If you’ve recently started or are about to start your own business, you might be wondering if it’s really necessary to have a business plan. While it might seem like a lot of work, making a business plan is essential for the success, direction and reputation of your small business. Here are just a few perks of having a business plan as well as some tips for writing one.
The benefits of a business plan
For starters, a business plan forces you to research the market and know your competitors, as Dave Lavinsky, contributor with Growthink, explains. For example, if there are already a ton of hair salons in your area, you might want to consider starting a business with a different focus.
A plan will also focus your resources and guide you when making decisions. As Lavinsky expresses, “Without a business plan, you may shift your short-term strategies constantly without a view to your long-term milestones.”
As entrepreneur, business planner and angel investor Tim Berry states in his guest post in Entrepreneur, a business plan is also essential if you’re trying to secure any investors or lenders for your business. Additionally, Shanika Chapman, contributor with Chron, advises, “Investors want to see that you’ve set milestones and implemented realistic tools to measure your success.”
A business plan will also establish certain objectives for both managers and employees, as Berry advises. It cements your business goals so that your team is not just on the same page, but also tracking and following up on the implementation of those goals.
How to make a business plan
If you own a small business, then you’ll want to craft a business plan. While some experts claim that only a one-page plan is necessary, it’s best to cover all of your bases by going with a longer 20- to 30-page business plan. That way, you can dialogue with lenders and investors, who will expect to review this longer, more comprehensive format.
Make sure your plan has the following parts, advises Susan Ward, contributor with The Balance: executive summary, business/industry overview, market analysis/competition, sales and marketing plan, ownership and management plan, operating plan and financial plan.
To give you a head start on crafting a business plan from scratch, a few of the sections can be defined as follows:
The executive summary is a one-sentence pitch that states what your business does, what products/services you offer and the overarching goal of your business.
The business/industry overview gives a summary of the industry and states how your business will market itself in light of the current market and your competitors.
The operating plan establishes the physical requirements your business will need, including logistics like staff, office/retail space and equipment.
The financial plan is perhaps the most vital part of your business plan, as Ward expresses. It lays out your business’s expenses and profits. As Jeremy Marsan, contributor with Fit Small Business, explains, if you’re starting a new business, this section should be a prediction of revenue and expenses for the next two to three years. If you’ve already launched your business, however, then this section should list your financial history for the past one to three years.
Writing a thorough business plan might not be the most fun task you do as you start and grow your business. However, it’s definitely a crucial step to perform if you want your business to thrive, have focus and have a well-crafted roadmap that wins over lenders and investors.