Why Make a Business Plan?
In many cases business plans are very important but so much of the time it’s a plan to try to convince someone else that you know what you are doing with your business like banks, investors, partners, etc. Now it’s true that a well written business plan can also be a major benefit to your success as well if done right. It can guide you and keep you on track and can be the vehicle to get you were you want to be especially with so many outside forces now days that bombard you. A plan can be extremely important to your success especially when you look at the statistics that says 51% of small businesses fail sometime during their first 5 years.
So why make a business plan? I want to show you a totally different kind of business plan. What if you made a business plan that focused only on what you want for your life? You have dreams about what you would like your lifestyle to be, right? Why not make a business plan that could give you those dreams? What would your business look like if it gave you exactly what you want in life. What kind of salary would your business need to give you? Why not build a business plan around that? Decide how much salary you would need to support your dreams and then build a business plan that would show exactly how your business could give you that. Wouldn’t it be better to have your business work for you instead of the other way around?
Did you ever stop and think what a unique position you’re in as a business owner? I don’t know of any other way you can have as much control over your success than owning a business. When you work for someone else, you are totally at their mercy as to what your future may be like. It doesn’t matter whether it is a private business you work for or a large corporation. Your future is in their hands. The only thing that might qualify other than owning a business would be to inherit or win a lot of money that would give you everything you want in life.
So, why make a business plan the normal way when you could first make one that could give you what you want in life? Have you ever thought about doing a plan like that? Would you know how? Would you have the time to do it?
Well if you don’t or not sure, let’s at least see what’s involved.
Here are the steps you would need to take.
First, you would need to know all your current business numbers. This will be the basis for the plan. You’re going to need to know:
1. What your current average monthly sales are
2. What your current average monthly material cost is
3. What your current average monthly labor cost is
4. What your current average monthly fixed expenses are
5. What your current average monthly variable expenses are
6. What your average number of transactions per customer per month are
7. What your average dollar sale per transaction is
8. What your average monthly profit is
9. What your average monthly profit margin is
10. And what % capacity your business is at right now
Second, decide what you want your salary to be
Third, determine how many years in the future you want to plan for
Fourth, you will need to know:
1. What % is your material cost of sales?
2. What % is your labor cost of sales?
3. And what % is your variable expense of sales?
Why do you need to know these percentages? As your sales increases or decreases, your material cost, labor cost, and variable expenses will track accordingly. They will track very close to the same % as your current business. As an example, let’s say your current sales is averaging $100,000 per month and your material cost is averaging $20,000 per month. That’s 20% of your sales ($20,000 ÷ $100,000 = 20%). So, what would your material cost be if your sales were averaging $200,000 per month? It would still be 20% but it would be 20% of $200,000 or $40,000. So with these percentages, you can project your material, labor and variable expenses. See how it works?
But your fixed expenses don’t do this. They remain the same no matter what sales does. That’s why it’s call fixed. These are expenses like rent, taxes, utilities, phone, salaries, insurance, etc. A lot of business owners never consider this. They just lump all their expenses together. But you could never make an accurate plan if you combine all your expenses together. If you project your sales higher and want to know what your expenses will be, you have to separate your fixed and variable.
So, thinking about this principle, let me ask you a question. If your sales grew 10% and nothing else changed, would your profit margin be higher, the same, or less? Profit margin is % of profit against sales
If you said the profit margin would be higher, then you are right. Why would your profit be higher? If you said because of the fixed expenses, you would be right. Your material cost, labor cost, and variable expenses would have gone up 10% but your fixed expenses would have remained the same. You brought in more revenue because of more sales and you spent 10 % more on material, labor, and variable expense to cover the extra sales, but you didn’t spend any more on your fixed expenses. So, less overall expenses, would give you higher profit margin. Make sense?
So, let’s see how we would make a business plan that would show exactly how your business could give you the salary you want.
First you would determine what you would like your salary to be. You’ve dreamed about having a nice income to support your dreams I’m sure. Let’s say right now you only make what your profit is giving you which might not be much. So let’s say the first year, next year, you would love to have a consistent monthly salary of $4,000 a month, every month. And every year you would like to be able to increase it so that after 10 years it would be at $10,000 per month. And let’s say you would like to grow your business 10% each year.
So, what would your business look like over the next 10 years to give you that?
Could you build a plan that would show exactly how your business could do that?
It would show what your sales, fixed expenses, material cost, labor cost, and variable expenses would need to be. It should also show you how many customers you would need and would show you what your profit and profit margins would be each year.
All it takes is your current business numbers as we listed earlier and you can make a business plan as many years out as you like.
Now, in addition, when you know the average number of transactions per customer and you know your average dollar sale per transaction, you can also project how many customers you would need over those 10 years as well. This would tell you everything about what your business would need to do to give you the salary you want.
So, wouldn’t it be nice to see what a plan like this would look like? Could you do it? It might not be as tough as you might think.
There is no doubt it would take some time and would require a lot of calculations, but when you understand these principles and know how to put it together, you could probably do it. What do you think? Have you ever thought about doing a plan like this? It’s actually kind of in reverse. You decide what you want and let your business give you that.
Now assuming you did do this and it looked reasonable to you, how would you go about making it happen? What approach would you use? This could be a little harder. Well let me show you something. It might be easier than you think.
Did you know there are 7 ways to increase profit in business? If we decided to grow our business, most likely the first thing we would think about would be to add more customers. Adding customers will increase sales and as we seen above can increase profit as well, but it might not be the most effective way to increase profit. Take a look at these and see which ones you think could work for you. Would it be to:
1. Add more customers?
2. Increase your transactions per customer?
3. Increase your average dollar sale per transaction?
4. Decrease your fixed expenses?
5. Decrease your variable expenses?
6. Decrease your material cost?
7. Or decrease your labor cost?
What’s more important, sales or profit? Profit is what generates your salary. You could actually make more profit with less sales. Less sales could actually be less work. The most important thing for a business is to make money. That’s profit. Now some might say, I don’t care so much about making a lot of money. I like the freedom of owning a business. Well that is probably true, but if you don’t watch your profit, you might lose that freedom.
It’s always amazed me how most businesses, even very large ones, talk about how much their sales are. You hear comments like, that’s a $10,000,000 company. But what’s a $10,000,000 company if it has no profit. Now I do admit that 2% net profit of $10,000,000 is a lot bigger than 2% of $1,000,000 but most likely the large one carries a lot more headaches too.
Maybe it would be much better to have focused on profit than sales. What if profit had been the focus instead of sales. What if this could have been the result?
$10,000,000 x 2% = $200,000 profit
$1,000,000 x 25% = $250,000 profit
So when using one or more of these 7 ways to increase profit, the first one (adding more customers) might be the one you want to focus on last. It’s probably more expensive
Now, if you had your plan completed and it showed what your business needed to do over the next 10 years to give you the salary and profit you wanted, the next thought would be how do I make it happen. Well the best way would be to take it one year at a time. Concentrate on next year first and then choose one or more of 2 through 7 to work on before trying to add customers.
As an example, let’s say your current average number of transactions per month per customer is 3.0. Which says on average each customer does business with you 3 times each month. You could calculate how much more profit you would get if you could increase it to 3.5. And I can tell you that would probably be enough to meet your plan. And if that did generate enough profit, all you would have to do is maintain everything else; sales, expenses, labor, average dollar sale, etc, and then just figure out how you could increase your transactions from 3.0 to 3.5. Maybe it could be with some type of promotion that would get customers to come in more often.
Once you chose which one or more of the 7 you want to use and calculate exactly how much impact they have on meeting your plan, you would now have a definite approach on how to make your plan work.
It seems simple. At that’s what it’s all about. It’s about how to make your plan work the easiest and smartest way you can eliminating all the guesswork or trial and error methods. Want to increase your profit? This is a good way to do it.
