We know, we know. You’ve come up with a great new business idea and you just want to get on with making that dream a reality. But hold your horses.
Before you do anything else, you should make sure you have a business plan in place. Not only will it help confirm your great idea is in fact a great business idea, it will also help you plan exactly what you will be doing when.
Not convinced? Then read on to find out why having a business plan is so crucial to business success.
What is a business plan?
A business plan outlines the objectives of your business and how it plans to achieve them. Think of it like a roadmap. You wouldn’t go on a long journey without a map in case you got lost. Well, a business plan serves the same purpose. It makes sure you have a clear idea of what your business is all about, how it’s going to grow and the steps you need to take to get there.
While all businesses should have a business plan, they are especially useful for new businesses as they also help confirm your great idea actually makes sound business sense.
What should a business plan include?
What is included in a business plan can vary, but a good one will have the following.
- An executive summary
This gives a brief overview of what’s in the plan. Most people write this last as you can then pull out key statements from all of the other sections. - A description of what your business does and how it does it
If you sell products, you should include operational details, such as your manufacturing process, and details on inventory and fulfilment. If you sell services, you need to describe what they are and how they benefit your customers. You should also mention any intellectual property you own, the legal structure of your company and whether you have any strategic partnerships in place. - Market research
The information in this section will feed into your marketing plan so should include information on who you want to sell to, the size of your potential market, your competitors and what makes you different from them. It should also talk about how you are going to market your business idea. - Your team
This should include bios of all your key team members and an explanation of how they are going to help you meet your business goals. - Financial documents
These figures back up everything you’ve said so far and should include a profit and loss statement, balance sheet and cash flow statements for the next three years. Be conservative in your projections.
If this seems like a lot of work, it is! However, if you are just starting out it’s fine to start with a shorter document which just gives a brief overview of each section.
But remember business plans aren’t just about sorting through your ideas and identifying any obstacles which might get in the way of your success, they also help keep your team focused on what’s really important, so putting the effort in is definitely worth it.
How a business plan could help your business
As well as ensuring everyone is clear about what your business is about and what you want to achieve, there are a number of other reasons why business plans are crucial for businesses of all sizes.
1. Keeps your business on track
A business plan is a bit like a reference tool – it sets out clear goals, how you are going to get there, and provides sales targets and milestones to make sure you stay on track. Used properly it can help you measure and manage your business and help you make key decisions at the right time.
2. Helps you hire the right people for your business
Having a business plan in place enables you to identify what roles you need to fill or what areas you could potentially outsource. It also helps you attract the right type of people for your business as you will easily be able to explain what your business is all about and how you plan to grow.
3. Enables you to raise investment
Whether you want a line of credit from your bank or outside investment, a business plan will answer any questions about how your business generates revenue and your potential profitability. This can make the difference between whether or not someone decides to invest and will also influence how much they are willing to give.
4. Contributes to a marketing plan
While the business plan does cover an overview of marketing, you should have a separate marketing strategy, which goes into detail about your potential customers, why they should buy from you and how you are going to reach them. This is essential if you want to get your sales and marketing right from the start. It will also provide invaluable information on whether and when you should release new products or services.
5. Decides when you need new assets
Running a business is never easy, and spending money on your business can sometimes feel counter-intuitive. That’s where a business plan comes in. It will help you decide whether it’s really feasible to move into a new office or buy new office equipment.
Business plans are living documents, so ideally, they need to be reviewed and updated on a regular basis. This will help you evaluate whether your goals are still appropriate, and ensure the plan reflects any changes that have happened in your business.
If you’re not sure where to start with your business planning, why not give us a call? We work with a number of startups and would be delighted to support you on this exciting journey.
