Business plans are the backbone to every business, and they are meant to be made so that they can be altered to reflect the changing nature of your business. For example, my first one for Bay of Quinte Young Entrepreneurs (then known as Youth Beyond Enterprise) was built with a focus on launching as a brick-and-mortar business, but when I opted to become an e-business (and change the name), I changed it to reflect the new reality.
What’s a business plan
Simple: a business plan has essentially two objectives: outline what your business will do (i.e. products, services, etc.) and how you anticipate doing it. It’s also roadmap in which you lay out what your goals & targets are for your business and how you plan to achieve them.
Why do I need one?
- To secure business funding.
- Having a business plan demonstrates to potential investors that you know what your talking about when it comes to your business and how investing their own hard-earned money will benefit them in the long-run.
- A plan demonstrates in clear terms just what makes your business concept unique, how you help solve a problem people have, and why people will buy from you over your competition.
- A business plan also forces you to lay out a budget based on what you have forecasted for revenue targets and anticipated expenses. Investors will want to see these projections to make sure that you have the financial smarts to not throw around their money frivolously and will use it strategically to move your business forward.
- To test the validity of your business.
- Putting your business idea down on paper is the best way to test if it is viable & worth pursuing.
- By the time you get to doing a market analysis (where you determine if a market actually does exist for your product/service) or a competitive analysis (where you compare your business idea to what is already being offered in the marketplace by your competitors), a business plan will give you a pretty good idea as to if your business will be able to hold its own. If it wouldn’t be able to, then the only investment you are out are the time it took to write the plan and conduct the research.
- It provides clarity and sets out benchmarks for you to base the business’ success by.
- By having it laid out in black and white, you will be able to use the plan to keep track of the benchmarks that you want to hit and how you plan to meet them. For example, you want your business to have registered 100 new clients within the first month and 500 within the first 6 months. To achieve this goal, you will attend trade shows, book appointments with potential customers, launch a social media campaign, and open a pop-up kiosk in a mall to build awareness of your product.
- It brings everyone onto the same page.
- A business plan lays out exactly what is expected of each team member. This includes outlining the part that they will play in the business achieving the goals and hitting the milestones as set out in the plan.
- A business plan isn’t written by just one member if there are multiple players, it is a working document that is collaborated on by everyone with a vested interest in the success of the business. When a business is just an idea/concept, a lot miscommunication can take place because everyone will have different perspectives on how things should go. By working together on the plan, there is the opportunity to hash out details and give everyone the opportunity to contribute.
- It helps you plan an exit strategy.
- It might seem odd to be thinking of an exit strategy when your business is still just an idea in your head and on paper, but it is essential.
- By building in an exit strategy, it enables you to plan your benchmarks in order to reach your end targets. Every business & entrepreneur has different reasons for exiting their business. Some will exit when it is bought out by a competitor, when the founder hits a certain age and they turn control over to either a family member or another member of the team.
- An exit strategy can also be based on sales targets, such as they will walk away if they do not hit an increase of 25% per year for 5 years. By having this as an exit strategy, the company can then make plans for how they will consistently meet this increase every year.
How long should it be?
- Your business plan should be long enough to get the point across with enough information that someone (i.e. an investor or a new teammate who came on board after it was written) could pick it up and know exactly what the intentions, targets and plans are for the business, along with where they as an individual are involved.
- According to Entrepreneur.com, one of the biggest mistakes entrepreneurs make with regards to their business plans is that they think everyone wants to and has the time to read tonnes of details. The best plan of attack is to have three sections (more details below): An executive summary of everything discussed in the business plan (typically 1-3 pages), the plan itself with more details (on average 10-20 pages), and as many appendices as desired to demonstrate you know what your talking about (i.e. diagrams, charts, calculations, etc.).
What needs to go into a business plan?
- Executive Summary:
- The Executive Summary is the elevator pitch of your business, with all of the essentials someone needs to either bring themselves up to speed on the goals & objectives (a new team member) or to make a decision to invest in or buy your business.
- This section, though it is the first (and sometimes only) thing read, I recommend writing this section last. This way, you have worked through all of the other sections, have laid out all of the details needed and can succinctly summarize the entire plan for someone to quickly read through.
- Company Description:
- This is the details of the business itself and how it operates, including location & hours of operation.
- In this section, talk about the following: how your company is legally structured (sole proprietor, partners, corporation, etc.), a brief history and the nature of the business, other players in the game (i.e. suppliers), any growth that the company has experienced, and what your short- and long-term goals are.
- Products and Services:
- This is the section where you clearly detail what the product and/or service is that you are selling, how you help to solve the problems being experienced by your customers over your competitors, and who these customers are (demographics).
- In this section, I recommend including diagrams/pictures to help illustrate your product (including longevity) and charts to highlight costs and what you anticipate they will generate in sales.
- Market Analysis:
- Use this section to clearly demonstrate that you have researched your competitors, know your targeted market and how your product/service is that much better than your perceived competitors.
- You also want to use this section to outline who will be buying your product/service (i.e. age, gender, income, personality, etc.). Outline the trends being experienced in the marketplace and how you plan to offer what is currently on trend and adapt as the trends change so that you remain relevant & in business.
- Sales and Marketing Strategy
- This is where you outline how exactly you plan to reach your targeted customer base, including how you will be setup (i.e. online, brick-and-mortar, or a combination), marketing plan, product/service pricing, and how the goods will get to the customers (which includes how you will initially acquire them and delivery to the customer).
- In this section, you also want to discuss your own labour market. Outline how many employees you have and/or plan to acquire, how you plan to do this (direct hiring, outsource, temp agency, placement agency, etc.). and the types of employees you will have (full-time, part-time, casual, permanent, temporary, etc.).
- Organization & Team Members
- This is where you talk about who the key players are on the team. Depending on how you are structured, you should include an organizational chart with who is who in what department. I recommend putting this chart in with the plan and not in an appendix. Discuss who the owners/founders are and what percentage they own & are involved (managing partners, silent partners, etc.) and what they bring to the business that will make it succeed.
- Do the same for your management team if you have one. Highlight who they are, what they are responsible for and what they bring to the team. Also, be sure to make note of any external players involved, such as accountants, lawyers, consultants, etc.
- Financial Plan.
- This is the final section of the plan, and the one where I really recommend seeking out the assistance of a financial professional. This section should be the second-to-last section written, just before the Executive Summary.
- Working with a financial professional, you want this section to include the following: historical financial data if you are building a plan for a pre-existing business, forecasted financial statements for the next few years, and a brief summary of the business’ financial data, including a trend analysis for the past and future.
Note: there are many different opinions about how many sections should be in a business plan, so I have gone with the structure that is most commonly referenced, the 7-element model which includes: executive summary, company description, products & services, market analysis, sales & marketing strategy, organization & team members, and financial plan.
Following the advice, I have already passed on to you, I have opted to provide an executive summary of the components that go into a business plan. For more information, please see the following sites that I drew the information from: National Federation of Independent Business, QuickBooks, Young Upstarts and Forbes.