So, you see, once you decide which of the 7 ways you’re going to do, then the only thing left for you to do is figure out how to make the one or ones you have chosen work.
No doubt there would be a lot work to do to do a plan like this. You would need to figure out how to put it all together, do all the calculations, do a lot of what if’s, etc.. And I’m sure one of the biggest things would be, would you actually take the time to do something like this or even have the time to do it? You could pay someone to do it but that would probably cost you a lot. Plus if you did that, most likely it would require a lot of back and forth work to get it just like you wanted it which would be even more expensive. But even then, would you spend the money to do it?
There is a better way. If you would like to develop a nice plan like this for yourself and give yourself a good shot at making your life better, then find a planning software that does it all for you.
A Sample Business Plan for a Small Business May Not Be the Best Way
You can find a sample business plan for a small business in all kinds of formats. There is a sample business plan for a small business where you basically fill in the blanks or you can have access to a sample business plan for a small business where you can pattern yours from it or you can develop a business plan that is centered on what you want for your dreams and your life.
I don’t know of better way than to let your business give you what you want for your lifestyle. Whether it’s a sample business plan for a small business or one where your business gives you a plan, it should tell you what is needed to take you where you want to go and when and how you can get there and it should be in clear simple terms, supported with all the specifics.
So using a sample business plan for a small business is just one of many ways to make a business plan but frankly I think designing one that will have your business give you exactly what you want is by far the best way.
So, why not start out with what you would like to have in life for you and your family? Then develop a business plan that could show you exactly what your business would need to do to give you that life style. If you think about it, there is no other way where you have more control over what you want in life than letting your own business do it for you. If you work for someone else, you’re sure not going to have as much control over your future.
So how would you go about making a plan like this? Well if you know a fair amount about business, you can. It will take some special calculations and some work but if you know how to put together a Profit & Loss Statement, you can probably do it.
You would first do a P&L for the present year for your existing business and the first year and as many years after as you would like to have your plan cover. Your existing business financials will be the foundation for building yourself a business plan for as many years out as you want. This data will tell you a number of things but first if you want to build your plan around what you want in life, you would need to decide some things about your life:
1. You would need to decide how much income you would like to have for yourself for each of the years you plan for.
2. You would need to determine what kind of profit margin you would want from your business for each of the years.
3. And by combining these 2 things into a P&L format you can develop a financial business plan that can extend as for into the future as you would like.
4. The first thing it will show you is how much sales you would need each year to give you the income and profit you would like. Once you see the sales needed, if you know your business well enough, you should be able to estimate those additional expenses needed to overcome capacity constraints that will occur as your business grows.
With this information you can actually predict not only what your sales will be, but you can see how much your fixed and variable expenses will be, what your labor cost will be, your material cost, and your profit.
1. So let’s first look at what exactly are fixed expenses? They are exactly what they say they are; they are fixed. This simply means these are expenses that are ongoing whether you have a lot of sales or “0” sales. They are expenses like utilities, taxes, rent, salaries other than the wages used in the making of the actual product or doing a service, business fees, telephone, etc. See how these expenses would continue on even if you have 0 sales? Any expenses that fall into this category are fixed expenses. Far too many small business owners never divide their expenses into fixed and variable. As a matter of fact, if you could have a business that had “0” fixed expenses; this would be the best of all worlds, why? If you had “0” sales, you would have “0” expenses. So the closer you could get to this the better you would be.
2. Variable expenses are those expenses that track directly with sales. If sales stop they stop. These are expenses like supplies used to support in the making of your product or doing your service. Such things as shipping cost for raw materials for your product or service. If you have no sales then you’re not going to be purchasing materials so your shipping cost for those materials will stop as well. As an example, if you have a lawn mowing business and there are no lawns to mow, then you wouldn’t be buying gasoline to travel to your lawn mowing site. These kinds of things are variable expenses. If you’re producing a product, it would include supplies used to produce that product like sand paper, glue, finishing materials, cutting tools, etc.
3. Labor and material costs are also directly proportionate to sales. These are things that go directly into the making of the product or into doing the service.
a. Labor cost is the actual direct labor used in the making of product or doing the service. The cost would also include all the fringe benefits like social security, payroll taxes, vacation pay, holidays, sick pay days, etc.
b. Material costs are all the materials used in the making of product or in doing the service. In the lawn mower service as an example it would be the gasoline used in the mower and any other materials used directly in that service. For producing a product it would be all the materials used in the product that is sent to the customer including all the packaging materials.
Average Selling Price
Now when you calculate your average selling price which is your cost of sales (material + labor) divided by (1-gross profit), you can determine how many customers you would need and then come up with what you think your conversion rate would be for converting leads to customers, you can determine how many leads you would need. Then from this and with the aid of the U.S. Census Bureau and some basic research on your own you can actually have a pretty decent idea of what size your market is and is going to be in the future so you can see if it will support your business plan or not.
So if you can put this all together, you can have a complete business operating plan that would show you exactly what your business would need to do to give you the income and profit you would like to have and a rough idea whether your market would support it or not. All you would have left to do would be to figure out how to make it all happen.
It’s like planning backwards.
1. Determine what you want in life
2. Figure out what your business would need to do to give you that life.
3. Figure out how long it would take you to reach it.
4. Figure out how big of a market it would take each of the years you’re planning for.
5. Then see if that market is big enough.
Isn’t this a much better way to go about planning your business? Shouldn’t your business be designed to give you want you want instead of you working yourself to death just hoping for the best?
So how would you go about calculating all this?
There is quite a bit of calculations and you should know a little about business principles but it isn’t that complicated. So first let’s look at figuring out your future needed sales with this formula:
Projected sales = fixed expenses divided by (1-(var exp % of existing sales + mat cost % of existing sales + lab cost % of existing sales + desired net prof %))
So, let’s say you existing sales is $850,000 annually, your fixed expenses are $275,000, variable expenses is $55,000 or 6.5% of the $850,000, material cost is $236,000 or 27.8%, labor cost is $109,000 or 12.8%, and your existing profit margin is $175,000 or 20.6%.
Now let’s say next year you want to have a profit margin of 25% so what would your sales need to be to give you that profit margin? Now you might think you would simply tack on 4.4% more to sales (25% – 20.6%) and you would have it. Well not quiet. it doesn’t work that way because you are going to have the additional variable expenses, material cost, and labor cost too. Remember, the more sales the more each of these expenses and cost will be.
So here is how you would do it:
Projected sales = fixed exp ($275,000) divided by 1-(6.5% + 27.8% + 12.8% + 25% (your new profit margin) = $896,057 (new sales)
You can do this for as many years out as you want. Obviously this is based on your first year’s fixed expenses remaining constant and no consideration of depreciation, inflation, or taxes.
But most likely you would need to increase your fixed expenses because you’re going to probably have more rent, utilities, or such as your business grows. So, you would simple put in your new fixed expense number in place of the existing one for each of the years you would be planning for.
So, you see if you decided you wanted a 35% profit margin at year 5 then you could see how much sales it would take to give you that.
Now it’s also important to know how many more customers you would need as well so you should always look at that unless you have another way of growing your sales other than with new customers.
Let’s say your average selling price for your service is $925.50 and you have one transaction per year per customer.
Using that first years sales example we used above, you would calculate it this way.
$896,057 divided by $925.50 = 968 customers needed for the year. Now if your average transactions per customer are more than 1, then you would need fewer customers. As an example, let’s say your average transaction per customers per year is 2.5 then 968 divided by 2.5 = 387 customers per year.
Now let’s say you estimate your conversation rate to be 3% of turning leads into paying customers with the advertising method you’re going to use, how many leads would need to contact to get 387 customers? Simply divide 387 by 3% and you get 12,909 leads you’re going to need to contact.
Then the question is; is your market going to be big enough to provide you with 12,909 leads for the next year and how many will you need each of the following years?
It may be easier than you think to figure this out. You would do some research and with the aid of the U.S. Census Bureau you can roughly determine whether your plan can be supported by your market or not.
