One of the most important things you can do to ensure the success of your business is prepare a well thought out business plan.
Unfortunately, many business owners find this to be a difficult and confusing process, partly because they are focused on the end product and not on the process of getting there. It's a journey, not a destination!
I've found that it helps to break the planning process down into pieces and then look at how they fit together in the overall plan. With this understanding in place, the process becomes a lot simpler, and your plan will be better as well. It's also a good idea to think of yourself as an investor in your business (which of course, you are) and think through the sections from that point of view.
The Parts of a Business Plan
The Definition Of The Problem and the Opportunity
• Who is the customer? What is their problem?
• What is your solution?
• Why is it better than other solutions on the market?
• What's the market opportunity?
Competitive Market Analysis
• Good market research is the key to a solid business plan.
• Who are your competitors?
• What do they do better than you do?
• How will your business be able to take a piece of their market?
• In this section you will also need to address the market pricing of your product.
Your Business Model
• Business model can be defined as how the business turns an idea into money.
• A typical example of a business model is “the razor and the razor blade”. Razor companies sell razors inexpensively, because what they really want to sell you are the razor blades now and in the future.
• What is your unique business model?
• What makes it special? Why are you different from the competition?
• Do you have any intellectual property that gives you an advantage?
Your Marketing and Sales Strategy
• How do you plan to market your product or service?
• How will you get the word out and create demand?
• How will you turn a prospect into a customer?
• If that doesn't work, what else will you try?
• Be specific, design a detailed plan that can be easily put into action.
Your Operational Strategy
• Describe how you are going to execute your business model and deliver your product or service.
• How will you run this business on a day-to-day basis? Who will do what?
• What operational metrics will you track to ensure that your plan is working out?
• Clearly address the risks of the business, and how you will deal with them when they arise.
• Don't forget the external risks that you don't have control over (interest rates, the economy, etc).
Your Team
• Your people are your most important asset!
• Include short bios including relevant industry experience in the body of the plan. Include your outside advisors as well as employees.
• Detailed resumes go in the appendix.
• Include an organizational chart.
Time Line
• Successful execution of a plan often depends on timing.
• Be specific about when you will be executing the various pieces of the plan. You need this for the financial projections as well.
Financial Goals and Projections
• A good plan includes 3 to 5 years of financial projections.
• Include projected income statements, balance sheets, and statements of cash flow.
• The projections should include expected investor returns and/or clearly show the repayment of anticipated loans. Include the money you have put into the business in these calculations.
• If you do not have a strong financial background, it's a good idea to get professional assistance with this part of the plan, it's really important that it be done properly.
• If the results of the projections don't make financial sense, make changes to the earlier parts of the plan, and adjust your projections accordingly.
The Executive Summary
• A one-page synopsis of all of the above answering the questions:
• Why this business? Why Now?
• Why should an investor (including YOU) put time and money into this venture?
• Include brief financial highlights.
• Write this last, but put it at the front of the published plan.
With these parts in place, you'll have a great roadmap to follow as you manage your business, as well as a document that can be used to obtain financing or investment, communicate with employees, and continue planning for the future. Use it well, update it often, and enjoy the successful business that it helps you create!
JoAnne Berg can be reached at 800-378-7680 or [email protected].
Unfortunately, many business owners find this to be a difficult and confusing process, partly because they are focused on the end product and not on the process of getting there. It's a journey, not a destination!
I've found that it helps to break the planning process down into pieces and then look at how they fit together in the overall plan. With this understanding in place, the process becomes a lot simpler, and your plan will be better as well. It's also a good idea to think of yourself as an investor in your business (which of course, you are) and think through the sections from that point of view.
The Parts of a Business Plan
The Definition Of The Problem and the Opportunity
• Who is the customer? What is their problem?
• What is your solution?
• Why is it better than other solutions on the market?
• What's the market opportunity?
Competitive Market Analysis
• Good market research is the key to a solid business plan.
• Who are your competitors?
• What do they do better than you do?
• How will your business be able to take a piece of their market?
• In this section you will also need to address the market pricing of your product.
Your Business Model
• Business model can be defined as how the business turns an idea into money.
• A typical example of a business model is “the razor and the razor blade”. Razor companies sell razors inexpensively, because what they really want to sell you are the razor blades now and in the future.
• What is your unique business model?
• What makes it special? Why are you different from the competition?
• Do you have any intellectual property that gives you an advantage?
Your Marketing and Sales Strategy
• How do you plan to market your product or service?
• How will you get the word out and create demand?
• How will you turn a prospect into a customer?
• If that doesn't work, what else will you try?
• Be specific, design a detailed plan that can be easily put into action.
Your Operational Strategy
• Describe how you are going to execute your business model and deliver your product or service.
• How will you run this business on a day-to-day basis? Who will do what?
• What operational metrics will you track to ensure that your plan is working out?
• Clearly address the risks of the business, and how you will deal with them when they arise.
• Don't forget the external risks that you don't have control over (interest rates, the economy, etc).
Your Team
• Your people are your most important asset!
• Include short bios including relevant industry experience in the body of the plan. Include your outside advisors as well as employees.
• Detailed resumes go in the appendix.
• Include an organizational chart.
Time Line
• Successful execution of a plan often depends on timing.
• Be specific about when you will be executing the various pieces of the plan. You need this for the financial projections as well.
Financial Goals and Projections
• A good plan includes 3 to 5 years of financial projections.
• Include projected income statements, balance sheets, and statements of cash flow.
• The projections should include expected investor returns and/or clearly show the repayment of anticipated loans. Include the money you have put into the business in these calculations.
• If you do not have a strong financial background, it's a good idea to get professional assistance with this part of the plan, it's really important that it be done properly.
• If the results of the projections don't make financial sense, make changes to the earlier parts of the plan, and adjust your projections accordingly.
The Executive Summary
• A one-page synopsis of all of the above answering the questions:
• Why this business? Why Now?
• Why should an investor (including YOU) put time and money into this venture?
• Include brief financial highlights.
• Write this last, but put it at the front of the published plan.
With these parts in place, you'll have a great roadmap to follow as you manage your business, as well as a document that can be used to obtain financing or investment, communicate with employees, and continue planning for the future. Use it well, update it often, and enjoy the successful business that it helps you create!
JoAnne Berg can be reached at 800-378-7680 or [email protected].