One of the first steps in creating a new company is writing a business plan. The business plan serves a wide variety of functions, including, though by no means limited to, the following:
It defines and focuses your objective using appropriate information and analysis.
It is used as a selling tool, offering pertinent information to lenders, investors and banks.
Study of your business plan may reveal gaps and weaknesses in your initial concept.
A well-written business plan may be used to solicit opinions and advice from experienced experts in the field, offering sound guidance and a head-start to those new to the market.
Dos and Don’ts of Writing a Business Plan
There are certain common errors made in business plans that are very easy to make, and you should take special care to avoid.
Do Not Indulge in Over-optimism – You probably would not be going into business if you were not optimistic about your future in it, but a business plan is a hard bitten and realistic document. Do not be pessimistic, but be very conservative and realistic regarding things like capital requirements, timelines, sales, and profits. Most new businesspeople underestimate the amount of capital that will be required to start the new business.
Do Have a Back-up Plan – Do not ignore the potential adversities that a new business may encounter. Spell out strategies for tackling them within the plan.
Do Not Rely on Gimmicks – Do not rely exclusively upon the individuality of your business idea or even of a proprietary invention that no one else has. All business success is based on a plan with a solid economic format, not the great inventions. The things that make your business stand apart may well help your success, but they will be worthless without the sound financial plan.
Do Use Appropriate Language – You are communicating business ideas to potential investors and lenders who may have no idea about the minutia of the business that you are launching. Stay clear of specialized, industry vocabulary and lingo in your descriptions.
Do Answer All Questions – Make every attempt to answer all the questions that a potential investor, lender, or business associate might have about every aspect of your business plan. Do not leave gaping holes.
Building the Plan
There are numerous variations on how to write business plans, and, like all good quality business communications, they must be tailored to the individual company involved. The following elements, however, are fundamental to all basic business plans:
Start with a Vision Statement. This is a brief outline of your goal in founding your business. This is the big-picture place, so if you are going to get dreamy-eyed and romantic anywhere in your business plan, this is the only place where you might get away with it. Your vision statement may be as brief as a single sentence, but is more likely going to be a short paragraph.
Next, introduce yourself, focusing on your prior experience as is applicable to the new business. If there are partners in the business, the same information goes for each of them. Prepare rsums for yourself and each partner. Be factual and avoid self-aggrandizement. This portion of your business plan will be meticulously reviewed by those with whom you are forging relationships, including lenders, investors, and vendors. If you have personnel shortcomings that you plan to hire or contract to fill, include that here too. For example, if you do not have business budgeting experience, indicate that you intend to contract an experienced financial professional to maintain your books and offer guidance where necessary.
The third section is your business profile. Here is where you present the details of how you will do business. Spell out the details about facility rental, materials acquisition, and staffing requirements. Detail the volume of trade that you need to reach the break-even point, and project when you foresee reaching that point.
The fourth section is your economic assessment. Explain the niche in the economy that your business will fill, and why it will succeed. Bring in studies provided by regulatory agencies if appropriate and possible. Show demographics and traffic flow if appropriate. Show your potential lenders why your business is the place to put their money.
Finally, provide a cash flow assessment, projecting a one-year plan. Again, be realistic, but not pessimistic. Do provide for potential economic difficulties and how you will address them.
In addition to these fundamentals, you may also include a discussion of your marketing plan and plans for future expansion. There are numerous government websites with valuable information pertaining to small businesses – make use of that information in your business plan. There may be sites that pertain to your specific business, and the Small Business Administration has a volume of valuable information pertaining to all start-up businesses. Additionally, depending upon the nature of your company, you may include additional sections as they pertain to the individual situation. Additional sections may include Products, Services, Distribution, Suppliers, Customers, or any variety of specialized sections that apply to your situation.
In short, keep the writing in your business plan clear and appropriate to your audience. Keep the tone positive but not unrealistically optimistic. Do not be overly verbose, but provide a wealth of information in a concise format.