So what do you think? Is it better to build a business plan around what you want in life then see how your business can maybe give you that or is it better to use a sample business plan for a small business where you are probably guessing?
What Makes A Good Business Plan And Why Do I Need One?
A strong business plan is essential for anyone looking to set up a business. A working business plan will prove your most used tool when it comes to building up your business, therefore it is essential to get it right from the word go. A business plan is a written document that clearly explains to the reader what the business is, what its objectives are, the strategy behind the business, the market it is involved in and its financial forecasts. A good plan can have many different functions from securing external funding to monitoring success or failure within the business. In general the most common function of the business plan is to act as a guide for a new business owner to follow when just starting out.
A business plan is essential for all businesses regardless of size, and once one has been written it is also important to maintain and update said plan. That being said, it is important to realize that whilst writing a detailed plan is useful and a good foundation for any successful business, it will not necessarily make the business a success or guard you from all disasters. If you keep up to date with business plan it will prove a really useful tool throughout the lifespan of your business. However, if you grossly over exaggerate profit margins or your budget then your business plan could also lead to failure. Stick to the figures and be realistic and your plan should hold you in good stead in the turbulent business market.
A lot of resources nowadays provide ready-made plans for specific businesses and whilst this is handy, most business owners will recommend that you write the plan yourself. This is because writing a plan for your business actually forces you to focus on what you want from your business and how to achieve your goals. When looking back on your initial plan for reference, you shouldn’t necessarily assume that your initial assumptions and predictions will be correct, they are just that: predictions. You should be able to go back to your plan on a regular basis and view it and change it to relate to the actual current situation.
It may seem like a daunting and laborious task to write an entire plan from scratch, but in actual fact once done it can be incredibly useful. In the beginning stages of your business, your plan will help to define and focus your objective by using accurate figures and details. Once established and looking to expand, you can then use your business plan as a selling tool to get more funding from external sources such as investors and the bank. As you are developing your business, your plan will help to highlight any gaps or weaknesses in the planning process. You can then address these issues and hopefully avoid any disasters. Finally, you can also use your plan to get advice from other experts within your field. By having a detailed business plan to hand you look professional and can present the information in an organized and clear manner.
In order to create a strong working business plan you need to place reasonable limits on long-term projections. For the time being, focus on short-term objectives and change and modify the plan as you go along. Too many long-term plans become pointless as they extend too far into the future. Don’t be too optimistic, instead stick to being realistic. Over optimism will be your downfall in the end and is only setting you up for a fall. When dealing with timelines, sales and profits err on the side of conservatism as this will protect your business in the long-run. Make sure your business plan is written in simple, clear language that can be understood by all in a bid to appeal to a wider audience and keep things clear.
Techniques For Writing a Business Plan
A business plan may be defined as the formal statement of a collective set of business goals or planning. It can also contain the background information about the organization. Business plan is mandatory to run a company because it is an essential part of initial strategic planning of any company. The capability of writing this plan effectively is a fundamental quality that a businessman should have, especially while starting a new business company or organization. The plan acts like a road map which may guide the company towards success.
There are some objectives or reasons to write a plan for business. These are mentioned below:
– It’s a tool or equipment for obtaining financing
– This helps to unite joint venture partners in a common goal or destination
– It makes the whole business goals feasible to study and analyze
– It will serve as the blueprint for the debut business companies.
A business plan works to convince individual or institutions for investing money in his business or loaning money. Sometime the plan writing is more important than the plan itself. While attempting to write a plan, the businessman’s strategic foundation should be identified first. This strategic foundation explains about the type of business he wants to start or which type of firm he wants to establish. It also indicates the basic elements that are needed to start the business firm. One can predict about the future condition of the company by the plan on his business. In the plan, the main products and the information on the clients should be written down in detail. To get more idea about it the business man can contact with business marketing consultants who can help him.
The planner can be able to declare the financial conditions and financial goals of the company by the help of written form of the business plan. A businessman must think about the present and the future conditions, which mean that he must analyze recent conditions as well as the upcoming needs. He should categorize the ideal and awful clients so that he can take steps to attract the best clients, at the same time to refuse the others. A business plan should be written in brief way so that he won’t forget any topic or information.
Writing a business plan proves the deadly seriousness of a businessman. It is very important in acting as a guide in different stages of the business. While writing a business plan one should follow some criteria which make the plan more effective and work worthy. To set up a unique business goal that is verifiable. The main purpose of writing the plan is to notify the specific goals or plan that a company is going to perform. It will guide the businessman to take decision himself as well as it will explain his plans on business and aims to anyone reading his plan. It also states the long term objectives of the business.
The plan must be realistic in every aspect. It includes the time line, market analysis, specifies projected expenses and revenues, and creates an accurate forecasting. One must keep his plan simple, easy and clear to be understood easily. If the language is difficult and inflate for impressing the customers, it may affect in reverse way. It may be confusing for the businessman himself. It should be very easy and naturally described without any excess verbiage. It should be in proper tone so that the reader can response and react positively to that tone. One must consult with some of the institute concerned with the business sector. These firms and organizations help you to take proper decision at the right time. Consulting institutes such as business consulting firms, business technology consulting, business plan consultants, organizational consultants etc. They help and give you the proper guideline in every aspect and decision. These types of firms summarize the plan and efforts that is effective for the company.
One must write a plan staying along the lines of traditional business plan format. Creative thinking is always appreciable, but to make yourself look more professional you must go with the guide of a tested business plan template. This may organize the plan into a well structured data and document.
One must clearly state and define the main purpose of the business plan. Similar to the identification of the goals of business, the writer must identify and specify the goals of the written business plan. It will help to secure the financial backing from the investors.
Once the plan is ready for the inauguration of the business, the businessman should decide his priority. These priorities will make the success in business easier. The main contents of writing a business plan are given below:
Statement of purpose
Table of content
-Description of business
Overall a business plan should be written in such a manner that it is easily understandable and that have the ability to attract newer clients. After these mentioned process been finished, one would be ready to face challenges that a new business would bring.
New to Business Planning? Start With a Basic Business Plan
Why would you want to write a basic business plan as opposed to a more elaborate one? Most business owners I know struggle with the idea of writing a full-blown plan for their business. To be completely honest, writing a plan for anything, let alone a business you own or intend to start, is challenging because…
1. we don’t know where or how to start
2. we want our plan to be perfect the first time we write it – as in, we don’t want to make any mistakes
3. we don’t like to write – and let’s face it, writing a plan involves writing.
I’m going to share with you ways to overcome each of these hurdles. But before you do anything, allow yourself to break the process of business planning into small steps.
The first step is to have a basic plan which will serve as the foundation for a more detailed and comprehensive plan down the road.
How to Start Writing Your Plan
What goes into a basic plan? Well, let’s first define a basic plan as a plan for the bigger plan you will arrive at later on.
Here are the essential questions you need to answer:
1. What do you want to gain by writing this plan?
Is this plan an internal plan which you will use to guide yourself or your team towards achieving specific and measurable targets? Or are you aiming to attract potential investors? Is this something you would like to take to the bank to propose a loan for your business?
Begin by examining what your specific goal is for writing your plan.
2. Who is going to review my plan, and what do you want them to do with it?
You need to identify who is going to actually study your plan, and what they are going to do with it. If it’s yourself, then it’s a little easier to answer this question because the answer lies within you.
If, however, you are writing your plan for others to review, and assuming you’ve answered #1 above, you’re going to have to do some background analysis.
Start listing names or titles/positions of people who you expect to review your plan. Then, for each person, brainstorm how you want that person to react to your business plan – what they should do with it.
You could do the same thing for investors – do you know any business owners? Ask them what they would look for in any business venture they would invest, and specifically what they would look for if you wanted them to invest in your business.
