool you use on a regular basis, bringing it up to date as needed so it remains current. The most efficient plans are those that are used as an integral part of the business as an aid for decision making and keeping tabs on your business.