Business Plan

15 Reasons You Need a Business Plan
Whether you're just starting out, growing your business or seeking outside help, a well-thought-out business plan is the vehicle you need to get you there.
By Tim Berry
Why do you want a business plan? You already know the obvious reasons, but there are so many other good reasons to create a business plan that many business owners don't know about. So, just for a change, let's take a look at the less obvious reasons first and finish with the ones you probably already know about. Think of this as a late-show top 10, with us building up to the most important reasons you need a business plan.
15. Set specific objectives for managers. Good management requires setting specific objectives and then tracking and following up. I'm surprised how many existing businesses manage without a plan. How do they establish what's supposed to happen? In truth, you're really just taking a short cut and planning in your head--and good for you if you can do it--but as your business grows you want to organize and plan better, and communicate the priorities better. Be strategic. Develop a plan; don't just wing it.
14. Share your strategy, priorities and specific action points with your spouse, partner or significant other. Your business life goes by so quickly: a rush of answering phone calls, putting out fires, etc. Don't the other people in your business life need to know what's supposed to be happening? Don't you want them to know?
13. Deal with displacement. Displacement is probably by far the most important practical business concept you've never heard of. It goes like this: "Whatever you do is something else you don't do." Displacement lives at the heart of all small-business strategy. At least most people have never heard of it.
12. Decide whether or not to rent new space. Rent is a new obligation, usually a fixed cost. Do your growth prospects and plans justify taking on this increased fixed cost? Shouldn't that be in your business plan?
11. Hire new people. This is another new obligation (a fixed cost) that increases your risk. How will new people help your business grow and prosper? What exactly are they supposed to be doing? The rationale for hiring should be in your business plan.
10. Decide whether you need new assets, how many, and whether to buy or lease them. Use your business plan to help decide what's going to happen in the long term, which should be an important input to the classic make vs. buy. How long will this important purchase last in your plan?
9. Share and explain business objectives with your management team, employees and new hires. Make selected portions of your business plan part of your new employee training.
8. Develop new business alliances. Use your plan to set targets for new alliances, and selected portions of your plan to communicate with those alliances.
7. Deal with professionals. Share selected highlights or your plans with your attorneys and accountants, and, if this is relevant to you, consultants.
6. Sell your business. Usually the business plan is a very important part of selling the business. Help buyers understand what you have, what it's worth and why they want it.
5. Valuation of the business for formal transactions related to divorce, inheritance, estate planning and tax issues. Valuation is the term for establishing how much your business is worth. Usually that takes a business plan, as well as a professional with experience. The plan tells the valuation expert what your business is doing, when, why and how much that will cost and how much it will produce.
4. Create a new business. Use a plan to establish the right steps to starting a new business, including what you need to do, what resources will be required, and what you expect to happen.
3. Seek investment for a business, whether it's a startup or not. Investors need to see a business plan before they decide whether or not to invest. They'll expect the plan to cover all the main points.
2. Back up a business loan application. Like investors, lenders want to see the plan and will expect the plan to cover the main points.
1. Grow your existing business. Establish strategy and allocate resources according to strategic priority.






A Standard Business Plan Outline


What information needs to be in your business plan? What is the order of information that will make the most sense to lenders and investors? You can answer these questions with the business plan outlines provided below.
What are the standard elements of a business plan? If you do need a standard business plan to seek funding — as opposed to a plan-as-you-go approach for running your business, which I describe below — there are predictable contents of a standard business plan outline.
For example, a business plan normally starts with an Executive Summary, which should be concise and interesting. People almost always expect to see sections covering the Company, the Market, the Product, the Management Team, Strategy, Implementation, and Financial Analysis. The precise business plan format can vary.
Is the order important? If you have the main components, the order doesn’t matter that much, but here’s the sequence I suggest for a business plan. I have provided two outlines, one simple and the other more detailed.

Simple business plan outline

1.      Executive Summary: Write this last. It’s just a page or two of highlights.
2.      Company Description: Legal establishment, history, start-up plans, etc.
3.      Product or Service: Describe what you’re selling. Focus on customer benefits.
4.      Market Analysis: You need to know your market, customer needs, where they are, how to reach them, etc.
5.      Strategy and Implementation: Be specific. Include management responsibilities with dates and budgets. Make sure you can track results.
6.      Web Plan Summary: For e-commerce, include discussion of website, development costs, operations, sales and marketing strategies.
7.      Management Team: Describe the organization and the key management team members.
8.      Financial Analysis: Make sure to include at the very least your projected Profit and Loss and Cash Flow tables.
Build your plan, then organize it. I don’t recommend developing the plan in the same order you present it as a finished document. For example, although the Executive Summary obviously comes as the first section of a business plan, I recommend writing it after everything else is done. It will appear first, but you write it last.

 

Standard tables and charts

There are also some business tables and charts that are normally expected in a standard business plan.
Cash flow is the single most important numerical analysis in a plan, and should never be missing. Most plans will also have Sales Forecast and Profit and Loss statements. I believe they should also have separate Personnel listings, projected Balance Sheet, projected Business Ratios, and Market Analysis tables.
I also believe that every plan should include bar charts and pie charts to illustrate the numbers.

Expanded business plan outline



Here’s an expanded full business plan outline, with details you might want to include in your own business plan.
1.0 Executive Summary
1.1 Objectives
1.2 Mission
1.3 Keys to Success
2.0 Company Summary
2.1 Company Ownership
2.2 Company History (for ongoing companies) or Start-up Plan (for new companies)
2.3 Company Locations and Facilities
3.0 Products and Services
3.1 Product and Service Description
3.2 Competitive Comparison
3.3 Sales Literature
3.4 Sourcing and Fulfillment
3.5 Technology
3.6 Future Products and Services
4.0 Market Analysis Summary
4.1 Market Segmentation
4.2 Target Market Segment Strategy
4.2.1 Market Needs
4.2.2 Market Trends
4.2.3 Market Growth
4.3 Industry Analysis
4.3.1 Industry Participants
4.3.2 Distribution Patterns
4.3.3 Competition and Buying Patterns
4.3.4 Main Competitors
5.0 Strategy and Implementation Summary
5.1 Strategy Pyramids
5.2 Value Proposition
5.3 Competitive Edge
5.4 Marketing Strategy
5.4.1 Positioning Statements
5.4.2 Pricing Strategy
5.4.3 Promotion Strategy
5.4.4 Distribution Patterns
5.4.5 Marketing Programs
5.5 Sales Strategy
5.5.1 Sales Forecast
5.5.2 Sales Programs
5.6 Strategic Alliances
5.7 Milestones
6.0 Web Plan Summary
6.1 Website Marketing Strategy
6.2 Development Requirements
7.0 Management Summary
7.1 Organizational Structure
7.2 Management Team
7.3 Management Team Gaps
7.4 Personnel Plan
8.0 Financial Plan
8.1 Important Assumptions
8.2 Key Financial Indicators
8.3 Break-even Analysis
8.4 Projected Profit and Loss
8.5 Projected Cash Flow
8.6 Projected Balance Sheet
8.7 Business Ratios
8.8 Long-term Plan

Business plan outline advice

Size your business plan to fit your business. Remember that your business plan should be only as big as what you need to run your business. While everybody should have planning to help run a business, not everyone needs to develop a complete formal business plan suitable for submitting to a potential investor, or bank, or venture contest. So don’t include outline points just because they are on a big list somewhere, or on this list, unless you’re developing a standard business plan that you’ll be showing to somebody else who expects a standard business plan.

1 comment:

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