Business Plan 101Woodridgeandscott
That document containing business goals, the methods on how these goal can be achieved and when they would be achieved is a Business plan.
Funders (whether a bank or an investor) and business promoters want a business plan to answer these questions:
- What problem does the company’s product or service solve? What niche will it fill?
- What is the company’s solution to the problem?
- Who are the company’s customers, and how will the company market and sell its products to them?
- What is the size of the market for this solution?
- What is the business model for the business (how will it make money)?
- Who are the competitors and how will the company maintain a competitive advantage?
- How does the company plan to manage its operations as it grows?
- Who will run the company and what makes them qualified to do so?
- What are the risks and threats confronting the business, and what can be done to mitigate them?
- What are the company’s capital and resource requirements?
- What are the company’s historical and projected financial statements?
- Executive Summary:
This is a concise (one page at most) overview of your entire plan.
- Business Description:
Includes a description of the business, products, and services; company locations and facilities; and management and labor.
- Business Mission and Strategy:
Includes your mission statement, strategic goals and objectives, and financing needs, with exit plan if needed.
- Markets and Competition:
Includes industry trends/analysis, competitive analysis, and SWOT (strengths, weaknesses, opportunities, and threats) analysis.
- Marketing Plan:
Includes the overall marketing strategy, pricing strategy, target markets and market segments, promotion and distribution strategies, and sales projections, and
Includes assumptions and summary of information appendices:
- Financial reports, historic and projected (balance sheet, cash flow, income statement)
- Management team.
- Other information referenced in the plan (e.g., lists of competitors, enviromemtall data that affects your market).
Here are some top benefits of having a business plan.
- See the whole business. When properly done it connects all the business dots and presents a better picture of the whole unit. Do your sales connect to your sales and marketing expenses? Are your products right for your target market? Are you covering costs including long-term fixed costs, product development, and working capital needs as well? Take a step back and look at the larger picture.
- Strategic Focus. Business plan prevents ball dropping and keeps the corporate goal in focus i.e. target markets, and the products or services to be tailored to match.
- Set priorities. You can’t do everything with a business plan, planning is may easy. Goals are prioritized and easy to track. Time, effort, and other resources are strategically allocated.
- Manage change. With good planning process assumptions can be regularly reviewed, progress tracked, and adjustments can be made to new developments. Plan vs. actual analysis is a dashboard, and adjusting the plan is steering.
- Develop accountability. Good planning process sets expectations and tracks results. It’s a tool for regular review of what’s expected and what happened. Good work shows up. Disappointments show up too.
- Manage cash. Good business planning connects the dots in cash flow. Profitable businesses suffer when slow-paying clients or too much inventory constipate cash flow. A good business plan will highlight this problem and adjust to it.
- Strategic alignment. Does day-to-day work fit with main business tactics? Do those tactics match strategy? If not, the business planning will bring up the hidden mismatches. For example, if you plan to set up a five-star hotel in a low income area, you’re out of alignment.
- Milestones. Good business plan sets target milestones to be achieved. These are key goals, like reaching a defined sales level, hiring that sales manager, or opening the new location. We’re human. We work better when we have visible goals we can work towards.
- Metrics. Performance indicators and numbers in business plan help track and monitor progress during performance review meetings. It helps figure out the numbers that matter. Sales and expenses usually do, but there are also calls, trips, seminars, web traffic, conversion rates, returns, and so forth. Business plan will help to define and track the key metrics.
- Realistic regular reminders to keep on track. We all want to do everything for our customers, but sometimes we need to push back to maintain quality and strategic focus. It’s hard, during the heat of the everyday routine, to remember the priorities and focus. The business planning process becomes a regular reminder.