BUSINESS PLAN: GREAT WAY TO WRITE BUSINESS PLAN
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The Basics of Business Planning In the introduction, you discovered some ways in which a business plan can have a huge impact on your success.
In addition to the key points I highlighted in Denise’s story, here are some reasons why creating a business plan is an absolute must:
Obtaining a Business Loan – The majority of business start-ups will require a business loan to get off the ground.
These loans are used to pay for initial business costs, such as supplies, marketing costs, labor, upfront payments and support resources.
Existing businesses can more easily take out a loan to pay for the resources necessary to expand their business.
However, you just can’t walk into a bank and expect to walk out with a loan,
on the strength of your word alone !
Most banks will require you to present your plan to a bank officer who will then determine if your plan is worth investing in.
A solid business plan will show the bank officer that you’re committed to keeping
your business afloat and profitable.
Seeking Investors – An investor is a person who provides upfront capital to a business in the anticipation of gaining a monetary return when the business is successfully up and running.
While investors are similar to bank loans, the main difference is that investors don’t require you to repay your debt on a predetermined schedule, as would a bank.
At the same time, just as a bank officer won’t give you a loan on demand without a plan to back it up, neither will an investor.
If you cannot demonstrate solid prospects of a positive outcome in your financial projections, an investor will not be inclined to put up any money toward your business.
Separating Dream from Reality – In the beginning of a new business, it is easy to let your emotions run rampant in everything from your passions to your visions.
Your emotions may be so powerful that they cause you to think too big too quickly.
While it’s not a bad thing to have big long-term vision, it is even more important to have your feet firmly planted in reality.
A well-developed business plan can force you to step into what is real right now and can help you focus on the next right thing to do.
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In addition, whenever your emotions cause you to start doubting yourself
and your abilities,
a quick review of the foundations of your business plan can help to banish those negative thoughts !
Selling Your Business – Although you may put hours
and hours of hard work, passion and dedication into your business,
don’t let your identity become tied to it.
The most valuable piece of advice I’ve ever received as a business owner is this:
don’t become emotionally attached to your business.
Launching a business, bringing it to successful maturity, and then selling
it is actually a very strategic business move.
It’s a great way to make money without having to work the rest of your life away.
However, your business will never have any buyers without a business plan.
Potential buyers will want to see why your business is worth buying; they want to see its present value and – more importantly – its future potential.
All this is bound up in your business plan.
Building Your Team – Unless you’re a sole proprietor, it’s likely that you’re going to need a team of at least a few people to help you with your venture.
A well-thought-out business plan can show potential team members that your business is serious; it can also inspire them to work hard and can focus them
on what is most important to your success.
A great business plan can attract high-quality talent, which can make
a huge difference in your ultimate business success.
Consulting with Your Allies – As a business owner, you should always have
a team that consists of a banker, an accountant,
a lawyer and possibly a business coach or consultant
if you’re a first-timer.
Bankers can help you with much more than getting a loan.
They can help you choose payroll options, provide discounted banking services to your employees, and even provide insurance options, just to mention a few services.
An accountant can handle your business taxes and advise you regarding finances,
both of which are essential to keeping a business afloat.
A lawyer may not seem necessary at first glance, but having one is very important.
A lawyer can point you in the right direction when it comes to handling business legalities and can offer you solid advice on the best way to expand your business, especially when the time comes to build an online presence.
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You’d be surprised at all the legal business requirements you know nothing
about !. The rules and regulations can be very confusing,
especially since they often differ by state.
A lawyer can help you stay out of hot water if you ever run into a liability issue.
Finally, you can benefit greatly from having a business coach, someone who can help you learn to become a master entrepreneur.
A business plan will make it much easier for these support people to do their jobs.
It will also help ensure that everybody is on the same page,
when it comes to supporting your pursuit of your goals.
Resource Planning – A business plan can help you project your financial needs, especially when it comes to fixed costs.
It is reckless to make unnecessarily large purchases or hire too many employees
if you don’t have the means to support them.
In some situations, it makes more sense to rent office space,
as opposed to buying it.
These are the sort of resource constraints the finance section
of your business plan can help clarify.
Catching Errors Early – When you create a business plan,
you’ll have everything about your business written out right in front of you.
This means that it will be easier to catch big errors early on in the process.
For example, if part of your sales goal is to produce 5,000 widgets by the
end of each month,
yet your resource planning section only calls for one employee to work on the production line,
it’s more than likely that you will have a very hard time reaching that goal.
It’s better to realize this before you throw your one and only employee into
an unrealistic situation !
A business plan is something you can easily scan to see the big picture and catch expectations that don’t mesh with the reality of your resources.
Proving to Yourself You Can Do It – Most importantly,
a business plan proves to yourself
that you can actually do it !
