The first thing you want to do for your business is to create a solid game plan. Business and marketing plans can be very simple or very complex. Make them as long or as brief as you need them to be. There is no right or wrong in this regard.
Business Model Canvas
The quickest way to prototype a business, even multiple business ideas, is to do a Business Model Canvas, which is covered in Lesson 3 in our Entrepreneur Academy. This covers the same bases as a full-blown business plan but in an abbreviated form. It helps you quickly assess an idea and its market potential and is ideal for those who aren’t planning to seek traditional financing through a bank or financial institution.
The more traditional approach is to do a complete business plan. These take a much deeper dive into your business idea and includes things like opening balance sheets, income projections, cash flow analysis, target audience, competition, etc.
Regardless of your financial situation, a business plan is a good idea. If you’re planning on seeking funding, it is essential. Even if you did a Business Model Canvas, you may want to do a final business plan – even a brief one – since it will serve as your playbook going forward.
Here’s an outline of the elements needed in a business plan:
A. EXECUTIVE SUMMARY
Summarize what your business is all about. Try to keep it to two pages. Put some sell into it, be passionate and enthusiastic, yet professional and concise. Include the goals of the business and your objectives. If you’re looking for a loan, state the amount. Basically, this is an extended elevator speech; every key piece of information someone would want to know about your business in three minutes or less.
Coach’s Tip: Write your Executive Summary last. It’s a lot easier to summarize your plan once you’ve finished it.
B. COMPANY DESCRIPTION
A brief history about your company, its products and services, target customers, location, key strengths, the state of the industry you’re in, who the owners are and what the business structure will be. Our SizeUp tool can give you a good head start in building your business plan. You can run various scenarios and tweak the numbers until your business makes sense financially and operationally.
C. PRODUCTS AND SERVICES
Your products and/or services described in more detail, including price points, distribution strategies, an overview of your major competitors and how your products and/or services stack up to theirs.
1. Product/Service. Describe the product or service from the customer’s point of view, including what they will and will not like about your product and/or service as well as the company itself. Explain why they want to buy from you and not your competitor and what value-added services you plan to offer to differentiate yourself in the marketplace (delivery, warranty, customer support, special offers, etc.).
2. Economics. An analysis of your industry and how it is changing. Include a discussion about its growth or decline, how your product and/or service addresses a need in the market, describe your barriers for entry into the market, competitors that may enter the market down the road, etc.
3. Customers. Describe who your ideal customers are, what their characteristics are, demographics, where they are located, why they would want to be your customers, etc.
4. Competition. Provide an analysis of your competitors, including their size, where they are, what their reputation is in the marketplace, any niche they serve, their strengths and weaknesses and how you stack up against them.
5. Strategy. Describe your pricing policy, how you plan to promote your products and/or services, sales support, customer satisfaction policies such as returns and warranties, and what the milestones of success are so you know when you achieve success at various points along the way.
E. SALES FORECAST
Provide as much detail as possible about your forecasted sales by product or service, by month and by year for at least two years. Include your break-even point and the projected point where you plan to start turning a profit.
F. OPERATIONS PLAN
1. Production. Describe your production methods, the process for developing new products and/or services and how you will manage quality and inventory as you grow.
2. Location. Explain where your business will be located and why it is a good location. You’ll also want to cover whether you will lease, buy or already own the facility, building or property.
3. Credit Policies. Give an overview of your credit terms and how you will handle collections.
4. Personnel. Describe the number of employees you plan to hire and at what point, their roles, a summary of their job descriptions, training requirements and onboarding process.
5. Inventory. If you are selling products, assess the required inventory you will need to have on Day 1, Day 30, 60, 90 and so on. Factor in its value, vendor terms, who the suppliers are, whether you get discounts for volume purchases, what these price points are and whether vendors can warehouse excess inventory.
6. Legal Environment. Describe licensing requirements, permits needed, insurance, zoning, government regulations, patents, trademarks and copyrights.
G. MANAGEMENT AND ORGANIZATION
Provide an overview of the management team, including each person’s responsibilities, who the company’s primary advisors are, and if there is an advisory board or board of directors, who will be tapped to serve on them.
H. PERSONAL FINANCIAL STATEMENTS
You’ll want to include financial statements for all owners and major stockholders.
I. STARTUP EXPENSES AND CAPITAL
Include all the startup costs divided into major categories such as Building/Real Estate – Advertising/Marketing –Inventory – Capital Equipment, etc.
Don’t forget to add in a contingency category which covers costs you didn’t catch initially. This should be 15 to 20% of all your estimated expenses. Working capital is another important category. It’s the money that is needed to operate the business and pay your bills while you’re getting up and running. Lacking the necessary working capital is a recipe for failure.
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