This article was originally called "Do You Need a Business Plan?"
The title was changed because in truth, every business needs a business plan. It's a common misconception that business plans are used only for raising capital, as in "my bank wants to see a business plan before they will approve a loan," or, "I need a business plan so I can get venture funding."
But a business plan is really just what it sounds like: a plan for running your business. The business plan will usually be divided into sections relating to the key activities of your business, such as Sales, Hiring, Manufacturing, and so on. In each section you will list the major goals and tasks to be accomplished, and the steps needed to accomplish them. For very small businesses you may plan a year in advance, but a more typical planning time frame is three to five years. In additional to these "operations" sections, your plan will have some informational sections that will be used in setting the operational goals. For example, what is the market opportunity that your company is pursuing? The information sections are especially important if you are using your business plan to raise capital, but they should not be neglected even if your company is self-funded. The information you gather about the market and your competitors is literally the foundation of your business plan.
The final key piece of your business plan is the financial section. In the operations section of your plan, you included a schedule of tasks, and that schedule should match your financial plan. For example, if you said that you would start advertising in April, you would spend $1500 per month, and the result would be a 20% increase in sales, then the $1500 per month advertising expense, as well as the increased sales, should be included in your financial plan.
Banks and venture firms will require the financial plan to be in a specific format; you may need an accountant to prepare this. But even if that's the case, start will a financial plan that you create and understand. Make sure the financial plan matches your operational plans, and be sure you understand how every number was determined!
You'll learn a lot in creating your business plan, and avoid many mistakes. Once your business plan is complete, don't put it away! Consult it regularly. Be sure your actual income and expenses match your financial plan. And if reality doesn't match your plan, figure out why and adjust the plan accordingly.
One small business owner initially projected that 65% of her business revenue would come from services her business provided, and 35% from product sales. Six months after the business was launched, she discovered that, although total revenue was very close to the plan, the ratio of service to product revenue was exactly the reverse of what had been projected. This raised several possibilities. Perhaps not enough effort was being spent to promote the service side of the business. Or perhaps the product portion of the business was a simply bigger opportunity than originally thought, and more emphasis should be placed there! Based on experiences such as this, I recommend that small businesses review their business plan at the end of each quarter, and that they conduct a thorough update of the plan at least once a year.
Simple Business Plan; Preparing One That Will Work For Your Business
Creating and starting your own business should be an exciting and thrilling time in your life. And a simple business plan can help.
Getting Outside Funding For Your Business
It is also hard to overestimate the importance of having a solid simple business plan to the success of the new startup business. A complete and accurate business plan is a necessary first step toward getting the financing that will be needed to create a new business.
Few new businesses can succeed without some form of outside funding, and a properly executed business plan is the key to getting this funding.
Any loan officer will want to see your business plan when you apply for business funding.
Using Private Investors And Partners
The simple business plan is also important for those business owners who plan to use only private funding. Private investors and prospective partners will want to see the business plan before they decide to invest their hard earned money there.
What Should You Include In Your Business Plan?
Many new business owners are confused about just what a business plan should include, and what format it should take. While the format of a business plan will vary from business to business, there is some basic information that simple business plans for any industry should contain.
Including Details About The Management Team
The management team section is actually one of the most important sections of the simple business plan. This is because the management team is such an integral part of a company’s eventual success or failure.
A company is only as strong as its management team, and it is important that the business plan showcase the qualifications and relevant experience of the principals in the business.
Including An Honest Assessment Of The Finances
An honest assessment of the finances of the business is also an important part of any business plan. Of course this is somewhat more complicated in the case of a startup company without a financial track record.
In the case of a startup, the business plan will include some financial assumptions. It is important to point out that these assumptions should not represent the opinion of the business owner.
This financial information will be vital to anyone reading the simple business plan.
The title was changed because in truth, every business needs a business plan. It's a common misconception that business plans are used only for raising capital, as in "my bank wants to see a business plan before they will approve a loan," or, "I need a business plan so I can get venture funding."
But a business plan is really just what it sounds like: a plan for running your business. The business plan will usually be divided into sections relating to the key activities of your business, such as Sales, Hiring, Manufacturing, and so on. In each section you will list the major goals and tasks to be accomplished, and the steps needed to accomplish them. For very small businesses you may plan a year in advance, but a more typical planning time frame is three to five years. In additional to these "operations" sections, your plan will have some informational sections that will be used in setting the operational goals. For example, what is the market opportunity that your company is pursuing? The information sections are especially important if you are using your business plan to raise capital, but they should not be neglected even if your company is self-funded. The information you gather about the market and your competitors is literally the foundation of your business plan.
The final key piece of your business plan is the financial section. In the operations section of your plan, you included a schedule of tasks, and that schedule should match your financial plan. For example, if you said that you would start advertising in April, you would spend $1500 per month, and the result would be a 20% increase in sales, then the $1500 per month advertising expense, as well as the increased sales, should be included in your financial plan.
Banks and venture firms will require the financial plan to be in a specific format; you may need an accountant to prepare this. But even if that's the case, start will a financial plan that you create and understand. Make sure the financial plan matches your operational plans, and be sure you understand how every number was determined!
You'll learn a lot in creating your business plan, and avoid many mistakes. Once your business plan is complete, don't put it away! Consult it regularly. Be sure your actual income and expenses match your financial plan. And if reality doesn't match your plan, figure out why and adjust the plan accordingly.
One small business owner initially projected that 65% of her business revenue would come from services her business provided, and 35% from product sales. Six months after the business was launched, she discovered that, although total revenue was very close to the plan, the ratio of service to product revenue was exactly the reverse of what had been projected. This raised several possibilities. Perhaps not enough effort was being spent to promote the service side of the business. Or perhaps the product portion of the business was a simply bigger opportunity than originally thought, and more emphasis should be placed there! Based on experiences such as this, I recommend that small businesses review their business plan at the end of each quarter, and that they conduct a thorough update of the plan at least once a year.
Simple Business Plan; Preparing One That Will Work For Your Business
Creating and starting your own business should be an exciting and thrilling time in your life. And a simple business plan can help.
Getting Outside Funding For Your Business
It is also hard to overestimate the importance of having a solid simple business plan to the success of the new startup business. A complete and accurate business plan is a necessary first step toward getting the financing that will be needed to create a new business.
Few new businesses can succeed without some form of outside funding, and a properly executed business plan is the key to getting this funding.
Any loan officer will want to see your business plan when you apply for business funding.
Using Private Investors And Partners
The simple business plan is also important for those business owners who plan to use only private funding. Private investors and prospective partners will want to see the business plan before they decide to invest their hard earned money there.
What Should You Include In Your Business Plan?
Many new business owners are confused about just what a business plan should include, and what format it should take. While the format of a business plan will vary from business to business, there is some basic information that simple business plans for any industry should contain.
Including Details About The Management Team
The management team section is actually one of the most important sections of the simple business plan. This is because the management team is such an integral part of a company’s eventual success or failure.
A company is only as strong as its management team, and it is important that the business plan showcase the qualifications and relevant experience of the principals in the business.
Including An Honest Assessment Of The Finances
An honest assessment of the finances of the business is also an important part of any business plan. Of course this is somewhat more complicated in the case of a startup company without a financial track record.
In the case of a startup, the business plan will include some financial assumptions. It is important to point out that these assumptions should not represent the opinion of the business owner.
This financial information will be vital to anyone reading the simple business plan.
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