Our last post covered the biggest reasons you need to have a business plan. Today you get to learn what a business plan is made up of. Work on each of these pieces, put them together and voila! You have a business plan! But you’re not really done. A business plan needs to be a living document. That means that you iterate and update and fix it as your business changes and grows.
Business Plan Building Blocks
This is a snapshot of your business that can be read in 3 minutes or less. It should be complete and compelling enough that a big-wig executive will know whether or not they want to read the rest of your business plan after just reading this summary. No pressure… Include what you do, your goals, what makes you different from your competitors, and if the reader is an investor make sure to include what you’re asking for.
Here you’ll go into more detail on what your company does. Who do you sell your product or service to? Who are your competitors? What’s the competitive landscape in your target market(s)? How will you differentiate your business? Describe the current status of the market as well as possibilities that make it desirable for you to enter.
Now you’ll start getting into the nitty gritty. The industry analysis is a huge part of your business plan and also great opportunity for you to get a really good handle on what you’re getting yourself into. Make sure to go back and edit your executive summary and company description after you complete this analysis, because it might change some things.
Target Market Analysis
Your target market is who you’re going to sell your product or service to. Who are these people? Find out as much as you can about their lifestyles, disposable income and demographics. Are they people or businesses? What are their habits for buying what you’re planning to sell (or similar products already on the market)? How much money is there to be made?
Your competitors are all of the businesses whose products and services will undermine the sales of your line. Is there a dominant force in the market you’re trying to enter or are you creating a new market segment? Are there indirect competitors that will draw your target market’s money away from your products? Are there innovations that could be catastrophic for your business? This is your opportunity to really dig in, see what you’re up against and even find some best practices.
Organization & Management
Here you will outline how you plan to manage your business. What employees will you need to keep things running indefinitely? Will you be dividing into different departments, and what responsibilities need to be assigned to these departments? How much will it cost you to employ them?
Service or Product Line
This is where you get to gush all about your awesome product or service ideas. Tell the world about your offering, all the bells and whistles and how it’s different than anything currently on the market. How will you benefit the consumer and beat out the competition? Get it all out there! You should also analyze the product lifecycle for your offering. How often will your customers be re-purchasing? Will your offering be obsolete in the near future (refer to your competitive analysis)?
Marketing & Sales Plan
In order to successfully operate your business, you’ll need a plan for selling your goods or services. Detail what channels and methods you’ll use to sell as well as how many employees you will need to bring on to reach your goals. Determine your pricing and use those numbers to figure out how much you can afford to pay salespeople or marketers.
The moment you’ve been waiting for…crunching some serious numbers! The key statements you’ll need to include are your income statement, balance sheet, and cash flow statement. If you’re a brand new startup and don’t have any income, use income figures from similar businesses in your industry. Using the numbers from the income statement, factor in your costs to figure out your balance sheet. Your cash flow statement shows a more incremental view of the changes happening on your balance sheet. The US Small Business Administration has some good tips on how to put together this portion of your business plan.
If you’re putting this business plan together to request funding from an investor, this section is imperative. Your funding request should include how much money you’re asking for, how you’ll be using it, how much more you’ll need over the next 5 years, and any big plans you may have regarding acquisitions or selling your business.
Milestones & Metrics
If there are any goals that you’ve already hit as a young company, talk about them here. This is also where you’ll want to write out the goals and measures of success you’re seeking after in your venture. How will you know that you’re successful? What standards are you holding yourself to? This will be a crucial section for holding yourself and your employees accountable to, so make sure you’ve done some homework and set solid milestones and metrics.
Your business plan…it’s nothing to laugh at. It will take some serious thought, research and time. Don’t get too caught up on making it perfect right out of the gate. Edit, revisit, brainstorm and take your time. I think it will be worth it in the end, which is really just the beginning!