You’re a business owner now, and the world is full of opportunities. It’s time to take action, develop your product and show your audience what they’re missing. Before you do any of that, however, you’re going to need to write a business plan.
Whether you’ve just started a small business, or you’re struggling to grow your existing small business, a good plan is absolutely essential. No business succeeds in the long-term by doing the same thing over and over again. You have to adapt and make choices about how you’re going to grow how you’re going to change.
Trying to start a business or grow without a plan is a recipe for chaos or unsustainable growth. If you want your company to last and have an impact, you need to take the time to weigh your strengths and weaknesses, study the market, and put together a concrete plan for what you want your business to achieve in the future and how you’re going to get there.
What is a Business Plan?
A business plan is an outline of where your business is now, where you want it to be, and how you’re going to get there. You should use it to lay out your vision for the future of your firm.
Beyond the vision, it also needs to be grounded in real numbers and research. It needs to be something you could show to potential investors to prove that you’ve put in the work and your business has what it takes. That means including predictions for earnings and costs and your market analysis, as well as the in-depth strategies you’ll be using to expand your business.
What Needs to Be in a Business Plan?
Critical investors expect a business plan to be neat and concise so they can quickly get concrete, actionable information. You might include an executive summary to make certain information even more accessible. It should include a brief profile of who you are as a company, and how you’re organized internally, and as a legal entity.
You’ll need to include the research you’ve done on your specific target market and your product. Who is your audience and how are they helped by your product or service? What is your marketing plan for reaching them?
Then you need precise and accurate data to show that you’ve put in the work. Include your projections for sales and expenses, as well as the data you’re drawing on to make those predictions.
How Do You Write a Business Plan?
You’ve decided you’re better off coming up with a business plan first than simply charging into the future and making important decisions for your business as you go. But how do you write a business plan?
1) Describe Your Company
The first essential step of the plan is to describe you and your company. Good businesses, even small ones, have to establish an identity—and that isn’t your decision alone. Spend time with your management team and any other staff discussing who you are and what defines your company.
When you’re ready, take some time to put together a new mission statement or revise an old one that you feel represents your company well and gives you direction.
2) What Do You Offer?
What is the product or service that you sell, and who is your target market? This should flow organically out of your mission statement. The service you provide and the people you serve should reflect who you are as a company.
If you’re struggling to come up with either your mission statement, or a description for your market and service, it may be time to revisit both of them jointly. Make sure your mission statement includes your target market, and your service aligns with your mission.
3) Do Your Research
Now it’s time to consider how your company fits into the larger market and world, and how that might change in the future. Learn as much as you can about your target clients and conduct a competitive analysis of your services in relation to other similar providers and companies.
What competitive advantages do you or could you have in the market because of your unique mission statement, product, or business composition?
Take time to study growth and sales projections for your business and the market as a whole. Find out everything you can about how your business will change and grow. That way you’ll be better prepared to make decisions about how your own business can change.
4) Envision the Future
Then you consider your own company culture and identity, and discuss with your management team what you want your business to become in light of the opportunities you’ve discovered in your research.
Create a financial plan complete with projections for how your sales and production will change over time and how you’re going to afford the investment required to make that growth happen.
5) Lay Out the Steps to Achieve That Vision
Once you’ve established the end goal, it’s time to name the steps to get there. You can start at the beginning and get going immediately. Do you need to develop a new product, find new clients, or hire new staff? Will you be developing a new marketing plan to connect with the clients in your unique target market?
Even as you get excited and start racing into the future, patience is essential. Realistic business plans can take a long time to come to fruition, but you can get there with hard work and dedicated management.
How Many Years Should a Business Plan Cover?
The length of a business plan depends on a lot of different factors. It can extend far into the future, but it should also have a closer deadline, ideally within a couple of years, where you can stop to evaluate your progress and re-assess market conditions for your product or service.
If you’re taking this business plan to potential investors as part of a funding request, you’ll want your business plan to show forethought in considering the whole life cycle of your product. How long will it take for your product to be adopted, to become more popular, and then to fade as it’s replaced.
The business plan needs to cover enough time that you will have clear results to measure and evaluate at a reasonable end-point. That means considering the revenue cycle for your product and your legal and tax obligations determined by business structure.
A good place to start would be a 3-year business plan, and then you can always expand or adjust as needed.
Are Business Plans Necessary?
Trying to grow your business without a plan is like leaving for a trip to somewhere new without access to a map. Your business plan should give you a sense of where you’re going and how you’re going to get there.
Putting together a business plan means looking out for possible obstacles and finding ways to prevent or overcome them. How are you going to face day-to-day small business challenges that arise as you try to grow?
You know you want to grow, but growing requires investing. How are you going to keep your balance sheets lined up with a healthy cash flow without putting enough thought into your spending? Whether you look for a bank loan or credit from investors, you’ll also need a business plan to show that you’re a good investment and have done your research.
Even if you think your business is set for success, you need a plan to back that up with facts and get others on your side. Top talent for your business and potential investors all want to see that they’re supporting a company with a feasible plan for growth and success.
This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. 1-800Accountant assumes no liability for actions taken in reliance upon the information contained herein.