When it comes to taking charge of your business, few documents will be more important to you than your business plan.
You may want to think of your business plan as kind of like a resume for your business. Much like your resume showcases you as a potential employee, your plan should showcase your business to potential future stakeholders and lenders. It also should outline the future growth and projected goals of your company, as well as define who you are as a business.
In short, it is a document that small business owners should work hard to perfect and continually update. You can do this yourself, as there are plenty of free guides on the web that can assist you. If you can afford to, you can also hire a business plan consultant – there are plenty of them out there ready to help you craft such a plan.
Why a Business Plan is Crucial
A good business plan is vital for any small business, and should serve as:
- A roadmap for your business. Much like a pilot uses a GPS system to show him or her the direction in which to fly, a business plan should also be the GPS for your company in that it should point you towards the goals you are working towards. It should include an outline of your company’s mission, its growth plans and business milestones you are looking to achieve and the general timeline for when you want to achieve them.
- A tool for financing. Your business plan can literally make or break your chances of getting much-needed financing. It should impress lenders by providing a thorough description of your marketing and sales strategy; how you stack up to your competitors and a detailed analysis of your cash flow.
- An outline of management. While a business plan is not a legal document, it is important for legal reasons, especially if your business has multiple stakeholders. Your plan should describe what each partner’s role is in managing your business. It will also help you to figure out the appropriate exit strategy if one of your partners decides to leave.
- A tool to attract potential future stakeholders. If your plan is to seek additional stakeholders as your business grows, your business plan should clearly communicate the strengths of your business as well as your future plans for growth.
The ingredients of a business plan vary depending on how big your business is and what market it’s in. A traditional business plan is typically detail-oriented and designed for small businesses with multiple employees. A small business whose only employee is the owner may want to go with a lean business plan, which gives a much quicker summary of your business but still touches on all of the key points as a traditional business plan.
A business plan generally should include:
#1 An executive summary/mission statement
This is the section in which you briefly describe your business and why you believe it will be successful. It should include a basic description of your products or services, basic information about your company’s leadership structure, as well as a brief summary of the qualifications of the business owner or owners.
#2 A detailed description of your company
In this section, you generally want to provide readers information about the problems your company solves for customers, as well as the market you want to serve. Breakdown, in detail, the problems your company intends to solve for your customer; explain what makes your company unique and what gives it an edge over competitors. Also, this is where you can toot your own horn. Describe your background and how you are uniquely qualified to lead your business.
#3 A description of your organization and management
If you have more than one stakeholder in your business, it is important to detail how much of a stake each partner has in your business, as well as the exact function each has in terms of managing your business. This section should also inform the reader of the type of legal structure of your company – whether it is a sole proprietorship, an LLC or a C or S corporation.
#4 A description/projection of marketing and sales
If your business applies for a loan, lenders will want to know what your plan is for attracting customers and how you fare against competitors in your market. In this section, you should go into detail about what makes your products or services unique, and what gives your company a competitive edge. You should also describe your sales process. Does your company, either through your website or in person, set up a strong sales funnel? Are your sales seasonal? This section, then, should also serve as a roadmap for your employees on how to approach sales and customer service.
#5 A detailed analysis of your current or projected cash flow
Like most small businesses, your company may seek much needed financing to handle rising costs and projected growth. No matter what type of loan you are seeking, the first thing that lenders will want to see is how strong and consistent your company’s cash flow is (or intends to be), and whether your company’s sales are seasonal. Also list the types of collateral you have for a loan, be it in the form of business or personal assets. If you don’t have a long cash flow history, then create another section to include reasonable quarterly or yearly projections of your cash flow based on the market you are serving and how your competitors are faring.
Check and Update
Your business plan should be as thorough, visually appealing, and organized as possible. If you need help writing a plan and have the means to, then hire a business plan consultant. There are also plenty of sites out there (and some of them are free) that offer business plan templates – electronic formats for business plans in which all you would need to do is plug in your information.
It’s also very important to note that while you should be proud of your first business plan, it shouldn’t be your last. Much like you would update your resume as your career progresses, you need to update your business plan as your business continues to grow.
Perhaps your company changed its approach to sales and marketing as you’ve learned more about your niche market? Maybe you’re planning to add new products or services? Perhaps your long-term goals have changed, or external influences have caused your cash flow to change? These types of changes need to be included when you do update your plan.