Why every small business needs a plan
There will be many ups and downs and lots of surprises when building a business. The old-fashioned business plan is the best tool to help you navigate ups and downs and make adjustments.
A business plan is a logical, actualized breakdown of your company's future. This document describes what you intend to do and how. Many entrepreneurs use it to present their vision to potential investors.
There are many ways to put a business plan to work. It is your North Star. It is there to remind and guide you, keep you on the right track, and help you plan your future.
Is a business plan necessary for my company?
A business plan is essential.
Before launching a business, owners need to take the time to plan. These plans give life to an idea or business, and help owners tackle difficult questions before they are even asked.
The average business's lifespan is decreasing, and most new companies won't last longer than five years. As a result, opening a business can be risky, no matter your level of expertise. However, business plans can help you reduce that risk by forcing your mind to consider the market and your financial goals. They also allow you to identify what will make you stand out.
A business plan is the essential DNA
A business plan is a blueprint that outlines your business goals and your strategies to achieve them. Of course, there are many other sections to a business plan, but these are the three most important.
The Business Concept
Your business plan should include big-picture goals. This section explains your industry, business structure, products/services, and how it compares to the competition. This is where you will demonstrate your vision of success, the big goals you are aiming for, and how you intend to surpass them.
This section will show you how to 'wow' anyone interested in your vision. Let them see the concept of your dream business.
To Include:
Executive Summary
Business Description
Operation and Management Plan
The Marketplace
This section describes your potential customers: who are they, where are they, and why are they, buyers. While these concepts were already discussed in the first section, now you will drill down to provide more information.
Personas should be created for your primary customers. Describe the market and opportunities that it presents for your business. Here you will also describe your competition and the strategies you have for beating them.
To Include:
Market Strategies
Competitive Analysis
Design and Development Plan
The Financials
This section can be best prepared with the assistance of an accountant or some good accounting software. It is the most exciting part for potential investors. Even if you aren't looking for investors, it is worth spending some time in these sections.
Income
Cash flow
Balance sheet
Statements on Profit and Loss
Break-even analysis
It's impossible to fill out these numbers before you start a business accurately. However, these projections will help determine your financial goals and the best way to achieve them.
What length should my business plan take?
Your business plan should only be as long and detailed as you need it to be. No more, no less.
It all depends on the complexity of your business and how hard or simple it is to explain. There are fewer complications than running a local sports bar or developing a cutting-edge tech business.
An average is, however, between 15-20 pages.
Variations on Business Plans
Business owners can use their business plan in many different ways. For example, the internal team can use it to monitor their progress and set goals. Investors may also be interested in it. However, they might not need all the details. Multiple versions of your business plan are the best way to address these diverse needs.
The Mini-Plan
A mini-plan is a good idea if you are starting your business. These plans are not recommended to show potential investors or customers a quick overview of your business. However, you will soon be able to offer a more detailed plan.
A mini-plan is a plan that can be as brief as 5-10 pages long and contains high-level information such as:
Business Concept
Projection of Income
Financial Needs
Marketing Plan
Cash Flow
Balance Sheet
The mini-plan is not intended to be used for the long-term. Instead, the main purpose of the mini-plan is to generate initial interest in your company by sharing highlights.
The Working Plan
The working plan's organizational roadmap is long on detail and short on presentational pizazz. This plan is only for internal use. It is not intended for investors or anyone else. These plans don't require complex appendices, stock photos of people sitting around tables, or complicated stock photos. This document serves one purpose: to make everything clear for everyone who reads it.
The Presentation Plan
The presentation plan is the finished version of the working method. It uses the skeleton. To ensure that the document looks its best, you will need to collaborate with a graphic designer and a copy editor. This is the best plan to use if you are looking for investment capital or a loan. You will need to include competitive threats and risks in your due diligence.
Because VCs are often short on time, your plan should be easy to follow. They may not give you another chance to meet with them. The plan's look and feel should match the company's style and be consistent throughout.
When is it time to update my business plan
Your business plan should reflect any significant changes in your company. Companies update their business plans every quarter, monthly, or quarterly. Therefore, venture capitalists and lenders will need to see a current plan.
A strong North Star will help you and your team stay on the same track to your common goals as your business grows. Your business plan will help you stay focused on your goals, metrics, and mission. You'll have a better chance of beating the competition if you follow it.
