Thursday, October 13, 2011

The Business Plan and why you need it

As a business owner, you have to be aware of and work with so many variables – like creating a compelling product, building a great team, generating sales and keeping your customers loyal. Writing a business plan helps you as it will guide you in understanding how your company operates. The process of writing a business plan, will help you learn how to forecast any challenges, understand what resources you would need and even manage your own company more effectively.

What does a business plan consist of?

First and foremost, when writing a business plan - you should be aware as to who your audience is. Depending if you’re pitching a VC or asking your banker for money, you should tailor the plan to what they are interested in. In general, every business plan are composed of these sections:

Executive Summary: Placed in the front of the plan but written last, this allows the reader to quickly understand whether want to read the rest of the plan or not. It will provide them with a concise idea of what your business is, where the opportunity lies and how you plan to solve it.

Description of Business and revenue model: This is a deeper analysis in your business. What is the problem you’re solving, how are you providing a solution, and how can the business be sustainable over the long term and make a profit.

Industry Description: What industry are you competing in? Do you research and find out who the main competitors are and why are they failing or doing well. Present your company in a way that outlines how you plan to capture market share.

Market Research: This is a deep analysis into defining who your customers are and whether they are interested in your product or service. By doing your market research, you may find out that your potential customers may want something else entirely.

Operating Plan: How are you going to deliver your product or service to your customers? Make sure you account for every detail including customer service, manufacturing, sales and human resources.

Management Team: For any business, it’s the management team that will make or break the company. Include a summary of each team member’s experience, what their responsibilities are and how they will help the company succeed.

Financial Analysis: The most important aspect of any business plan, the financial analysis will show others if your company is going to make a profit. It will outline when you will break even and how long will it take to profitability.

Tips on a successful business plan

When you are raising money for your startup – it’s your business plan that will grab the attention of potential investors. Make sure that you have no spelling or grammar mistakes, it is printed on good quality paper, and most importantly, your financials are solid. Mistakes in your plan will make a poor impression to anyone who’s reading as they will wonder if you will make same mistakes in running your company.

As mentioned earlier, understand who the plan is for. If your plan is for your partners or employees then it would reflect more on the operations side. Likewise, a plan written for a loan officer, they will be very interested in your financial analysis. Did you make realistic projections? Will your potential sales revenue cover the loan payments over time?

Your business plan is one of the best methods to show investors that your company is worthy of their investment. By keeping your plan clear and realistic you will be able to show them that you can make it happen.