Writing a business plan is like eating broccoli. I used to make faces and say that it’s not for me. When business owners seek funding to start or grow their business, lenders first ask for a business plan. Their main focus is to review the Executive Summary and Financial Projections in the business plan. So start crunching those numbers and finish up your broccoli because later you will be glad you did.
But then why is it that bankers, financial institutions, Venture Capitalists and Angel Investors all want to see a written business plan? Not only that even potential partners and major suppliers request for a copy of the business plan prior to signing any major agreements. Why is the business plan so important?
Business plan consists of topics that help potential investors, banks and other parties of interest determine the feasibility and success rate of their return of investment. So lets break down the ingredients in broccoli to understand what makes it so important.
Note that the topics and items I have written below are explained very briefly. I strongly recommend owners use free business planning templates offered by SCORE, purchase business planning software or sign up with a qualified business planning website portal to prepare a business plan. A good business plan product describes each item listed below and more in greater details.
1. Executive Summary:
This section in the business plan is more like a compressed version of your complete business plan. It gives a quick glance of each section of your business plan and helps the party of interest to understand your objectives such as need of finances, partnership, affiliation or other interest. Its important to keep this section concise, clear and to the point with adequate content. Define business opportunity, description of products/services, current business status, financial potential and description of your request.
2. Company Background
Write description of your company or business, how it came to be, where it is today and where do you see it heading. Share how you came up with the idea, your vision to form, grow and success you foresee based on your vision, knowledge and experience. Include business description, company history, current business position, objectives and ownership.
Specify description of your products so that the party of interest can clearly understand what you will deliver in a simple and easy to understand description. Include competitive analysis, research and development, suppliers and inventory.
Specify description of services with clear detail. Include service descriptions, competitive comparison, service delivery, research and development.
5. Industry, Competition and Market
Specify the industry, competition and your business niche, and why you feel that your products or services can attract customers. Include industry definition, primary competitors, market size, market growth and customer profile.
6. Marketing Plan
This is one of the most challenging part of operating a business. Selling is hard to do and this helps you understand, assess and plan to connect with your target market. It also helps you implement your marketing strategy. Describe Management, Organization and Ownership Including management/principals, board, organizational structure and professional consultants.
7. Goals and Strategies
Specify long term goals, highlights and strategies you will apply to achieve those goals. Include business goals, future plans and key to success.
8. Financial Assumptions and Projections
This section contains a long list of items and this is the first section that most investors, banks and financial institutions review after reading the executive summary. Include items such as income, operating expenses, taxes, assets, liabilities, equity, payment terms, debts, line of credit, balance sheet, profit and loss, cash plan and more.
Every business plan consists of the topics that you as a business owner might feel does not apply to your business. You will not know until you start executing each item. Every step of the way you will realize the importance of each topic. Every execution will help you prepare for the next topic.
The beginning of a marathon is always a psychological battle and you ask yourself, “Am I going to be able to finish it? This seems too much for me.” As you continue running, you gradually cover more miles and start to feel better. It might feel challenging at times but the mind reenergizes when you realize how far you have gone and that you are getting closer to your destination. Then you complete the run.
Your business plan is your roadmap that, after every step of execution, will take you one step closer to validating and enhancing your vision. The thought of having your own business is one of the greatest compliments to the mind only if the idea is incubated and nourished carefully with research and planning, because proper incubation is the true “first step” toward success.