If you’re like I was when I started my first business, I started the business and was knee deep into it before someone finally said “do you have a business plan”? And even though I wasn’t looking for funding, I wish I had taken the time to at least write a simple plan. It would have been very beneficial through various crossroads along the way. So if you haven’t taken the time to write even a simple business plan, here’s why it’s important and some creation tips that might help.
One of the biggest benefits to having a business plan is to help you stay on track. This includes the direction of your intended products and services as well as how to successfully change directions when needed. A perfect example of this is when I had grown my dressage training business to the point where I had practically outgrown the facility we were at. But like I said, I never did a business plan, and I definitely didn’t track my growth or my customers, or market, or any real business data. So when I planned to move to a larger facility, I didn’t really have a “feel” for things like how much to spend on what type of marketing or even if my customers would want to move, or what kind of clientele the new facility would attract or if my pricing and training options were appropriate. Needless to say, my move was a very expensive lesson in what not to do.
Another important benefit is that researching and monitoring your sales, cost of sales, marketing ROI, and business processes against a business plan will allow you to make course corrections and future decisions much more effectively than relying on your “gut”. It will also help you with your planning and prioritizing in areas such as growth, management, and financial health. Determining milestones, or due dates, will help you stay on track and understand how long it actually takes to meet your goals.
A business plan will also help you break down your dreams into short-, medium-, and long-term goals. You’ll be able to more clearly determine if you’re meeting your objectives when you need to expand, hire, or cut-back. You’ll learn to be more proactive instead of reactive, which is always better for becoming successful. And your plan doesn’t have to be super fancy or complicated.
So how do you write a business plan? First, do some research. Determine what your goals and objectives are for your business. It’s important to breakdown your goals into short (1 year), medium (3-5 years), and long-term (5-10 years) goals. Next, crunch some numbers to define what your financial needs will be over the same time periods. If you need to do some additional research to get more concrete values for costs, expenses, and potential revenues, make sure you write down where you got your information (for future reference). This type of information will be known as your “assumptions” if you don’t already have existing numbers to use.
Once you’ve done some background research, crunched some numbers, and laid out the basics, you want to write an Executive Summary. This will be an attention grabbing description of what you do and why the reader should read the rest of the plan. Many times the executive summary is the only part of the plan potential partners, investors, or backers will read. Start with an enticing statement about what your company does and why it’s important.
The next section is a detailed description of your business, your industry, information on markets in the industry, and a present and future outlook on those markets. This section also needs to include any new products, services, or developments in the market that may positively or negatively affect your business.
The third section will included market strategies including a detailed, thorough market analysis. The market analysis should include the results of your detailed market research and a definition of your intended target market.
The fourth section is a competitive analysis. A common method of creating a competitive analysis is using a SWOT analysis where you analyze your company’s strengths and weaknesses, opportunities and threats based on your market research in the proceeding section.
The next section will describe your products and/or services and your company’s development plan with respect to production, marketing, and budget. It’s best to use charts and graphs that clearly show your short-, medium-, and long-term plans.
The next to last section will be the operations and management section. You will describe how your business functions including operations, logistics, management team and responsibilities as well as your capital and expense requirements. Again, it’s a good idea to use graphs and charts to clearly define these parameters.
Your final section will be your financial plan. This section will define how much external funding your company will need from short- to long-term. You will need to clearly describe where and how the funds will be used and what assets will be required.
Now that you know why you need a business plan and a general overview of how to write one, let’s discuss why it’s important to stick to your plan. Simply stated, it’s not. What’s important about having a business plan is to use it as a tool. As with any plan, it’s meant to be a tool that guides you through a process…the process of developing your business along your defined goals. Therefore, you need to regularly track your progress against the metrics defined in your plan and re-evaluate your plan and make adjustments to meet your goals. That is the most critical part of having a plan.
Another example of using a plan as a tool comes from my experience as a dive instructor. We were always taught to “plan our dive and dive our plan”. And many times that was exactly what happened. But we all know, especially if we dive, things happen, and as dive instructors, we were highly trained in effectively dealing with these types of “things”. So even though we “planned our dive”, and did our best to “dive our plan”, when “things” occurred that weren’t in the plan, it was imperative to reassess the method of achieving the goals of the plan, and adjust accordingly. That’s the key! And, of course, to enjoy the dive along the way!
Mahalo and much success,
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Markowitz, E. (2010, September 15). How to Wrtie an Executive Summary. Retrieved from Inc.: http://www.inc.com/guides/2010/09/how-to-write-an-executive-summary.html