What exactly is a business plan? Simple: It’s the road map to your company. If you were to randomly stumble upon an empty lot today, if you didn’t know where to begin building a home, you would not walk over to that vacant lot and start nailing down boards to make a home. Just starting a new business without a plan is just as dangerous. A plan helps guide you through the sea of possibility.
Business plans are all over the place, and they’re all very similar. From start up to operation, business plans lay out the steps to take to make your new business a success. They are crucial documents for any entrepreneur. Most business owners will require at least one such plan before going into business for themselves. Even if you have no desire to own your own business, you’ll still benefit from having one.
Business plans help potential investors and lenders understand your venture. They show your financial situation, including your future income and expenses. They show whether or not you will be able to pay monthly installments, and what interest rates you will be charged. They allow interested investors to see the full picture of what you’re up against, and they show how much money you need to raise to avoid bankruptcy.
How do you write a business plan, then? You’ll need a detailed description of your product or service, as well as a detailed explanation of how you plan to sell it. You should also explain, in great detail, how you intend to obtain capital to fund your business. Without this, no investor will be willing to invest any of their money in your startup. Most angel investors, for example, will require at least six months to a year to payoff their investment.
One of the key aspects of a good business plan is identifying your target market, or a niche. This means determining what the best products or services that you could offer would be. For instance, if you want to start a mobile catering service, you’ll probably want to focus on a city in which a large number of Hispanic families live. Obviously, if you only serve white children, there’s no market for your new business! As you gain experience with your new business, write down your target market in detail, and continue to refine it as you go along.
After identifying your target market, you should also have a clear idea of how much money you have available to invest. If you don’t have enough money, you should probably try to start a part-time business or work at a minimum wage job, or something similar. A well-planned, realistic business plan will take all the guesswork out of this step, but as a general rule, your executive summary must have a rough estimate of how much money you’ll need from investors, to pay your employees, rent office space, supplies, equipment, and anything else that you think might be required in order to run your business profitably.
Most business owners aren’t experts when it comes to strategic planning, but if you’re not experienced, it can be very helpful to hire a strategic consulting company to provide direction for your business plan. However, not all consulting firms are created equal. You may want to compare your list of potential vendors with those of your competitors, as well as potential suppliers that your competitors are trying to get signed up with. It’s always a good idea to have a list of contact information available, so that you can speak with these companies directly. You should also keep in mind that these companies typically charge more than they’re worth, so be sure to negotiate a fair price, according to your budget.
Your executive summary is only going to be effective, though, if you’ve developed a plan that details exactly how you intend to use the money from investors and what your plans are for expansion. If you haven’t done your market analysis yet, now is definitely the time to do it. Your potential customers will be looking for your product or service, and they’ll be comparing prices between competitors and your company. If you don’t provide direction for them, they’ll move on to the next possible funding source. If you provide detailed information about what you’re planning to do, then you’ll be attracting investors in the first place, because you’ll be able to provide them with financial goals and a clear path towards achieving those goals.