3. What is the core product or service your business offers to buyers?
To answer this, write down the product or service you intend to offer as simply as possible. We’ll answer more detailed info about it in the following questions.
4. Who is the ideal customer for this product or service?
Really, ideas for business are a dime a dozen. You often hear people talk about a great business idea they have, but they rarely back it up with any kind of proof that a customer exists for such a product or service, and that that customer would be willing to pay.
Try to be specific in profiling your buyer. For example, does your product or service cater to men or women, or both? What age groups or income levels does it service/attract? Are there any geographical areas that your product or service would supply?
5. Is there enough demand for your product or service?
This is something you’ll want to investigate in more detail as you develop your business plan. At this point though, what’s important is to do some preliminary research. Searches on Google, Hoovers or Bizminer will help you study a particular industry, and you can often drill down your research to a particular state or city. Your search at Google is of course, free, but you’ll often find for a small investment at sites such as Hoovers or Bizminer, you’ll get meaningful data for your market vertical, which you can start analyzing right away.
It’s also not a bad idea to survey buyers on their purchase behaviors and perceptions towards your product or service. Arranging a questionnaire or focus group can give you some useful insight into how potential buyers react to your product or service.
If it’s reasonable, consider giving away product or service trials and then follow-up to evaluate user expectations and experiences.
If you don’t have demand for your product or service, it really doesn’t matter how great it is anyways, right?
6. What existing problems or needs does your product or service solve for your customers?
This is one of the most important questions to answer, because ultimately, your product or service is just another one available unless it clearly and uniquely solves a problem or need which buyers face.
To give an example, let’s say your product is a software application that helps you manage your finances and taxes. There are a few applications in the market which do that already. So, what does your application do that others don’t? Is it better on features, is it faster? Is it more secure? Is it more user-friendly? Is it more portable? Does it really help someone save money or increase their net worth?
Can you see why getting clear on the solution you offer to your target market is so crucial?
7. Who are your direct and indirect competitors?
You really should gain at least an initial understanding of who else is offering similar products or services to your target market. It’s good to know how their products or services are currently used and perceived – why people buy them, and why they don’t. In doing so, you begin to understand the strengths and weaknesses of your competitors from the consumer’s perspective.
Depending on what your product or service is, you can find all kinds of information about user experiences with your competitors’ offerings. Sites like Amazon let you see product reviews by customers who bought products.
8. What do you need to get your business rolling/growing, and what will it cost?
This is arguably the most painful part of business planning. Yet, what is the point of having a plan if you don’t know how it all adds up financially? You may not know how to put all the numbers together on your own. If that’s the case, invite or even hire someone to help you sort out the numbers.
Aside from any potential revenues earned from sales of your product or service, you’ll need to know your fixed expenses – what it costs you to run your business whether or not you sell a single item, and your variable expenses – what it costs you for each item sold.
Naturally, in the early stages of planning a business, you will be doing a lot of forecasting, and your numbers may not be as accurate as you’d like them to be. So, you’ll want to be as conservative as possible about how much revenue you’ll generate and how much your business will cost to run.
9. Putting your plan to action – what are the key steps you need to take?
At some point, the plan needs to hit the road! The plan is no good if it doesn’t help you take action. So a simple action plan should be included – what needs to be started and completed, when and who will do it, all need to be mapped out at least at a basic level.
Having an action plan will also help you get excited about your business venture, as you can see how it comes to life.
10. How can you improve your plan?
Once you’ve answered these questions, you have a basic blueprint of how your business is going to look at the early stage.
Remember, your first step is to prepare a basic business plan that serves as a foundation. From this foundation, you will want to further explore areas which need more analysis and testing, while some aspects of your business venture merely require you to get started and measure how things are going.
Develop Your Business Plan As a Web Host
A business plan defines your whole business strategy, where to start with and where your business will lead you in future? To create a business plan you must know the details about the business you are going to start.
Why a Business Plan is required?
Before starting a business everyone needs to know where your company will stand in next 10 or 15 years that depends on you for how long you can carry on your business plan. After collecting all the necessary information regarding your business you have to assemble that in order which results in a proper business plan. The essence of your business plan is based on:
- Goals: Define your goals properly and strategy to achieve them.
- Problem & Solutions: What you are going to do in any sort of crisis? How you can handle it?
- Financial Issues: How much finance you have? And how long you can survive with it? How are you going to manage you business profit and loss?
Business Plan Duration:
While writing a business plan you should keep that in mind, how long your business plan can survive? For that you have to do market research about the business you are going to start, it pros and cons. The success of your business can tell you how long your strategy will work?
Your business plan must be flexible, if things doesn’t workout according to the plan than what will be your next step? Most of the people got stuck in the situation where they don’t have enough flexibility in there business plan. So your business plan must be flexible enough so that you can make changes according to the twist and turn in the market.
Web hosting Business Plan:
If you are planning to start a web hosting business first you have to define your business plan. Your business plan must have consists of following elements:
Define your Business Strategy:
Most people got confuse in the beginning that where to start off. If you are starting a web hosting business and you don’t have much idea about it started off with a small investment. Initially get a reseller web hosting plan. In reseller hosting plan you are allow to host websites as a third party. Certain amount of space is reserved on a server for reseller account and he has permission to rent it further on the behalf of his own company. A reseller can have a shared server or he can rent a dedicated server. Many known web hosting companies had started off as a reseller and now they are giants. So starting of as a reseller can turn out to be a huge company.
Before doing anything one should analyze the conditions or situations. So as in the business you have to analyze your market place and how things work in web hosting business. While performing a market analysis you have to keep these things in mind, what are you offering? Where you have to start? Why you choose this business? And how you will compete? Market analysis will clarify your targeted clients and competitor so you can define your web hosting plans keeping market trends in mind.
What are you going to Offer?
First you have to decide what sort of web hosting plans you can offer? There are many cheap web hosting companies offering cheap web hosting plans. What is your uniqueness? A Reseller can provide any type of hosting plan depending on what sort of account he is using himself? As a reseller host you can offer shared web hosting, Virtual Private Server (VPS) hosting plan and dedicated server hosting plan. Also you can define your own price and packages. To beat your competitors you can define many discount packages. Attract them with cheap offers or provide some additional services.
Marketing is another important aspect of a business especially when you are new. Let the others know you are here. You have to promote your web hosting business, for that you can use ads, social media, affiliate marketing and other online resources. Marketing strategy must be defined clearly keep in mind your targeted clients and other related companies. A healthy marketing can boost up your business so your marketing campaign must offer attractive web hosting plans.
Most important aspect of any business is “finance.” What you going to invest in the business? How much financial resources you have? And how long you can survive with any output from your business? Market survey will help you to decide how much investment is required to set up web hosting business? Keeping in mind all the available financial resource you can define your business scale, whether you are going to start your business at small or large scale.
As if you are starting as a reseller host you don’t require much investment. In financial plan you have to keep record if incoming and outgoing cash so you can keep an eye on what you are earning? And how you have to spend it? Keeping in mind all these factors you can develop an efficient financial plan.
Operations and Management:
As in the beginning you are starting as a reseller host so you don’t have to worry about many operations. You hosting company will take care of your hardware maintenance and other complicated issues. Also they will provide you 24/7 customer support. In future when you move on to the bigger level, you will require more space and manpower to perform these operations. Depending on the growth of your business you have to define your needs in term of hardware, software and resources to maintain all this setup. List down all the operations you have to perform and how many people are required to perform these operations. In web hosting business you have to maintain your many different client accounts including there web hosting plan and services they are getting.
All these elements are essential to develop and efficient business plan.
How To Develop A Successful Business Plan
Make Sure You Have A Business Plan
The first point to keep in mind about business plans is… have a business plan! This may seem obvious but is overlooked. Many people start businesses without a plan; sometimes it can come from sheer bravado, thinking “I don’t need a plan”, or alternatively you might hear “It’s all inside my head, that’s my business plan”. The reality is no matter how much you work with things in your head, no matter how confident you may be and how much you think you already have a great vision for your business, there are so many great reasons why you should get it down on paper.
