Why write a business plan? To get you organized! To help you get a loan! To help you not be in the 80 percent of small businesses that fail within the first five years of operation!
The real value of creating a business plan is not in having the finished product in hand; rather, the value lies in the process of researching and thinking about your business in a systematic way. The act of planning helps you to think things through thoroughly, study and research if you are not sure of the facts, and look at your ideas critically. It takes time now, but avoids costly, perhaps disastrous, mistakes later.
The importance of a comprehensive, thoughtful business plan cannot be overemphasized. Much hinges on it: outside funding, credit from suppliers, management of your operation and finances, promotion and marketing of your business, and achievement of your goals and objectives.
Despite the critical importance of a business plan, many entrepreneurs drag their feet when it comes to preparing a written document. They argue that their marketplace changes too fast for a business plan to be useful or that they just don't have enough time, but just as a builder won't begin construction without a blueprint, eager business owners shouldn't rush into new ventures without a plan.
Before you begin writing your business plan, consider four core questions:
* What service or product does your business provide and what needs does it fill?
* Who are the potential customers for your product or service and why will they purchase it from you?
* How will you reach your potential customers?
* Where will you get the financial resources to start your business?
It typically takes several weeks to complete a good plan. Most of that time is spent in research and re-thinking your ideas and assumptions. But then, that's the value of the process. So make time to do the job properly. Those who do never regret the effort. And finally, be sure to keep detailed notes on your sources of information and on the assumptions underlying your financial data.
There are business plans from a few pages in length to hundreds of pages for large companies. Take the time to thoroughly explain every aspect of your business. If your business plan tells all there is to know about your business then it is long enough. If it does not, keep writing. The person reading your business plan needs to know that you thought about everything from the legal structure to who is going to vacuum. Every detail is important.
Gather all of your information pertaining to your business including:
* Legal documents
* Scratch pieces of paper with ideas written on them
* Prototypes, mockups
* Pictures
* Plans
* Anything else you can think of
Here is a generic outline of the sections of a business plan. All sections may or may not pertain to you and your business.
* Business plan outline
* Executive summary
* The company (present situation)
* Your name and legal form (partnership, proprietorship, corporation)
* Your company history and reasons for success and problems to date
* How you differ from the competition
* General market conditions for your business
* Who are your customers, and how are you locating them?
If you are an existing business, discuss your position and how you got there. It is very important to be up front in acknowledging past difficulties, to be honest about the reasons for them, and to present real plans (not just intentions) to overcome them this time. Of course, you want to put your best foot forward, but it is imperative that you address the "tough" financial questions.
If you are a start-up business, you need to address other matters. How will your customers know about you? How is your business different or what niche do you fill? What need is there for your product or services? What are your "hard" contributions to the business cash, equipment, etc.? How will you survive economic downturns? Is your business seasonal?
Then you should address:
* Business goals and objectives (short-term and long term).
* Organizational issues such as the legal structure, management, personnel and outside advisors.
* Description of the products and services of your company including features and seasonality.
* A market analysis that looks at customers, competitors, potential growth and sales volume, competitors, the size of the market, trends in the market and marketing strategies.
* Product strategies, including pricing, promotion and distribution.
* Financials, including your assumptions, financial statements and financial feasibility analysis.
There are two main purposes for writing a business plan. The first, and most important, is to serve as a guide during the life of your business. It is the blueprint of your business and will serve to keep you on the right track. To be of value, your plan must be kept current. If you spend the time to plan ahead, many pitfalls will be avoided and needless frustrations will be eliminated. Second, the business plan is a requirement if you are planning to seek loan funds. It will provide potential lenders with detailed information on all aspects of the company's past and current operations and provide future projections.
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