One of the most important aspects of my job is to review business plans for clients. Essentially looking into the soul of what their business will become. This has given me a great perspective on the importance of the business plan, but also the mindset many people have towards them. A common belief is that a business plan is only a tool to receive a loan; banks want to see real information before just handing out money. However, not all businesses require a loan when starting up. That doesn’t mean a startup, or business planning to expand, should move forward without creating a business plan.
There are tremendous benefits in having a business plan that can directly lead to long-term success; it is a major piece that will make up the foundation of the business. If real effort is put in, then the business owner should be armed with the information to know exactly where success can be found. That doesn’t mean there won’t be changes and lessons learned along the way, but having a road-map makes getting to a destination that much more likely. Additionally, spending the time on a business plan can even show that opening the business is a bad idea; for a number of reasons. That is valuable information to know before much, if any, money is actually spent.
In the process of writing the plan, there are several sections, along with the process itself, which I believe can make the difference between profitability and closing the doors. Below is a list of each and what I feel they provide.
- Industry/Market Analysis: The first question this section should answer is the level of completion in the market. It can also give insights into where to open as it should show any under-served area.
- Marketing Plan: How will this business be different? Why would a customer come here instead of any number of other places? These questions must be answers, along with how customers will be made aware of the business and be transitioned from a consumer to a customer.
- Financial Projections: This may be the most important section connected to ensuring profitability. If the numbers don’t add up or 1000 customers a day would be required to break-even, then real consideration must be given to making major changes to the business model.
- Making calls: By simply making calls to get quotes, ask question and talk to those already in the industry, contacts will be made and valuable information will be gathered. This includes actually getting a quote for pretty much everything needed in the business; such as insurance, products and supplies. Calls also provide the opportunity to ask questions from those who are experts in the field. Never be surprised when an amazing new insights is discovered through these conversations.
- Looking at the competition: By doing market analysis, a clear picture should emerge about the competition, who they are and what they are doing. This is important because it can show what is successful, but also what needs to be done to be different.
All of these sections have way more involved than what I have listed, but I tried to capture the main ideas. The last item, that is not usually part of the business plan, but I feel is vitally important, is the action plan. For some, this may come in the form of a timeline, but having this plan can help ensure everything that must be done is accomplished. When starting a business, many variables exist that take time and there has to be an effective way to track them and create accountability.
The business plan is one of the most important aspects of starting or expanding a business, and I believe it should become the journal of the business over time. That doesn’t mean rewriting each section as things change, rather adding in a page in the back with new information that is valuable; new marketing strategies, better accounting practices, customer demographic information, etc. This will always be helpful if a loan is needed to expand the business, as well as being a how-to manual for creating any new venture. There is no such thing as too much information.
The bottom line is that the process of writing the business plan is almost more important than the plan itself. With that in mind, what other section do you feel can make the difference between success and potential failure? Please leave your thoughts in a comment below.
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