Going into business for yourself is a big step. You might have the best idea in the history of the world, but that doesn’t mean that you will get people to buy it. Plus, even if you do, you will have to manage your money properly to avoid cash flow and other financial issues. That’s why making a business plan before you start is so important. It offers you a guidepost for how your business will grow and develop over time.
A business plan is many things. For one, it is a declaration of what you plan to do and how you plan to do it. It is not so much about your idea but about the nuts and bolts of your operation. For private equity firms, this not only offers a clear path to follow but also grants them a glimpse into your vision, providing them with a deeper understanding of your goals and aspirations. They can see where there is a fit in the market, how scalable your business is, and whether you have the right team and partnerships behind you.
Studies have shown that businesses with a plan are more likely to grow and be successful. Without one, you will be driving blind with no clear direction. The more comprehensive and detailed you make your plan, the better. However, you can always make changes as your business circumstances change. If you are unsure what to put in it, here is a guide to the seven you need to include in your business plan.
The executive summary guides you with everything that will come in the business plan. While it is the first thing that anyone would read about your plan, it is usually the last thing to be written. Once you have all your information plotted out, you can write the executive summary. This is your chance to make a first impression on the reader and allows skimmers to get the gist of what you will say.
Make sure that your executive summary includes what your business will be, what your goals are, what your target markets are, and your current and projected financials. This will give a bird’s eye view of our business situation and give investors something to whet their appetite. While the executive summary is vital for pitching to investors, if your business plan is going to be used only for your planning, you do not need to include it.
For a business to be successful, you must have a place in the market for it. If your great idea has already been tried, you may have to rethink things, for example. First, you need to grasp how big your market is. For example, a soft drink manufacturer has a huge possible market since anyone could be a consumer. However, a producer of baseball bats can only market to people who play baseball. You should also develop an ideal target customer. With that profile in mind, you can drill down even further into what your market is and eventually develop more effective marketing.
Listing of Products and Services
While you will talk about your products and services throughout your plan, you should have a section that details exactly what they are. That way, the reader will have a complete understanding of what you will be offering to consumers. You don’t need to go into great detail, but there should be an overview of each product and service included in your plan.
Along with a description, describe how you source materials and equipment for manufacturing your product. Or if you will have your products made by a third party. All of this information needs to be included to ensure that you accurately assess your costs.
How Your Business Will Be Protected
An investor wants a return on what they put into your business. If your business goes belly-up in a year, then they won’t’ recoup that investment, let alone profit from it. You need to have protection for your business in various forms. For one, business insurance can protect you against lawsuits, professional errors, employee injury, and damage to your commercial property. Never try to go without coverage for something so that you can save money. A lawsuit or catastrophic damage to your building can put your business in dire straits. Inventory wants to know that you can weather any possible storms and keep operating to get them the money they are owed.
Outline Your Marketing Plan
If nobody knows about your business, then nobody will buy from you. It’s that simple. If you don’t know how to reach your target audience, you will have difficulty bringing in revenue. Outline your marketing plan in your business plan. Are you going to use primarily digital marketing? What about broad-based advertising like television and radio? You will have not just to have a plan but also have your plan costed out. That way, you can balance the need for effective marketing with having a budget and figure out how to get the best return on investment.
How is your business going to operate on a day-to-day basis? How many employees do you need, if any? What kind of workplace will you have? These are all important questions that need to be answered in your plan. You will need a cost analysis of all your possibilities since having a remote team can be cheaper than buying or renting an office. This section should talk about all of your suppliers, how much inventory you will have on hand at all times, and even the layout of your workplace. Demonstrate your knowledge of the supply chain and how you will be able to provide consumers with what they want effectively and efficiently.
Create a spreadsheet that shows how much revenue you project to bring in on a month-to-month basis and how much your expected costs are. That way, you will have a realistic snapshot of what your business can look like at launch and in the future. Make sure that your growth projections are realistic so that you don’t overcommit any investments hoping that you will bring in more than is natural. Your financial projections should also include a description of how you will scale your business once you reach a certain threshold.
There are many benefits to having a well-written and detailed business plan. Just ensure that you include everything you need so that investors and you will have a solid document to work from.