Most of all if you are seeking funding for your business, it will be absolutely crucial to go along and show someone an actual plan, because there will be very few people who will loan you money on the basis of what’s just in your head. So it’s pivotal to have a plan and be committed to preparing that document. If you are someone who shies away from planning, or you don’t like writing or preparing documents, nevertheless you are going to have to force yourself on this occasion. I say that because it is such a key document for the future success of your business, such a tool throughout its development to return and refer to.
Have An Overall Vision
When writing your business plan it is really important to have an overriding vision of what your business is going to do, what it is going to be, and what you want to achieve. Very often it is tempting to get straight into the technical details, the monetary concerns, financial matters, where you will be sourcing supplies, etc. Now all these things will be vital in your business plan, but it has to be held together by a coherent, broader vision.
Remember the proverbial expression ‘not seeing the wood for the trees’? You need to see the ‘wood’ first, then delve in and start examining the individual ‘trees’, meaning the individual items which you will be breaking down later. So a great point is to make sure that you have that overarching vision – and if you cannot find one, then maybe it is an indication that you are obsessing on a few technical aspects that do not necessarily make up a whole business as you had imagined it. A business that makes sense and is going to be sustainable in the future is one that has that clear vision within which all the smaller parts contribute to make it successful.
Contextualise Your Budget
Of course your budget will be extremely important. But sometimes people sort of pluck figures out of thin air, not giving it the context it needs in the business plan to make real concrete sense of how that budget is going to work.
So it is crucial that every time you mention financials in your business plan, to really give them the correct context. When I have worked with clients in developing business plans, there has been a budget or amount set aside for example to be spent on marketing, which has been decided a bit arbitrarily. I mean with no real research, no understanding of what that amount needs to be spent on, and what that budget will truly achieve. It seems to have been put there to fill the need to attribute a certain sum to marketing.
Make sure you are researching each point of your budget, make sure that you are giving it context and it makes proper sense within your overall plan.
Don’t Make Assumptions About Customers
To be an entrepreneur does require plenty of self-confidence, sometimes almost a bloody-minded determination to make your business work. But this confidence spilling over into thinking that you know what ‘the market’ wants can be dangerous, without checking that it’s true. You need to do your research that the market does ultimately want what you will be offering, whatever products or services you will be selling.
That is a great thing to make sure you have in your business plan, that your business will be built around those real customer wants. Do not make callous assumptions, or statements like “I know what people want”, “People are going to love this”, and so on. Have you done your research? Do you really know that the people you will be targeting want your product / service, and crucially do they want it AT THE PRICE that you will be offering it at? Whilst confidence in your plan is fantastic, you must make sure that it does not lead you down a blind alley along a path that is not desired by your target market.
Don’t assume what customers want, do your research and make sure that is clear from the start in your business plan.
Research Your Competitors (But Don’t Copy!)
Every business plan should focus a lot on the business’s potential competitors, because research and analysis of the competition effectively gives you plenty of useful information. It may guide you as to where you should be advertising and marketing, or certain strategies to use or ones to avoid because you see they have been used unsuccessfully by others.
I often see people split into two camps. On one hand those who almost ignore competitors in their business plan, because they do not want to think about the issue yet and feel so confident they have a great idea for the market regardless. But I recommend not being overconfident when it comes to competitors. They are still there for a reason, they are still around and in business for a reason, so view them with that in mind.
I teach that you should seek to learn from competitors; obviously never copy another business’s idea or what they are doing, but you can absolutely learn from their mistakes or see what they are doing and discover ways to improve it. All of that analysis belongs in your business plan: make sure you have your competitors under the microscope and make sure that is a solid chunk of your plan. That is some of the best research and information you will gather about what will make your business successful in future.
Be Prepared For Risks
It is a fact of life that any new business or enterprise has a degree of risk attached to it. Therefore it is important for your business plan to analyse and calculate that risk, showing how you will engage with it. There is no business plan out there that is risk-free, but very often where the risk is higher then the rewards will be as well.
What should come into your business plan is how you assess it, how you foresee anything occurring that could have an adverse impact and how you would deal with it in the right ways. If you are looking to obtain funding from a bank or people you know, it is essential to show what the risk factors are in the proposed business and how you plan to defend against them.
It could be, for example, the risk of a change in the economic environment – what are your contingency plans for that in terms of dealing with such a situation? There may be many other risks as well specific to your particular sphere of operation, but that ability to plan ahead for all scenarios makes for a robust business plan. When I have received business plans, the very best responses come from people who have looked at the risks and have an answer for every question. What you never want is to throw a scenario at your plan and have to answer “I don’t know what I would do in that situation”. You want to plan for every possible contingency, and certainly all the major risks to the ongoing success of your business.
Obtain Feedback On Your Plan
When writing a business plan you sometimes end up locking yourself away. You might have unique ideas which lead you to seek some isolation and secrecy, or if you are going to be a sole trader you may only have one person to consult namely yourself. But it is fantastic to try and get broader input on your business plan – whether from a professional, or simply from friends and family whom you trust. I say that because of course you need to be careful with commercially sensitive ideas, as you do not want to pass your plan on to someone in the pub who then starts your idea before you across the road.
But do not be too paranoid, make sure you are showing it to people you trust, whose feedback you welcome and can be genuinely useful in guiding how the plan takes shape. Very often when working as individuals we get very close to certain details and miss out a big thing that has slipped your mind. You can concentrate so much on essential financials and supply logistics, but overlook other issues like marketing or opening times. By showing the plan to someone you trust, they can have a look and see what might be missing or worth developing more. Getting that valuable second opinion on how robust your idea is will put you in a much better position to start and keep going successfully.
Writing an Effective Business Plan For Your Small Business
Plans are Useless; Planning is Indispensable
“Plans are useless; planning is indispensable,” according to Dwight D. Eisenhower, then Commander of the Allied Forces in Europe during WWII. Now, you may be in total agreement with the first part of that statement, but you are really not convinced of the truth of the second part.
At this point, you may be tempted to skip writing a business plan altogether, viewing it as an unnecessary exercise in jumping-through-the-hoops, suggested by some old business professor who probably never held down a “real” job anyway. Maybe it’s okay as an assignment for an MBA class, but it would be just too confining and irrelevant for today’s fast-paced business environment. Anyway, you’re ready! You’ve thought about this business venture for a long time and talked it over with friends and everybody agrees it’s a great idea. Best to strike while the iron is hot!
Press for Success
Far be it from me to dampen your enthusiasm, but you should give yourself every opportunity for success. That’s what the planning part of the process of creating your business plan will do. By the time you have pressed your way through it, you will not merely have some neatly arranged document to keep on file, you will have a working tool that addresses the essential factors that influence your future.
Besides, your friends may be 100% behind you in your new venture, but, in case you are hoping to involve others who have actual money to invest, you may need to be able to make a convincing case. Wouldn’t it be nice to have anticipated possible questions and be ready with plausible answers? If you are risking your own money, that is perhaps even a stronger reason to do some indispensable planning.
If you are one who is intimidated by the blank page, never fear! There are several good software packages that will guide you through the process, such as Business Plan Pro Complete from PaloAltoSoftware. Business Plan Pro Complete walks you through the entire planning process and generates a complete, professional and ready to distribute plan with a proven formula for success. The planning wizard makes it a snap to get started since you simply answer yes or no questions to create your custom business plan framework. Bplans.com offers free business plan samples and how-to articles as well as a wealth of other information. It is definitely worth taking the time to checkout. Microsoft Office Online Templates also has a variety of free templates to use with their products. The wizard indicates the information you need and you fill it in as you go.