Starting a business, especially for the first time, can be an overwhelming task.
Your business plan can put everything in perspective for you.
As soon as you have a completed document, you’ll be more likely to feel empowered
to do what needs doing !
Your business plan will enable you to feel confident about the projected success
of your business.
The ability to intimately describe the inner workings of your business
is an extremely powerful motivator.
The basics of business planning can easily be described by answering the traditional
“who, what, where when, how and why” questions:
Who Needs a Business Plan?
Anyone and everyone who wants to start a new business will need a plan
if they want to be successful.
As I mentioned earlier, you don’t have to sit down and design a plan,
but by failing to do so, your chances of failure will be dramatically increased.
A business plan helps you define and manage your business mission and goals,
clarify marketing strategies and define target audience information,
manage your finances and set up the company’s structure.
If you do not have all that information together in a place where your entire team can
refer to it, your business is likely to fail.
Goal-setting First and foremost, a business plan helps you define your company goals. Setting goals and objectives for your business is a standard part of the planning process;
it will form the backbone of your business’s success.
it will form the backbone of your business’s success.
Its objectives are your overall intentions for the business;
the goals express how you plan to get there.
Once your business reaches one goal,
it can then reach toward something even bigger and better.
You can always create goals in your head or even jot them down on scraps of paper,
but in both cases, they are easily misplaced or forgotten.
However, when you state them as part of your business plan, you will not only have easy access reference to them but they become integrated with the rest of your efforts
to make a go of the business.
Goals are so much more than just statements.
To successfully reach your goals, it is usually necessary to spend time with them.
Write them out in detail and then break them down into smaller, manageable steps that you can easily bang out in order to accomplish the final outcome.
At the same time, your goals are not stand-alone statements;
they should always be shaped in support of your overall business purpose.
This purpose is defined in your vision and mission statements.
Vision and Mission Statements
The process of conceiving and ultimately describing your vision and mission statement is just as important as goal setting.
A company’s vision is a compass; it marks where the company is headed,
both in general terms and in specific stages.
A small, home-based business can grow into a successful, well-known corporation, but only with a clearly stated vision and mission statement upon which to build strategies and goals.
Giving your business a vision will help fuel your goals and motivate you and your team to move your company forward, from something small to something incredible.
A mission statement helps you define your target audience,
making it easier to ultimately reel in potential customers to increase your profits.
Mission statements often promote the greater good,
thereby appealing to specific customers.
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For example, a grocery store whose mission is to help conserve the environment would most likely appeal to customers who eat organic produce.
This would secure a solid profit base, because organic produce usually has greater profit margins than non-organic products.
A business plan can help you clearly define the product or service you
are offering to consumers.
One of the first sections in your plan requires you to describe your product/service in great detail, including the reason you’re selling it, an explanation of how it matches up to the competition, and its projected list price.
A business plan helps you define your target audience and describe an ideal client
profile the company can use to locate that ideal customer in the real world.
Knowing your target audience is one of the most important factors in determining
the success of a business.
An old friend of mine, Helene, was a business coach who was looking to develop
her clientele, increase her leads, and make her business more profitable.
When I was younger, I interned for her as a business development director;
in this capacity,
I helped her find fresh ways to generate leads.
I quickly noticed that she didn’t have a well-defined business development strategy;
this was preventing her from being able to clearly define her ideal client.
When I asked her to describe her target audience, she replied
Since Helene’s business was largely remote,
she thought it didn’t matter who or from where she got her leads.
However, the answer “everybody, everywhere” encompasses
more than 7 billion people,
from 24 different time zones, speaking a host of languages.
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This answer does nothing to define a realistic customer base.
Over time, however, I was able to help her narrow down her answer to “overwhelmed business owners in the Rhode Island area.”
Since she was a business coach, her audience was obviously business
owners and since she lived in Rhode Island,
we decided it would be easier for her to focus in on that area,
for the time being.
Using descriptions of her last few clients, we were able quickly and easily to put together an ideal client profile that would help us properly target similar clients who were more likely to say, “yes” to her business.
Keep in mind that it’s not uncommon for companies to actually shift their target audience partway into their run.
The Kellogg Company is a great example of this.
In the beginning, Kellogg’s target audience for their breakfast cereals was children.
However, their market share fell dramatically in the early 1980s.
Instead of allowing the company to cave, the executives refocused their target audience, focusing on baby-boomers.
To appeal to this audience they began to emphasize the importance of eating
a balanced breakfast.
This caused the company to bounce right back to the top of the breakfast
Define Your Business Structure A business
plan can also help you describe the structure of your company.
In your plan, you can describe the legal structure of your business, identify your business leaders, and discuss the flow of your business.
You will also note if your business requires any special licenses
or permits in order to operate.
