Developing a Business Plan

Every new business starts with just an idea. No matter what the idea is, however, the fact remains that a well thought out business plan is what will turn an idea into a reality. It is a common misconception for small business owners to think that business plans are only written for the sole purpose of obtaining financing. Nothing could be further from the truth. Developing a business plan is a vital tool for business owners and management that can be used as a road map and cornerstone for the success of any business, large or small.

What exactly is a business plan?

A business plan is simply a written document that describes and analyzes a specific business, providing complete and very detailed information about both short-term as well as long-term plans for the business. A business plan also provides information to potential investors to help them determine the strengths and weaknesses of the business and to help identify present and future investment potential for the business.

Why do I need a business plan?

A complete business plan will provide several things for the business owner. First, it can assist you in obtaining financing to start or expand the business with potential investors. It will help to identify the strengths and weaknesses of the business, assisting management to develop and fine tune the business. A business plan will also provide detailed financial projections about the company, providing very clear short and long-term business objectives as well as answers for any potential financial backers. More importantly, for the business owner, a business plan helps to keep a business focused and will greatly improve the odds for success.

What are things to consider when developing a business plan? The following is a list of just a few of the questions that you will need to answer when developing your business plan:

1. What specific type of business is it? Retail, service or manufacturing?
2. What is the legal structure of the business?
3. How will the product/service be produced or performed?
4. What are the company’s strengths and weaknesses?
5. What are the company’s biggest opportunities and most imminent threats?
6. What is the current financial picture of the business?
7. How will the business create the need for its product/service?
8. What are the financial projections for the business in 1, 3, and 5 years?

Environment & Market

Other things that you will have to include in your business plan include conducting a market analysis that supplies information about the marketplace that you will be competing within. Your market analysis should include the following:

1. Competitive Analysis – Who are your main competitors and how is your value proposition unique from them?
2. Customer Analysis – What is the market size, growth rate and profit potential of the market in which you are competing?
3. Industry Analysis – How attractive is the industry or category of business that you will be competing? What type of business environment will you be competing within – technological, political, economic, social or regulatory

Marketing Plan

When developing a business plan, you’ll also have to develop a marketing plan to influence the customer to buy your products or services. Questions that you’ll need to answer related to your marketing plan include knowledge of the “Four P’s” of your marketing plan: price, product, place and promotion.

1. Price – What is the price of your product or service?
2. Product/Service – What product or service will you be selling and markets will you serve?
3. Place – Where and how will the product or service be sold and distributed?
4. Promotion – How will you create awareness and get buyers to buy your product or service?

Financials

A business plan should also include financial statements from the past (if applicable) as well as up to 5 years of future financial projections for the business. The financial section of the plan should, above all, be realistic and serve as a benchmark to measure progress when compared to the original company projections. For a brand new business, financial projections should include a comprehensive determination of all expenses the business will incur. These basic financial projections will help to create the financial statements for the business which include:

1. Balance Sheet – A balance sheet serves as a “snapshot” of the financial state of a business at a particular moment in time.
2. Income Statement – Shows profit or loss for a particular time period.
3. Statement of Cash Flows – A cash flow statement shows positive or negative cash flows over a period of time to give business owners visibility on cash fluctuations and how to prepare for them.

Overwhelmed by the thought of preparing a business plan? Join the club. Luckily, there are some great tools on the market that can help small business owners with the prospect of generating a business plan.

I recommend Business Plan Pro software.  It’s very simple and easy to use and it minimizes the daunting task of writing a business plan.  I’ve used it myself and its hands down the best business plan software available anywhere.  Business Plan Pro has over 500 sample business plans and is used by over 1 million small businesses. The software utilizes the most widely accepted and preferred format of investors, lenders and even the Small Business Administration. Business Plan Pro is perfect for start-ups and is the top choice for business schools, small business development centers as well as SBA counselors. It has been touted by Guy Kawasaki, PC Magazine, the Wall Street Journal, Entrepreneur, Inc.com, PC World, and ZD Net among others.

I highly recommend Business Plan Pro.  It will save you time and money when developing your business plan:

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