You may find that the easiest part is the actual writing of the plan. The real work comes in the data-gathering, which may take you a hundred hours or more, depending on what you already know or have researched. If your new venture is in an area where you’ve been working, you may already know about your customers, your suppliers, your marketing plan, your organizational structure, your financial and cash flow needs, equipment, inventory, and so on. If you know all of these except for Marketing, say, then this is where you will need to invest some time and effort. You can find a wealth of information by utilizing the traditional data sources such as chambers of commerce, major cities’ websites, trade associations, the US Census Bureau, trade journals, magazine and online articles and advertising, etc. Performing keyword searches on Google, or Ask will bring up websites to check out. Following are some places to start:
- James J. Hill Reference Library (jjhill.org): One of the nation’s premier business libraries to bring you FREE and affordably priced tools and resources you can use to create a better business plan based on relevant and credible data.
- U.S. Census Bureau (census.gov): A source for a variety of useful statistics, especially the Economic Census that comes out every 5 years.
- American Demographics (adage.com/americandemographics): Just as the title suggests, numerous free reports about consumer demographics in the U.S. nationally and by statistical area.
- Internet Public Library – The Census Data and Demographics (ipl.org)/: An especially useful site that has links to information about countries other than the U.S.
- Corporate Information (corporateinformation.com): Features information summaries on over 350,000 companies in the U.S. and abroad for competitive analysis.
You can find a variety of companies online to help you with your market research. For example: Sundale Research’s (sundaleresearch.com) primary goal is to provide new and mature businesses with objective, accurate industry data and market analysis on a wide range of topics. Their market research is intended to save you time and money while keeping up with industry trends.
But your idea may be so new that you may also need to talk to potential customers, host some focus groups, talk to an ad agency, or maybe even make a prototype and float it past some people. Be prepared to spend the time. Remember, it’s not about the Plan but the Planning.
Build It on Paper First
Whether you decide to use business plan writing software or to just follow this guide and create your plan with your word processor, here are the sections of a good plan and the questions that need to be addressed:
- Cover Page – Show the name of the company, your name, and the date.
- Introduction – What is the name and address of the business? Who are the principals, their titles, and their addresses? What is the nature or purpose of the business? What is your launch date? How much start-up and/or operating capital is needed?
- Executive Summary – One to three pages that summarize all the information to follow; come back and write this last.
- Industry Analysis – How does your product or service compare with what is currently on the market? What is the trend in the overall industry? What have been the total sales in this industry over the previous 3 to 5 years? What new products or technologies have had the biggest impact on this industry recently? What is the future outlook for these and what trends are emerging? Who are the competitors, where are they located, and how are they doing? What advantage do you offer over them? Who is buying this product or service now? Describe the typical customer for this product or service. Are there emerging markets or market segments? Where does this product or service currently perform best? Possible Data Sources: trade associations; trade journals; attorneys & accountants dealing with the industry; industry salespeople; state business websites; focus groups.
- Description – What product(s) or service(s) are you offering specifically? Are any patents, copyrights, or trademarks needed? Have they been acquired/filed? What is the size of your business? Where will it be located? Will this require purchasing or building a facility? Will this require leasing a facility? At what cost? Has a lease been negotiated? What personnel will you need? Where will you find suitable employees? What equipment do you need? Will it be purchased or leased? What are the qualifications of your principals? How do their backgrounds promote the success of this venture? Why do they think this will be a successful venture? Possible Data Sources: local Chamber of Commerce; community colleges & local universities; local employee leasing company; real estate agents; US Patent & Trademark Office; US Copyright Office.
- Production Operation – If a product must be manufactured, what is the process? Will the work be done on-site or subcontracted? Who are the subcontractor(s)? If on-site, what space, equipment, machinery, production employees are needed? What suppliers are needed? Who are they? How will quality be assured? What is the anticipated production output? What established credit lines do you have? Possible Data Sources: local Chamber of Commerce; yellow pages; trade associations.
- Service Operation – If a service is offered, describe it. Will the work be done by company personnel or subcontracted? Who are the subcontractor(s)? If on-site or in cyberspace, what employee qualifications, equipment, and technologies are needed? How will quality be assured? What performance levels are anticipated per employee? Possible Data Sources: local Chamber of Commerce; yellow pages; trade associations.
- Marketing – How is the product or service priced? How will it be distributed? How will it be promoted? Will it be promoted by the venture or an outside agency? What agency? How have you determined what amount to set aside for marketing? How have you determined product or service forecasts? Possible Data Sources: on-line searches; Amazon; local outlets; trade journals; industry attorneys & accountants; salespeople.
- How is the business structured? Who are the principals and the principal shareholders? What authority does each principal have in the venture? What are management’s qualifications? What is the job description for each position? What does the organizational chart look like? Possible Data Sources: on-line templates for job descriptions & organizational chart.
- Risk Assessment – What weaknesses are inherent in this venture? What vulnerabilities face this type of venture? What impact will these have? What new technologies may affect this venture over the next 1 to 3 years? What contingency plans are in place? What level of liability insurance is required? What does it cost? Who is the carrier? Possible Data Sources: trade associations; trade journals; Service Corps of Retired Executives (SCORE); industry salespeople; customers; focus groups.
- Financial Plan – What is the anticipated income? What are the cash flow projections? What is the anticipated budget over the next 3 years? What is the break even point? When is it anticipated to be met? What funding is needed and where will it come from? What funding is currently available? What collateral is available? What is the net worth of the principals, if applicable? Possible Data Sources: accountant; accounting software; Small Business Administration; Small Business Development Center; SCORE; banks; venture capitalists.
- Appendix – Resumes of principals/management; letters of recommendation from current business associates/customers/suppliers; marketing research data; demographic data; leases or contracts in place or as promised; business licenses; price lists from suppliers; trade or industry articles or data; floor plans; information on subcontractors; liability insurance policies.
Impress for Success – Now you have to admit, this is going to make an impressive package! Put it in a binder and you have built something to be proud of – the first of your many business accomplishments. Your potential investors will appreciate the depth of your analysis, but this tool will prove helpful in describing your venture to your employees, customers, and suppliers, as well. After you have been up and running for a few months, you will find that the planning that you have done will sensitize your inner “business compass” and allow you to flexibly adjust to contingencies. And that is indispensable!
Planning out your business on paper first gives you long-term benefits with potential investors, employees, vendors, and suppliers. The business plan becomes your roadmap to success, with pertinent data that shapes the course of your business start-up and lets you adjust your journey as contingencies arise. Business planning templates are readily available and data sources abound at your fingertips. You will achieve a solid understanding of your business as you work through each section of your plan.
IMPress Action Checklist:
Below is a list of the steps that will help you put together your business plan. Check off each step as you complete it to keep track of your progress.
- Purchase business plan software or download a template
- Read over the business plan sections to decide what data you have, what data you need
- Gather data via the internet, phone interviews, print material
- Fill in the plan’s sections
- Write the Executive Summary
- Print and Bind Your Plan
Do I Really Need a Business Plan for My Business?
Most successful businesses have created a business plan at some point, usually before their start-up.Why?
A business plan is needed to address all of the central components to starting a business. It is essential to make sure that you, as a new entrepreneur have carefully thought through many if not all, of the important components of your business. Ideally, you need to do this BEFORE starting your business.
What is a business plan?
They are generally prepared for two reasons:
1. To obtain financing for the business
2. To help determine if essential components of starting a business have been considered.
Often times with new entrepreneur’s (and sometimes even with the more experienced!) they overlook certain aspects of starting a business. So the business plan helps to ensure that most, if not all reasonable questions have been answered and strategies thought about.
Although business plans are often considered optional – they serve a vital importance to entrepreneurs.
Many aspiring entrepreneurs and even experienced entrepreneurs fail to recognize their importance. It is often considered an “optional” component of their business and should only be prepared when absolutely necessary.
It is needed to address all of the central components to starting your business. It is essential to make sure that you, as an entrepreneur of quality, have carefully considered what you are offering, how you are offering it and whom you are offering it to.
