Developing a Business Plan
If you are someone who has spent countless hours contemplating starting your own business, and now find yourself poised to take action, the crucial first step is to begin developing a business plan!
One of the best investments you can make to turn your dream into reality is to spend the time, effort, and energy to develop a formal business plan. However, there is a great deal of difference between pondering business choices and developing a business plan.
There are three important benefits of having a formal business plan. The first is that a business plan will be an essential part of any request for financing. A well-prepared plan improves your chances of receiving the funds you need. Second, it can serve as a guide for policies and actions for your company over a number of years. Strategies and statements should be well thought out, unambiguous, and capable of being carried out. Third, the process of preparing the plan will enable you to focus on issues that are essential for the future success of your business.
A formal business plan should include the following:
- Executive Summary. This introduces and summarizes your business plan in its entirety, including your business’s profile, mission, and how you plan to get there.
- Market Analysis. This part involves thorough research on the industry of your business. It’s the quantitative and qualitative assessment of your market/industry including internal strengths and weakness of your business, as well as the external threats and opportunities of your market.
- Company Description. In addition to the basics such as proposed location, real estate, facilities, and equipment; this should also offer information about your company’s purpose. List your mission, goals, and objectives. State what your company does, and what differentiates you from your potential competitors. It would also be wise to mention your target audience/clients in this section and any potential clients or partnerships.
- Management and Organization. Discuss your planned management and reporting structure, identify key employees and list their backgrounds, list all planned positions and identify each of their roles.
- Marketing and Sales. How do you plan to promote your business and make sales? Develop marketing strategies centered around your findings in your market analysis. Ask yourself: What forms of promotion does my target audience respond well to, and what would be the best way to reach them?
- Services and/or Products. Talk about what you’re selling/what services you offer, and who they will benefit. Be sure to go into detail about these products/services.
- Request for Funding. If you find yourself needing to request funding, you'll want to include information on the business, your current financial situation, how the money will be used, and more. Tailor each funding request to the specific funding source, and make sure you ask for enough money to keep your business going.
- Financial Projections. In this section, provide financial projections for the next 3-5 years. How much you plan to spend, earn, and what you expect your profit margin to be. These projections will serve as forecasts of your cash inflows and outlays, income and balance sheet. They show bankers and investors how you will repay loans, what you intend to do with your money and how you will grow.
As you proceed through the business plan, remember that statements and research findings should be supported with credible data as much as possible. Basing your statements and business decisions on credible data will help better facilitate your business plan and will go a long way when requesting funding.
While the preparation of a formal business plan can be an arduous task, it is time and effort well spent. The process of preparing your plan will put you in a better position to make daily decisions and the final document will be extremely useful when seeking financing, obtaining potential investors and key employees, and finding your first customers!