These days, there is a lot of debate about business plans. Which one is best? The simple one-page action plan, or the detailed volume documenting every aspect of your business operation? I think there are uses for both versions.
When I started Roundpeg, I created a detailed plan, outlining my target market, competitive position, products, pricing, and financial models. I gave a copy to several key advisors including my brother (the consummate salesman), my husband (the person who will find every inconsistency), and my friend Dick (a business coach, with a focus on financial statements). Each read the plan from their perspective and gave me feedback.
The revised version was probably 40 pages long. I updated that plan every year, adding notes on staffing, and shifts in our marketing plan. In the last few years, Roundpeg has hit a new phase in our growth. As we have matured and stabilized our business model, there isn’t the `need for a complete rewrite of our annual plan. We have shifted instead to a two-page summary accompanied by financial forecasts.
But if you are just starting out, or dramatically shifting your business model to explore new markets or launch new products a more comprehensive business plan is in order. You may also need a more formal document if you are looking for a traditional bank loan or investment from an equity partner.
What Is a Business Plan?
A good business plan should be written to help a business look ahead, allocate resources, focus on key points, and prepare for opportunities and problems. You use it the same way you study a map to plan a route, determine where to turn, and locate key landmarks. A complete plan includes descriptions of the company, product or service, market, forecasts, management team, and financial analysis.
Before you start writing think about your audience. If you are writing for yourself, don’t spend much time on the. You know where you came from. Put the majority of your energy into the strategy and operations. On the other hand, if you are looking for an investor you will need to prove there is a market for your product. Potential investors are going to want to see that you have done your homework, know the competition, and understand your customer’s pain.
Both investors and bankers will want to know more about the people. Do you have people with the skills and resources to develop the business and lead it from startup through the transition to mature operations? When it comes to the financials, investors typically assume a startup is guessing and they are more willing to roll the dice on the idea. Bankers making loans want to be sure they have a chance to being repaid at some point in the future. For them, the revenue model and cash flow analysis are critical.
With your audience in mind here is an outline of the important elements of a small business plan
While this comes at the front of the document, it is actually written last. It should both summarize the plan and tease the reader, giving them a reason to learn more. It should contain:
- Company description and current status
- Products/services and market description
- Company objectives
- Financial performance and funding plans
History and Position to Date
Here you describe why you started the business, why you believe it will succeed, and how you will define success. It should include:
- Company background
- Sales and other achievements
- Mission, vision, values, and goals
- Business structure and management team
- Product/service description
Does anyone really want your product? Don’t guess. Take the time to conduct research before you write this section. Be sure to address the following:
- Description of the target customers
- Product preferences and purchase influencers
- Market trends
- Assessment of the competitors
How are you going to achieve your objectives? This section should outline your strategy for each of the four “P’s”
- Product: This is a concise description of the features and benefits of your product/service.
- Place: This is your distribution strategy. How and where will customers buy your product?
- Price: This section should focus on your pricing strategy. Is your goal to be the lowest price or a premium product?
- Promotion: How will you make customers aware of your product? This might include traditional advertising, press releases, events, social media, and referral marketing.
This section is not complete without the milestone schedule, a table that captures all the assignments, commitments, and plans that assign timelines and responsibilities. It should also include your plans for :
- Sales and sales management – Who is going to be responsible for sales activity.
- Manufacturing/supply – If you are selling a service focus on how you will deliver the service. What will your process be?
- Staffing issues – Hiring, staffing, and training.
- Business controls and critical risk. Don’t be afraid to outline some of the things which could go wrong. This will force you to create contingency plans
Forecasting and Financials
The plan culminates with the financials. Ultimately, your business plan must boil down to results. This section should include:
- P & L – History and 3 – 5-year projections
- Balance Sheet – Current and projected
- Cash Flow Analysis
- Break-even Analysis for new products or business
The appendix is where you put all the other “stuff” which is important but doesn’t seem to fit anywhere else. It can be as long or as short as you want. Almost anything can go in this section. It might include: :
- Expanded product descriptions, technical specifications, and patents
- Comprehensive financial statements
- Certifications, licenses, and contracts
- Newspaper clippings, testimonials, and letters
A Business Plan is Never Really Done
As you finish your business plan draft, remember, it doesn’t matter how simple or complex your business plan is. It is the process, not the finished product, that is important. A good business plan is never finished.
The best business plans are not beautifully bound documents gathering dust on a shelf. They are tattered and smudgy from frequent use and revisions are written in the margins.
Make business planning an annual event. Put an appointment on your calendar for one year from today for a business plan review. Pick a quiet place, away from the office, cell phone, and email to honestly assess your results. Did you miss, meet or exceed your goals? Were your systems sufficient? Did you correctly anticipate market trends and competitor activities?
Once you complete your assessment of the past, it is time to look forward. Talk with your team and advisors as you update your answers and plans to prepare for the year ahead.
Need some help kicking off the process?
We have a program to help you write a plan in just a few weeks. Sign up today and we will send you a blank outline and a weekly reminder with a few simple assignments to help you work on your plan.