The Basics of Writing a Business Plan for Your Small Business or Startup

There seems to be a never-ending debate these
days about the merits of a business plan and whether entrepreneurs should bother creating
one. I’m not going to jump into the debate too heavily here, but my stance is YES, every
entrepreneurs should have a constantly evolving business plan. If you’re going to look for
funding, you need to have one, and even if you’re not in search of outside funding,
it’s always a good idea to have completed some solid market research and laid out your
marketing, financial, and operational plans BEFORE you get too deep into running the day
to day of your business. So, for those of you that take my advice and
decide to complete a business plan – whether in a formal document that you could hand to
a potential investor or otherwise – here are the basics of what you should include that
plan. First up is your executive summary – and this
is really only necessary in the formal plan. Basically, it’s the cliff’s notes to the
business plan and should concise and compelling so that any potential investor who reads it
is interested enough to continue on to the full plan which will contain the real meat.
I tend to write the executive summary last so I can pull the info I need about the company
and its business model, management, competition, and marketing and financial plans from the
rest of the plan. The next section is the description of the
business. Here you say what your business does, provide information about its products
and services, and explain the business model. This forces you to fully think through how
you’re going to bring in money so you and any potential investors understand where the
revenues will come from. Next you need to provide an in depth marketing
plan. Here is where you explain in detail why what you have to offer is so special and
how you’ll make sure your customers know that so they’re willing to shell out cash
to buy it from you. You need to perform some market research and competitive analysis so
you know who and where your customers and competition are. This section is incredibly
important because if you can’t clearly explain how you’ll bring in customers, then you
really don’t have a business. Also remember, anything you discuss in this section must
be directly related to the forecasts in the financials section. If you say you’re going
to bring in a million new customers in the first 6 months, you’d better have a marketing
plan that justifies that type of growth and have included the marketing expenses in your
financials. Lots of people underestimate the importance of creating a thorough marketing
plan and then fall short when they actually open their doors. Remember, just saying you’re
going to do email marketing to bring in clients isn’t enough. You need to say where you’re
going to get your email list from, what the open, click through, and conversion rates
are for that type of list to justify the number of customers you project, and then include
the costs of buying and sending to that list in your financial plan. After your marketing plan comes the operational
plan. Here you explain how stuff is going to get done. Where will your employees come
from? How much do they cost? What about supplies and equipment, R&D, compliance with regulations?
This section is where you lay out how all of the gears will work together to ensure
that stuff gets done when it needs to get done so that your company continues to move
forward. Next you should identify your corporate structure
– what type of business entity you chose and why. If you’re not sure what the best entity
for your business is, I have an old video you can check out and will be creating an
updated version soon. After that you’re onto the management team.
Here you explain who is in charge of what and why. This is another piece of the puzzle
that many people ignore if they’re not seeking outside funding but shouldn’t. You need
to seriously think about who will be included in your executive team and what they contribute.
Having your best friend be your Chief Technology Officer when his background is accounting
makes no sense. Be honest with yourself about who should take on the key roles in your company
and make sure that they’re qualified. Don’t stack your executive suite with dead weight
because you feel like you should have a bunch of “directors” or “chiefs” or because
you want to appease family or friends. Finally, you need to create a financial plan
for your company and forecast what will be happening with your money. First you should
create pro forma financial statements to get an idea of whether your company will actually
be profitable. If you don’t know how, you can take a look at my old videos about financial
statements and pro formas but I’ll also be uploading new versions in the near future.
If you really have no clue what you’re doing, you should probably bring someone in to help
you create the financials or go to your local small business development center, women’s
business center, or score chapter for help. Remember that you need to have an explanation
for every number you put here so go back to your marketing and operational plans to make
sure you don’t miss any expenses and you’ve justified any revenues. Once you have these
completed, if you’re looking for investment, you’ll need to discuss the financing you
propose. Now, these are just the basics of a business
plan and some more formal plans may have additional information. However, if you thoroughly complete
all of these sections, you’ll be in good shape to move forward with launching your
business solo or recruiting investors to work with you.

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4 thoughts on “The Basics of Writing a Business Plan for Your Small Business or Startup

  1. A great primer on the essentials of how to write a business plan, as well as its importance.

    The subtitles are also appreciated as aspiring entrepreneurs are often multi-tasking!

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