Although it may be tempting to say “I have everything in my head about my business” – could lead to a lack of clarity.
The idea of keeping everything in your mind makes it possible for you to:
- forget certain things
- remember things incorrectly or too modified to later be useful
- misconstrue thought combinations that you had at one point but later revised
- revisit ideas that you already have thought of and since dismissed…
Preparing a business plan will allow you to document what you know and have the permanent impact of writing it down.
But this is complicated – Right?
In the context of the larger corporate world a business plan is not only essential but required. Many formats of business plans are modelled after the layouts and inclusions used for larger public companies. The time frame and level of detail is much greater for large corporate entities as they are required for various interested parties (stakeholders). However, it is not necessary for smaller businesses, especially start-ups to prepare overly lengthy and complex documents.
Your business plan need not be a time consuming, uncontrollable and over-the-top difficult process!
How Can I, As an Entrepreneur Achieve This?
Through the simple process of preparing a Preliminary Business Plan you will:
- Engage in a key strategy that will help you to organize your thoughts
- Help you to focus on your business intentions.
- Apply a straightforward, step-by-step process to prepare one.
- Obtain clarity about your business.
Why is it called a Preliminary Business Plan?
Traditional business plans, like those used for large public corporations can be very complex and have the level of detail that is not required for most smaller, private businesses.
A Preliminary Business Plan is shorter, designed more for the start-up of the business and it is easier to understand and prepare.
Here are just some of the questions that it should answer:
- Describe in detail exactly what your business is to be.
- Describe whom your products and/or services are for.
- How do you plan to deliver your products/services to your customers/clients.
- What pricing do you plan to use.
- If you have a product, list the major suppliers
- Indicate whom your major customers/clients are likely to be.
- What are the risk factors that you see for your business.
- What current businesses pose as competition to your business?
- How many employees do you plan to have in the company and at what point will they become active?
- Have you completed one?
It will address all of the central components to starting your business. It is essential to make sure that you, as a new entrepreneur have thought carefully through and considered all that you need to BEFORE starting your business.
A Preliminary Business Plan is a step-by-step method that allows you to organize your thoughts and WRITE DOWN your intentions through documenting them in a meaningful way. It also provides you with a document to provide to interested parties (for example, banks, investors, etc.) if the need arises.
You need to prepare one, if you are:
- An aspiring entrepreneur who is serious about properly planning a business and would like to discover if you need one for their new business.
- An experienced entrepreneur who never has prepared one, but would like to learn how.
- An aspiring entrepreneur who is skeptical, but would like to explore the process and know more.
- Any entrepreneur who has heard about them, but are confused and would like some clear DIRECTION of what to do.
3 Business Plans Every Entrepreneur Must Have
I am mentoring small businesses and I am amazed at the ideas I read from the entrepreneurs I have the pleasure of meeting.
Unfortunately, not many have well laid out business plans and most use the Internet for planning.
A big percentage of the documents they use from the Internet are impressive, but what they do not understand is that one cannot use a business plan tailored for another region of the world to fully execute his specific business.
Business concepts are similar universally, but execution and sustainability differ depending on one’s environment and market.
The business plans I have read display glorified projections and their market analysis clearly depicts great profit.
In short, one look at a business plan will tell you that some issues have yet to be thought out clearly. For example, competition, risk, challenges and so forth.
Before embarking on your venture, draft at least three business plans.
This plan is the truest of them all. I refer to it as the naked business plan. It covers almost everything including risk and possibility of failure. No business life lesson can be complete without a discussion on risks and risk management and no business can be started without embracing risk.
Risks are inherent in everything we do – business risk management is the key to ensuring risks are identified and a plan-B or C thought out. Some risks we can control while others we cannot.
This plan should cover who you are as an individual, what your honest strengths and weaknesses are and how you will handle stumbling blocks or closure.
It should address questions like; Can you persevere through tough times? Do you have a strong desire to be your own boss? Do the judgments you make in life regularly turn out well? Do you have an ability to conceptualise the whole of a business? Do you possess the high level of energy, sustainable over long hours, to make a business successful? Do you have specialised business experience?
Financial projections in the plan should cover, at the very least, five different modules. You should work on the plan yourself and get prepared for any outcome.
I like to call this the headlines business plan. You only have one shot at getting investors – make the best out of it.
This is a plan that shows what team you will be working with and how you plan to invest to make money for investors. Show a well laid out plan that includes short and long term financial gains.
The confidence, coupled with experience, shown in this document will determine whether you get the initial investment you seek.
Financial projections in this case can be three to five years. They are there to show sustained profit. You should not glorify the plan nor try to get a lot of money for the start-up.
You must mention what your competition is and how you plan to create your own niche market – having a business plan that does not have a thorough SWOT analysis could raise the red flag. You might end up not getting financial support.
Pick the right team, get professional advice, try to separate your product from the rest in order to achieve your own niche.
Do not spend too much money. Most people think that having a lot of money is fundamental in starting a business. That is a fallacy – you can make a lot out of very little.
This is the plan that you started out with – the ”sitting research” through which you came out with pros and cons of the venture. The plan that has been developed from different Internet searches to better understand what you will be dealing with.
This is the longest business plan. This plan has a lot of data, but you should sieve out information that is irrelevant for your business. Without this plan, it is difficulty to cover everything that needs to be covered in your proposed venture.
Starting a business is not for everyone, but great planning initiated through a solid business plan will always bring in the results.
How To Write A Business Plan
In my previous article, I talked about how you can plan your business startup. I defined a business plan as a written description of the future of your business. This is a document that indicates what you intend to do and how you intend to do it. I further explained that if all you have is a paragraph on the back of an envelope describing your business strategy, you have written a plan, or at least the beginning of a plan. I also said that a business plan consists of a narrative and several financial worksheets.
I mentioned that the ‘writing of a business plan’ as one of the pivotal steps involved in setting up a successful business. By now you should understand the need for writing a business plan. Writing a business plan, for a traditional brick and mortar business, will probably take a lot of time. It may take up to 100 hours or even more. For obvious reasons, a new business needs to carry out a lot of research before a business plan can even be developed.
For an online business, a detailed and in depth business plan is usually not necessary unless you are trying to combine your online business with a traditional business. For most online business startups, the detail involved with planning a traditional business is not required. However, it would still be beneficial to you if most of the topics were still covered, even if only briefly. Having a written plan in front of you will help you to focus on important aspects of the business.
You may not have thought much about your competition or outsourcing some of your work, but things like that will impact your ability to make a profit. And you will find this especially so in the beginning phases of your business. Even you are just opening a lemonade stand in the front yard, you will still need to know what Susie is selling her lemonade for on the next street over!
So, although a detailed business plan may not be required for an online business, I am going to include it here so you can at least look at and consider each section and determine yourself if it applies to your business.
Here I shall be discussing the basic steps involved in writing a business plan:
1. Executive Summary: The first step involved in writing a business plan is the executive summary. Here, include everything that you would cover in a five minute interview.
Explain the fundamentals of the proposed business: What will your product be? Who will your customers be? Who are the owners? What do you think the future holds for your business and your industry?
Make it enthusiastic, professional, complete, and concise.
If you are applying for a loan, state clearly how much you need and be precise in how you are going to use it. Also include detail about how the money will make your business more profitable, thereby ensuring repayment of the loan.
2. Business Description: After the executive summary, you need to write a short description of the business you are going into. You need to give a general description of the industry your business belongs to. You will write about your company’s mission statement, goals and objectives, business philosophy, as well as its legal form of ownership (sole proprietor, corporation, LLC, etc.).
Describe your most important company strengths and core competencies. What factors will make the company succeed? What do you think your major competitive strengths will be? What background, experience, skills, and strengths do you personally bring to this new venture?