Flex Within Your Identity Having a business plan in place is more important
now than ever before.
The life of businesses today largely depends on responding to trends that
are constantly changing, thanks to the burgeoning rate of information
consumers receive on a daily basis.
Only when you have a clearly defined identity anchored in the marketplace are you able to adjust your positioning in order to take advantage of shifts
in customer preferences.
For example, McDonalds started out as a fast food restaurant that primarily served hamburgers and French fries.
While they’re best known for their original menu, times have changed;
now many consumers are more interested in eating healthy food.
Let’s face it – when you’re trying to eat healthier,
McDonald’s isn’t the first restaurant that comes to mind!.
So, how did McDonald’s respond ?
They responded to the market trends by adding healthier menu choices.
Salads, grilled chicken wraps, and unsweetened beverages all made an appearance.
If McDonalds had stuck to their original menu and ignored the trends, would they still be regarded as one of the top fast food chains today ?
Instead, they would be remembered with nostalgia as a has-been.
Grow Within Your Identity.
A business plan can also help you manage business growth.
Let’s use McDonald’s again as an example.
The golden arches got its start with one restaurant in California.
A man named Ray Kroc had a vision, which led him to grab up the McDonald’s
brand when it came up for sale.
He then opened several locations, which then quickly spiraled into hundreds that eventually spanned the globe.
Let’s pretend for a minute that McDonald’s was not the huge success that it is today.
Instead, let’s say the brand was a huge failure, but Ray Kroc didn’t know it because
he didn’t have an adequate business plan.
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When the brand began to spread just across the United States, it wouldn’t have been able to stand under the weight of the additional stores.
However, having a business plan that allows for growth and greater profitability
is most likely a huge reason McDonalds now has restaurants all around the world.
Plan a Firm Financial Footing Finally, a business plan can help you manage the finances of your business and of your related products/services.
A properly written financials section should give anyone who reads your business plan a clear understanding of your business’s financial projections and abilities.
The financial plan usually includes a balance sheet, an income statement,
and a cash flow statement.
Why Do You Need a Business Plan ?
You need a business plan because it enables you to easily manage your business without becoming overwhelmed, confused, or disorganized.
Your plan will contain all the basic information about your business for partners, potential investors, and advisors to draw on.
It helps you focus on what’s important and gives you a basis from which to adjust
to the winds of change.
A business plan can help you attract potential investors and eventually buyers,
if and when you are ready to sell your successful venture.
It is incredibly easy to learn the process.
Anyone can do it.
Since a business plan gives you a much higher chance of making it past the two year mark, there’s truly no reason not to have one !
What Type of Business Plan is Right for You?
What comes to mind when you imagine what a business plan looks like ?
I personally envision a sleek, typed document, housed in a fancy cover that is stored in a company’s secret vault.
Others may picture a simple online document that is easy to edit and update
as the business grows and develops.
Yet others may visualize a handwritten notebook full of business details and sketches.
There really is no right answer as to what a business plan looks like.
However, there are several types of plans you can design.
The type of plan that is best for your business often depends on multiple factors,
such as the business’s size, the company’s primary focus, etc.
There are two basic types of business plans.
Formal business plans are usually typed, detailed documents that are often intended as a tool to secure funding.
Informal business plans, on the other hand, focus more on a company’s goals and are often handwritten and less strictly organized.
Although you can easily handwrite a business plan, I recommend creating a computer-based document, even if it’s intended to be informal.
Regardless of the size of your business, even an informal business plan is more easily accessed, updated and organized.
Within these two categories are a few more types of business plans.
These are each based on a specific purpose:
Feasibility Plans: Feasibility plans are used to measure the practical possibility
of making a profit from a business’s product or service.
These plans will describe the product or service, identify the target audience and the need you hope to meet, an accounting for the necessary capital, followed by recommendations for moving ahead.
Before you jump into any business venture, I recommend you write up a basic feasibility study for your product or service.
After all, you need to know if it will be worth all the effort of putting in on the
market – that is, unless you’ve already put it out there just for the heck of it and have “accidentally” stumbled upon success, like my friend Denise !
Unfortunately, while your product or service may seem like a genius idea to you and your friends, you need to know if it also sounds like a genius idea to the people out there who will buy it – your audience – your customers.
Many people make the mistake of not researching this practicality and quickly go under when they discover the hard way that they can’t make a profit.
You’ve got to be reasonably certain of the market demand for your product.
Otherwise, you’re writing a recipe for failure.
You may also find feasibility plans helpful for when you want to introduce additional products or services into the market. Many existing companies will give a new product a test run just to see how it is received.
If they find it successful, it can easily be added to the company’s product or service offering. Startup Plans:
Start-up plans are designed for when you’re envisioning or just beginning
a new business.
