The Chapter Business Plan
There are plenty of examples of super-successful entrepreneurs who got where they are without ever completing a formal business plan. But for most business owners and organization leaders, the process of writing a business plan is still the best way to make themselves think about their business ideas in a practical, rational way.
PLAN BASICS
Of course, every business plan is unique – depending on the nature of your business or organization and the purpose of the plan. But all plans should include these basic elements...
- Executive summary. A one- or two-page brief description of the company's business objective. It may contain things that are not found elsewhere, such as a vision and mission statement.
This part of the plan will also summarize information found in other sections. If you're trying to raise money, include in this section a statement of how much money is needed and how it will be used.
- Management team. People are of great interest to potential investors, partners and employees. Give brief descriptions of key managers, their backgrounds and their functions in the company. You may want to include an organizational chart.
- Product or service description. This is the place to explain all key elements of your product or service. You should include its underlying strengths and, most especially, what makes your product or service better, cheaper, safer, and more efficient... than anything now available in the marketplace.
- Marketing plan. Describe in detail your plans for positioning, pricing and promoting your product or service to potential customers. If you have market research to back up your argument, include it.
- Operations. Often a small business or organization is successful because of its extremely efficient systems or logistics. If there's a story here, be sure to tell it to readers.
- Financial data. For bankers, venture capitalists or other potential backers, this is the most important part of your plan. It should include income statement, balance sheet, cash flow statement, etc. These documents should follow accepted accounting standards and be prepared professionally.
- Appendix. You can add things here that don't fit into the major sections, such as press clippings, product samples and employee resumes.
STYLE POINTS
Length will depend on the complexity of your business and what the plan is trying to accomplish. Venture capitalists are said to like bulky plans, but as a general rule, about 25 pages is sufficient.
Many successful businesses operate from a very simple concept that can be expressed in a few words or lines.
Naturally you have hopes, dreams and probably passion for your idea, but your business plan is a place to stick to facts instead of feelings and to projections instead of hopes... and to have realistic expectations of the business' profits.
You should write the plan your self even if you're not particularly talented at writing. You can always have someone edit it for you later. It is important for you to do the writing, because your own knowledge of the business and the marketplace cannot easily be put into words by someone who is not directly involved.
However, if you're not used to writing business plans, getting guidance from experts can be extremely valuable.
The Web provides a very large supply of information. Check out www.bplans.com for sample plans.
AVOID PITFALLS
In addition to covering the basics of business plan building, you can add clout to your plan by paying careful attention to avoiding the common pitfalls of plan writers...
- Miscalculating the competition. Try to identify every company that could be a competitor, not just the obvious ones. And – be aware that there are successful niche players in every business. Don't underestimate the barriers to entry into your business. One of your competitors that is not big enough to build a factory, for example, can always have a product made by someone else.
- Confusing revenue or sales with receipts. Sales booked during a period don't necessarily translate into money received. There's always a lag as customers buy now and pay later. Make sure your business plan allows for that. Also take into account that increased volume of sales doesn't always mean more profits. It could put you out of business if the sales are costing you too much or your profits are inadequate.
- Believing too much in your plan. Remember that pro forma and projected financial statements are based on expectations about the future and thus are, by their nature, imprecise. A business plan isn't worthless just because it doesn't turn out to be perfectly accurate. Your goal should be to make it as reasonable as possible, but don't believe in it too literally.
At the least, your business plan should help you monitor how reality is stacking up to your plan. If the plan is off base, waste no time before revising it.
SUMMARY
Often, writing a business plan is closely tied to the need to raise money. But think of it, too, as a great communications tool to help explain your organization sponsors, members and future members.
Regardless the purpose for writing a business plan, don't think of it as cast in stone once it is printed. It's prudent to review your plans quarterly and update them annually... or whenever circumstances in the business change significantly.
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