A colleague of mine who works with small businesses shared this observation; many small business owners don’t know the difference between a business plan and a strategic plan. Many businesses may have one or the other and a small percentage may have both. Intrigued, I checked into it and discovered a 2015 Wells Fargo study reported that only 33% of business owners have a business plan. The study also reported that those who do, had bigger goals and higher expectations for the year ahead.
So what is a business plan? How is it different from a strategic plan? In this article, I outline the business plan content. Next week’s article will review the strategic plan and the following week, I’ll talk about the purpose of each and how they can keep you on track and help you build your business.
What is a business plan?
A business plan is a written document that sets out your company’s objectives and strategies. It explains your company’s mission, how it will do business and what you are working towards. For first time business owners, think of it as writing down everything that’s in your head. You have an idea for a business; you think about who your customer is, you start thinking about the cost of your product and how much you are going to charge. These are all important parts of a business plan. Putting all this down on paper will help you work through the ideas, refine them and perhaps even identify and eliminate some not-so-good ideas. If you are planning on seeking funding from a bank or investors, you can be certain you will be asked for a copy of your business plan.
What is in the business plan?
There are many ways to structure a business plan. Content will vary depending on the type and scope of your business. Just keep this in mind; the content should be well organized, logical and flow from section to section. Your business plan is really your story. Introduce the characters, explain the problem and solution, and end with your desired results, the happy ever after.
Here is a list of the main components in a business plan.
Overview & Table of Contents
The overview is a short narrative that sets expectations for the plan and outlines the content. The Table of Content is important to easily direct readers to the content they are most interested in. If you are writing the business plan, just for you, skip this section. Its just extra work.
Executive Summary/ Vision
The Executive Summary sets the tone for the entire business plan. This is where engagement begins and you entice the reader into your business idea. Therefore, it must be a brief and well written description of the concept and direction of your company. It may include the following: history of the company to date, purpose of the plan, your company’s vision, information from your “about” page on website. If using the plan to secure funding, include: amount needed, potential sources, method of repayment. Although it is the most important single component of your plan and the first thing others will read, write it last after you have compiled everything else that supports the story. You will be succinct in your message and your passion will be evident between the words.
Product or Service
Provide information, descriptions and drawings or designs of your product or service. This may also include information about your business environment or the status of the industry. This does not need to be highly detailed or extensive. Provide enough information that expresses the uniqueness of your product or service and explains the value proposition.
Market Analysis and Target Market
Explain why you believe your business will be viable in the marketplace. Provide explanation and characteristics of your target market, customer demographic information (age, sex, income, and education), psychographic and geographic information. Conclude with estimates on the size of the market and your market share forecast.
Marketing Plan
Explain position in marketplace, target customer, product and promotional strategies, competitive advantage and timelines, etc.
Operational Plan
Describe how the business will operate. Include information on legal structure as well as facilities, equipment and other requirements for operations.
Team and Management Plan
Introduce members of your team. This may include short bios of lead staff and job descriptions. Include relevant historical information such as any experience in the industry. No need to include detail of job history that doesn’t pertain to this endeavor.
Financial Plan
This section supports the narrative with numbers and shows how your plan makes financial sense. The financial section may include: the budget and an explanation of expenses such as start-up costs, monthly costs, fixed or overhead costs, variable costs. Include a balance sheet, cash flow projection, profit and loss statement for first three years. You may also need to include sources of financing, personal financial statements and any explanation of assumptions used in preparing projections.
Tips for writing a good business plan
Now that you know the content of a business plan, here are some tips for success when you write your plan. Be conservative with your financial projections. Be reasonable about what you will accomplish. Use charts and graphics to help tell the story. You don’t need to use business terminology or financial words. More important is the business concept and what makes it viable. Be straightforward and concise in your narrative. Don’t be afraid to seek help if you get stuck. The SBDC at Gannon is a good local resource.
There is a lot of good that comes from having a business plan. Just the exercise of writing the plan will lead to discovery. Taking time to compose the plan is when our mind can really quiet and sink into the ideas, employ consideration and write with confidence.
Why having a business plan is a good idea?
On the other hand, not having a business plan increases risks. You may mistake cash flow for profit and invest in inventory or expansion without a justified plan. You may operate with blinders without taking time to access the competition and understand market trends that are likely to trickle down. If you find your business in a precarious cash position and want to inquire about a bank loan, not having a business plan ready to present to the bank could add months to the process, perhaps time you can’t afford.
Making Sense of it all
A business plan is an important tool in managing and growing your business.
If you have never written a business plan, begin by writing down everything you know about your business that’s in your head.
Your business plan tells the story: who are the characters, what is the problem and solution and what is the end or outcomes of the story.
It doesn’t have to be a well written document. Content is most important.
Chances of success and meeting your goals increase when you have a business plan; chance of success decreases without a business plan as risks increase.
If you are feeling overwhelmed, know you can do this. Start with one small step. Keep working, tweaking and developing your plan. Overtime, you will have a really good written document that you can look to as often as needed to remind you and keep you on track with developing and growing your business.
Need help with your business plan? Email me at barb@barbwebercoaching.com and you and I can schedule a 30 minute phone call to see where your at and I’ll answer any questions you may have.