3. Marketing Analysis/Strategy: The next thing to write (after the general description) should be your marketing strategy. For new or existing businesses, market analysis is an important basis for the marketing plan and will help justify the sales forecast. Existing businesses will rely heavily on past performance as an indicator of the future. New businesses have a greater challenge – they will rely more on market research using libraries, trade associations, government statistics, surveys, competitor observations, etc. In all cases, make sure your market analysis is relevant to establishing the viability of your new business and the reasonableness of the sales forecast.
4. Location: Writing down the location of your business is very important. Locations with greater customer traffic usually cost more to buy or rent, but they require less spending for advertising to attract customers. This is especially true of retail businesses where traffic count and accessibility are critical.
If an online business, you need to go into detail how you will attract customers to your website. General statements like “I will use Face Book ads and email marketing” will contribute almost nothing to helping your cause unless you have detailed statistical analysis of tests you have conducted or of another similar business you have been associated with. If you do not have any data upon which you reference your estimates, it could show lack of proper thought to the remainder of your business plan.
5. Competitive Analysis: Business by nature is competitive, and few businesses are completely new. If there are no competitors, be careful; there may be no market for your products. Expand your concept of competition. If you plan to open the first roller skating rink in town, your competition will include movie theaters, malls, bowling alleys, etc.
6. Management and Operations: Because management problems are the leading cause of business failures, it is important to discuss management qualifications and structure. Resumes of the Principals should be included in supporting data. If your business will have few employees and rely heavily on outside professionals, list these key people and their qualifications. If you are seeking financing, include personal financial statements for all of the principals in the supporting data section.
7. Personnel: The success of any company depends on their ability to recruit, train and retain quality employees. The amount of emphasis in your plan for this section will depend on the number and type of employees required.
8. Projected Financial Statements: These statements are usually helpful, but not necessary. You will develop and describe your strategies for the business throughout your Business Plan. In the financial section, you will need to estimate the financial impact of those strategies by developing projected Income Statements, Balance Sheets, and Cash Flow Statements.
It is usually recommended that these projected statements be on a monthly basis for at least the first twelve months or until the business is projected to be profitable and stable. Activity displayed beyond the monthly detail may be in summary form (such as quarterly or annually). The forecast period for most business plans is two to four years.
9. Summary Section: This section is where you will be able to attach or explain any detail not applicable to the previous sections. This section should be used to provide the financial statements of the Principle’s involved in the business and any other data you think an investor would be interested in seeing.
The main thing to remember in this section is not to provide new data, but to explain in detail data that has already been provided and to provide the support for that data.
When you sit down to compile all of the elements of your business plan, make sure you have each section able to stand on its own merits. This means you should not reference other sections sending the reader (your potential investor) back and forth between sections.
Do not try to write your business plan in one sitting. As I mentioned in the beginning, for a traditional brick and mortar business, it could take in excess of 100 hours to compile all of the information needed into a comprehensive but yet understandable document. For online businesses, probably not that long. But your final product should be well thought out, well documented and easily understandable.
The Three Main Elements Of Business Planning
Every day, millions of businesses spring up, both online and offline. These businesses run the gamut of categories, from spas to sneaker stores, accounting firms and accessory websites. Business planning is the first step in creating a secure future for your company.
Creating a Plan For Your Business
Writing a plan is the first stage of business planning. As the name suggests, a business plan is a roadmap for the direction of your company. While many owners fail to write such a plan, it is an essential step in the growth of your company. It helps you to forecast and problems that may develop in the course of business. Think of it as a contingency plan. If you are planning to apply for commercial real estate or bank loans, you will need to demonstrate proper planning for your business.
A business plan contains several main elements. First, it lays out the mission and the goal of the business. The plan will spell out whether your company is in business to serve a greater good or simply to fulfill an unmet need. Determine whether your business will serve other businesses or supply products to consumers. These are all important elements that should be included.
It does not have to be long or overly complicated. It simply has to have the elements required to put your goals into action. Developing a SWOT analysis (strengths, weaknesses, opportunities, threats) will help you to identify problems before they start. Craft your own or hire a business writer to create a dynamic plan that will guide your operations. An effective plan is one of the most important elements over overall business forecasting.
Creating a Marketing Plan
Similar to a business plan, the marketing plan spells out how you will market to new customers and retain current ones. The marketing plan should identify your target customers and develop a strategy to reach them effectively. Your marketing plan usually includes market research that gives you a profile of the ideal customer. As with your other plan, it is important to identify any strengths, weaknesses, opportunities and threats that may affect your company’s operations.
Your marketing efforts do not have to be expensive. In many cases, companies that don’t have marketing plans spend more than is necessary to reach their customers. With a plan that will spell out the ways you will market your company, you will save money and energy on your business marketing efforts. Creating an effective marketing plan is one of the most crucial elements of planning for your business.
Unless you plan to run your business for your entire life, you will need a plan of succession. If you are the only person who can run and operate your company, it is doomed to fail when you can no longer run it. Create a plan that will spell out what steps will be taken to either sell your company or hand it over to another manager. Develop a system that allows your business to be run without you. An operations manual that details the key components of running your company is the first step in succession planning. Consult an attorney about the legal aspects of either selling or transferring ownership of your company.
Planning is an important element of any successful company. By adequately planning for the direction of your business, you will enjoy business profit and success.
Business Plan: Why Should You Create A Business Plan For Your Online Home Business?
Having a business plan is so important to you as an online marketer. But most people, who start online businesses, especially small businesses, do not really take the initiative to make a business plan. Probably they think that it’s not necessary. But for sure there is little you can achieve in life without proper planning. More so in the contemporary times when survival depends largely on one’s ability to organize your physical and mental resources well. The future is actually for those who are organized. And the future of your business is dependent on your good planning.
Planning is very important in life. Everybody should do planning at individual or family level. As an individual, you should plan for the day well in advance in order to accomplish what is to be done in that day. At family level, a family plan helps to focus on supporting the entire family in its growth and development. Planning is also done at business and organizational level.
A business plan is therefore an outline for taking an idea for a product or service and turning it into a commercially viable reality. It’s a roadmap of the business you intend to start and without it you may end up getting lost on the way. It should therefore be remembered that having generated your business ideas and analyzed them to come up with the most viable idea, it’s important to create a business plan for your online home business. Do you have one?
Some people think that they do not need a business plan for a small business. But let me make it clear that the size of the business doesn’t matter. Whether small or big, you need a plan. If you need a plan as an individual and for your family, then why not have a plan for your small business? Like for individuals and families, you need to plan for your online small business.
A business plan shows you what you would like to achieve and how to achieve it. Although not all plans are written down, a good business plan should be written down. If you have it in your head, it’s high time you spent some time to write it down for better results.
Why should you create a business plan?
1. It encourages you to think deeply about your business objectives and goals.
When you create a business plan, you get to think about the short-term and long-term objectives. It also helps to develop a mission statement for your business. This helps you to remain focused as you do your business.
2. It encourages you to think about the possible problems and how to overcome them.
In any business you may think about, there are always risks involved. Creating a business plan enables you to anticipate the risks that you may encounter in the process of running your business. It also makes you to think about the various ways of overcoming the problem in case it happens. That’s a proven way of looking at things for you to remain in business.
3. You get a clear picture of the whole business project.
The process of making a business plan makes it possible for you to focus on the nature of your business in details, to analyze your target market, to develop a marketing and operational plan and to make your financial projections.
4. You get new ideas.
It becomes easy to communicate your ideas to the people you interface with, who in turn can give you better ideas or complement the ones you have. Collect all the material to one place. Having a business plan makes it possible to have all your ideas and plans in one place. It becomes easier for you refer to it and to use it to develop your business. You become a more committed business person and even others people, like your prospective financiers, can easily regard you as a serious business person.
As I conclude, I would like to advice all people, who want to start any kind of business or who already have business without a business plan, to think about creating one as way to building a successful business. One of the causes of failure in business is lack of proper planning. Create a business plan if you want to succeed in your online home business!