Ask any business expert for advice on what is most important for the success of a business and the vast majority will cite writing and using a business plan as a critical component for success. Almost every lender will require some type of plan before lending any money to a business. However, ask most new entrepreneurs if they have written a business plan and a common answer will be "no." Why is this advice, noted prominently in all startup literature, not being heeded?
Many small business owners run their businesses without a written plan. Would you ever consider going on a journey without determining what supplies you might need, the mode of transportation or how to take care of things at home while you're away? Of course you wouldn't. Why then would you set off on one of your most important adventures, starting or managing your business, without a clear picture of what's ahead and what resources you will need to get there?
Most entrepreneurs will blame not having a plan on the time, knowledge, and research needed to put it together. Yet business plan writing advice is abundant, almost too abundant. Certainly, sorting through all the advice, some of it contradictory, can be quite intimidating. If a plan is written, it usually is in response to a financial institution's request and is formatted to fit the financial institution's needs. Once the funding is obtained, the plan is shelved until the next round of funding is needed. This is a mistake.
A well-written business plan is the story of how you are going to run your business. It is your opportunity to chart the path for where you want to go. Starting a business without a plan is like going on a trip without a map or a destination in mind. It might be a fun trip. Then, again, it might not. And, running a business is not a simple jaunt. You need that map and destination already in mind if you are to stay in business. However, writing that map and destination for your business does not need to be a complicated process.
Let's take a look at what a good business plan should include. As I mentioned in my feature on general planning, "a business plan is used when one is starting a new business or a new process or product within a business. It includes not only a description of the new business, process or product, but also a discussion of how one plans on managing the marketing, development, production, and financing of this new venture."
Your business plan establishes your checkpoints and goals along with setting a timeline for accomplishing certain objectives. Knowing who the plan is written for will help in making it a better plan. For yourself, you may be able to be more succinct and goal-oriented. For a lender, you will want to be bottom-line about how you are going to generate a profit. However, all have certain essential components.
The essential components of a business plan are:
A concise overview of the entire plan along with a history of your company.
Illustrates your knowledge about the particular industry your business is in, and presents general highlights and conclusions of any marketing research data you have collected.
How all of the different elements of your business fit together.
Organization and Management
Your company's organizational structure; details about the ownership of your company; profiles of your management team; and the qualifications of your board of directors.
Marketing and Sales Strategies
How you are going to attract and service customers.
Service or Product Line
What are you selling?
The amount of funding you will need to start or expand your business.
The critical financial statements to include in your business plan packet.
Additional supporting information.
Once you have gathered the information for the essential components, you can reformat it to fit a variety of needs. Much of this information comes from you, the business owner. That is why having someone else write your business plan is so often ineffective. What gives the plan "life" is you telling the story of your dream and how you are going to make it a reality.