Why do You Want to Create a Business Plan?
According to the US Chamber of Commerce, “One of the cornerstones of launching a new business is writing a business plan. The plan is a roadmap to a business’s goals and outlines the steps to achieve them. The plan also serves as a sort of resume to put in front of loan officers, investors, and partners to secure funding.”
Benefits When You Create a Business Plan
Every traditional lender wants to see one. Potential investors also want to see one. If you are working with a partner you will need one to show agreement on what the plan for the business actually is. It is also a vital piece of communication with management.
If you want to sell your business, or need to do a business valuation, you need one. Beyond all of that, you need a plan to follow for your business anyway. There is a specific format and design that it needs to follow. Some loan applications have a place for this, but it is best to already have one put together that you can adjust as needed.
You have a couple of options. You can either hire a business plan writer, or you can do it yourself. There are a lot of resources out there to help you if you choose to do it yourself or work with a mentor.
Create a Business Plan with the Help of the SBA
The Small Business Administration offers extensive guidance in this area. Local small business development centers can help as well. The important thing is to make sure all of the necessary information is included. It also needs to be in the right order.
What Information, and in What Order?
First, there is an introduction. Then, there is a research section. After that comes the financial information. Finally, though not required, you may have an appendix with additional information.
The introduction includes an executive summary, a description, and strategies.
The executive summary is a complete summary of the business idea. The description goes into further detail than the summary. It describes the business, answering questions like:
What type of business is it? What product or service will it offer?
This is where you work to get others excited about your business. Catch their attention and make them want to keep reading.
The strategies section lays out your plan for getting started. Do you have a marketing plan? Where will you locate? How many employees will you start with? What is your ramp up plan?
Create a Business Plan: The Research Portion
After the introduction comes the research portion of the document. This is also called the market analysis. It has two parts: The Analysis of Audience and the Competitive Analysis.
Analysis of Audience
The analysis of audience answers the following questions:
- What need will your business fill, and for whom? For example, are you a childcare facility filling a need for affordable childcare for working moms? Are you an eatery filling a need for a lunch spot for those working downtown?
- How will your business fill the need?
The competitive analysis is just what it says, it analyzes the competition. It answers the following questions.
- Is there already a business working to fill this need?
- Is there room for more?
- How do you plan to compete with them?
Create a Business Plan with a Planning Section
After the research section will come the planning section. This will include the plan for design and development and the plan for operation and management.
Plan for Design and Development
The plan for design and development explains how the process will play out, from start to finish. What steps are you going to take? Basically, it is a more detailed version of your strategies section.
Plan for Operation Management
The plan for operation management discusses who will own the business, and who will run it from day to day. This could be as simple as stating that you are going to be the sole owner and operator. Or, it could be as complicated as laying out a complete partnership plan or board of directors format. Do you plan to run the business daily or hire a manager for the day-to-day operations? Discuss that here.
A lot of new business owners get lost here. How do you have financials if there is no business yet? You lay out your funding plan in this section. What money do you already have? Where did you get your current funds? Did they come from angel investors, crowdfunding, personal savings, or something else altogether?
How much do you need? How will you use the funds? This section also has a complete set of financial projections. It usually goes out for at least 5 years. It’s best, if possible, to have an accountant put together your projections.
Create a Business Plan with an Appendix
An appendix is optional, but recommended by most professionals, including The Small Business Administration. It can include such things as credit histories, resumes, product pictures, and letters of reference.
If applicable, licenses, permits, patents, legal documents, and other contracts should be included as well.
Anything you can include that makes it easier for the lender is a good move. You have the space, so why not use it? More detail is nearly always going to be better than less detail.
The presentation is important as well. Your business plan should be professional in both appearance and content. If you are using your plan to apply for a loan, do not just fill out the questions on a loan application. Take the time to put together a well written and well-designed strategy.
This is where a business plan writer can come in handy. It is possible to do it yourself but use all available resources like The Small Business Administration and Small Business Development centers.
You need this document for more than just to get funding. It can help you make decisions about growth. It can also help you recognize and shore up weaknesses. This document also highlights your strengths for potential lenders, investors, and partners.
That can help you convince partners to join your business. A well-researched business plan can help you recognize opportunities, as well, even some you may not have considered previously. Maybe there is a market need you can fill that you didn’t even see until you did the market research for this document.
You need a business plan. Lenders and potential investors want to see one. It is also vital to communication with partners and management.
It should include all the necessary information, in the right order. This includes an introduction with executive summary, description, and strategies sections. Next, it should have a research section with both a market analysis and an analysis of audience. Then, there should be financial information with current funds and budget, sources of those funds, projections, and the funds request.
Finally, you should have an appendix if applicable.