Why Make a Business Plan?
Are you thinking about starting a business? If so, you’re not alone. Today there are more than 500,000 new businesses started each month in the United States. Of those 500,000+, only 50% will survive the first year, and just 12% maintain enough profitability to see their 5th year as an operating business. However, if you have a business plan that is well thought out and carefully executed, it dramatically increases your chances for success.
A business plan is the road map your business will follow on the path to success. It is a concise document detailing what you hope to achieve and how you intend to make those achievements happen. If done carefully and thoroughly, a good business plan serves as a guide for everyone in your company:
– Top executives
The first step of creating your business plan is writing down some basic information about your new venture, such as: why the product or service is needed; what makes it better than competitors; where it will be sold; who will buy it – all this information can be found here on Industry Today. The next step is to detail who your business will serve, how it will help them and what steps you’ll take to make sure they keep coming back. These people are called your “Target Market.”
– Who are the various individuals, groups, or businesses that buy my product/service?
– What specific needs do I meet for this target market?
– How much money do these buyers have to spend on this service/product?
To start writing your business plan, gather all the information you’ve compiled about yourself and your market. Then carefully go through each section of a good business plan (detailed here) and fill in the blanks with facts. Here’s an:
SECTION 1: Executive Summary
If you have the time, many good books are available that give detailed instructions on how to write a complete business plan. This article offers some basic guidelines for your business plan and should serve as a good starting point for many entrepreneurs. Just remember; the more complete you make your business plan, the better it will turn out. You can never go wrong writing too much or including too much information in your startup business strategy.
SECTION 2: Company Description
– What is my company’s mission? (i.e., To provide high-quality mobile phone accessories for discerning customers everywhere.)
– Who is my target market? (i.e., Our first set of customers will be people who want to add a touch of class to their mobile phone while maintaining the functionality and ease of use they expect from modern technology. We plan on targeting upscale retailers, including specialty electronics stores, department stores, cell phone carriers, and many others.)
– What is my company’s main competitive advantage? (i.e., Our products offer a unique blend of custom styles and personalized features that allow our clients to create a genuinely original accessory for their device. We also have a streamlined production process that makes customization an affordable option for budget-conscious consumers.)
SECTION 3: Company Ownership
This section provides information about the legal structure under which your business operates. Most start-up ventures are sole proprietorships or general partnerships, so that these types will be used as examples.
– What is the legal form of my business? (i.e., Sole Proprietorship)
– How many owners do my company have, and what are their names and titles? (i.e., Alice Jones, President)
SECTION 4: Management Team
– Who is in charge of making decisions for my company? (i.e.: Alice Jones, President & CEO)
– What do they bring to the table? What skills, education, or experiences will help them be an asset to the team? (i.e., Before starting her own company, Alice worked as a sales representative at a local cellular phone carrier, gaining valuable knowledge about the industry she is now entering. She’s also well respected in her community and has many connections to help the business grow.)
SECTION 5: Company Locations, Facilities, and Employees
– What facilities does my company own or occupy? (i.e., Alice rents a one-bedroom apartment for use as an office, but she plans to purchase a small warehouse sometime before the end of year two.)
– What equipment and machinery are needed to meet these needs? (i.e., Alice owns a laptop computer, cell phone, and mobile printer that will be used to manage the company’s day-to-day operations. A copier and scanner are also included in this equipment list as they will be vital to many aspects of business operations.)
– What are the names, titles, and job descriptions of key employees? (i.e., Alice’s sister Sarah has agreed to provide administrative support while working toward her degree in graphic design, but there is no need to state this information in this section since it does not relate to operations or production.)
SECTION 6: Competition
– Who are my main competitors? How do I stack up against them? (i.e.: Our biggest competitor is a privately held company that specializes in custom mobile phone accessories just like our own. Because they have been in business for several years longer than we have, they already dominate much of the market share in the area where we plan to start our operations.)
– What advantage does my company hold over them? (i.e., our streamlined production process and ability to offer custom designs at the same price as mass-marketed products give us a decided edge in this competitive environment.)
SECTION 7: Startup Operations
– How much capital is needed initially to get the operation off the ground? How will it be financed? (i.e.: Alice will make a personal investment of $4,000 for startup costs, including initial inventory, marketing materials, and advertising fees. She’s also applied for a $10,000 loan through her local bank.)
– When do I expect my company to turn its first profit? (i.e.: Since most of our merchandise is manufactured overseas, the time frame for recouping initial expenditures will be about six months with a positive cash flow in month seven.)
– What are the marketing strategies that I plan to use? (i.e., Alice plans to purchase advertising space in several local publications and social media channels using dedicated hashtags and coupons for discounts on custom-designed products.)
Why Make a Business Plan? The benefits are endless! A simple Google search will showcase the numerous articles written on why making a business plan is essential to any new or existing small business. Here are some key reasons the US Small Business Administration (SBA) highlights:
– Helps put your business on the right track.
– Creates a roadmap for success.
– Encourages financial discipline/reduces the risk of failure.
– Helps attract investors, lenders, partners, and employees.
“If you don’t know where you are going, any road will get you there.” – Lewis Carroll (Alice in Wonderland)
If you are thinking about starting your own business or have started one but haven’t completed an official plan, now is the time to start! Once written, it will serve as the guide that takes you from “Startup” through to “Successful Business.” With ambition and drive, anything can be achieved as long as clear goals and specific outlines of able tasks with timelines are created!
The SBA provides a great list of tools for writing or creating your plan. They also have an extensive library of business plans that are being used successfully in the market today! Check it out; you’ll be glad you did!