Hopefully, you will have completed your own feasibility studies and these will be included in your startup plan.
Start-up plans lay out the basics of your business, including your company description, your product or service description, the configuration of your management team,
a market analysis, and a financial analysis.
You can easily form a basic start-up plan with limited knowledge; then you can customize your plan as your business needs develop.
Strategic plans take a closer and much more detailed look at a company’s goals, so that the entire business can benefit, continue to profit, and can progress the top 25%.
A proper strategic plan should include your company’s vision and mission statements and will lay out critical success factors, including goals, strategies that will be employed to reach those goals, and a proposed timeline for reaching them.
As your business begins to grow, you will find yourself coming back to this document repeatedly to follow up on your goals, look for areas of improvement, and to set down new goals that will keep your business flourishing in the black.
You can also easily include these items in your start-up plan Growth Plans:
Growth plans focus on a company’s proposed development and how to manage growth successfully.
Growth plans can be writwritten for internal or external purposes.
The information in a growth plan will vary but it will often be written to address specific potential investors.
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For this reason, a growth plan will include a highly detailed description of the company and its key players, as well as a clear description of present financial status and projected expansion markets and expected revenues, based upon anticipated demand.
Internal Audience Plans:
Internal audience plans are used by existing businesses to describe and promote
a specific project.
Internal audience plans describe to all the parties involved the details of the proposed project, where your company currently stands in terms of profitability,
and where it wants to go.
They help a business determine how much money it will need to put out in support
of the project and will detail the cost of each project resource.
It will also outline possible marketing tactics that will support the project.
These plans often include a market analysis to show where the company stands
in relationship to its competition.
Operational plans are written in the same way as internal audience plans except that they focus on how your business operates.
For example, if your company wants to reach a specific deadline for introducing
a new product or service, those details would be laid out in this kind of plan.
Again, first-time business owners will not need to worry about utilizing this type of plan until their company has developed into a much larger entity.
When is the Best Time to Create a Business Plan ?
The truth is, once you’ve started to seriously visualize your business, you’ve already begun creating a business plan in your head.
Yet, your business can’t become a reality until you physically put it down in black and white. It’s a simple task, but it stops many people cold.
Over the years, hundreds of individuals have come to me,
asking if I could help them start a business.
The first actionable task I give them is to develop a business plan and then report
back to me when it’s written down.
So far, I’ve not heard back from a single person.
That’s because the sheer process of creating an actual business plan can
be scary indeed.
Suddenly this dream of yours takes shape in reality and that, my friend,
can unleash all sorts of emotions !
Fear can overwhelm you, self-doubt can rise up to assail you; you may even begin
to question your sanity for daring to imagine that you could create this, this thing.
However, if you can fight through these emotions to set down even the most basic plan,
you will have overcome a major obstacle to your success.
After all, you will have made it further than everyone else who has asked me for help !
There’s really no standard entrepreneurial answer as to when
to create your business plan.
My opinion is that as soon as you can envision your business,
you should write down a plan.
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As I mentioned earlier, you may have a GREAT idea for a product or service, but once you begin researching the market, you could discover that it’s really not all that unique and there’s no demand for it, setting you back to square one.
Yet, that could be your salvation, because it will have prevented you from wasting time
and effort in the pursuit of failure !
The best time to find out that your product or service will work – or not work – like you envisioned it, is now.
The sooner you create your plan, the earlier you will know if it will work.
Also, the earlier you lay out your plan, the more committed you will be to getting
your business up and running.
We’re like that, you know.
We tend to be more committed if we have skin in the game.
The more sweat you invest into your project, the more determined you
will become to see it succeed.
If you have an idea but keep putting off developing a business plan for it,
your business will never get off the ground.
It’ll just continue to float around in nebulous form as a mere pipe dream.
You want to write your business plan now, while your business is in its infancy.
If you wait until your business is a full-fledged concern, you will have already developed systems that are so complex that they are difficult to tease out onto paper.
It’s much better to define your business as it is in its simplest form.
Then, as you establish and adjust the systems and processes,
you can note them down as you grow.
In this way, your plan will grow and develop along with your business.
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How Do I Write a Business Plan ?
There are many ways to get started on the creation of your business plan.
I know many people who have simply researched what a business plan should contain and then just put all of that information together into a document.
There are hundreds of business plan templates available on the internet.
It’s also quite possible to outsource the job; some business owners hire writers
to get their business plans written.
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As you progress through this book, you’ll learn to create your own business plan by following straightforward step-by-step instructions.
Starting in a couple of chapters,
I will begin to walk you through the details of each part of your plan, a section at a time.
By the end of this book, if you do the work as you read, you will have your very first business plan finished and ready to go !
To be continued