No matter who you go to for advice, they will recommend that you put a lot of
time and effort into your business plan. But in my experience, very few first time entrepreneurs do.
I am not going to lie to you, writing a business plan is hard work.
Much of the content will need to be researched and tested. The end result might look radically different from your original business concept and in all likelihood, you will have uncovered many, many, issues that you need to address before your business can function let alone be successful.
So why would you bother?
Believe it or not (look out - cliche coming):
It is the journey and not the destination that is important when you are
talking about business planning!
The work you put into researching your business idea to prepare your business
plan will provide you with valuable information about how your business will
During the business planning process you will discover whether your market will actually like what you have to offer, and determine what the acceptable level of pricing is. You will know what is important to your target customers and will be able to tweak your products or services to meet their needs.
You will have investigated what systems, processes or procedures you need to create to make the business actually work and made important decisions about how you will communicate with customers, suppliers, employees and external service providers. You will have a better idea of the values and beliefs you bring to your business and how that can impact on how you do business and you will have a clear vision of the future you are trying to build.
Done properly the planning you do for your business will also produce goals and objectives for your business, strategies and action plans that outline how you intend to achieve those goals, and a gap analysis that will outline what you need to improve.
A Business Planning Process
Before you can sit down in front of your keyboard and bash out a business plan, you need to do a bit of work to gather all of the information you need. The steps in the process include:
- Business Model Development/Review
- Market Research (Industry, Competitor and Customer Analysis)
- SWOT Analysis
- Financial Analysis (Costing and Pricing)
- Objectives and Strategy Development
1. Business Model Development/Review
Your business model defines your business. It describes what your business will provide (goods and or services), and it specifies who your customers will be and why they buy from you.
It also outlines the methods you intend to use to sell to those customers.
In your enthusiasm to get started you may be tempted to skip this step - DON'T - online business models matter!.
By working your way through the process of developing your business model, you will gain a far better understanding of of what you are trying to achieve and how to go about it!
2. Market Research (Industry, Competitor and Customer Analysis)
Conducting small business market research involves looking at your customer base.
You need to know about their behaviours, wants and needs and you need to look at the industry to see how your future competitors are currently serving the market.
Your market research will look at the conditions in the market (and the wider economy), and attempt to forecast future trends and identifies how your new business might fit within the market.
3. SWOT Analysis
SWOT Analysis involves gathering information on four areas of interest about your business (or your proposed business model) and the environment in which you are or plan to operate when you are starting a new business.
Two of the areas are internal to the business (strengths and weaknesses) and two are external (opportunities and threats).
By using a SWOT Analysis Matrix and assigning numerical values to each factor identified in your analysis, you can compare and evaluate multiple models to determine which one is the most promising.
4. Financial Analysis (Costing and Pricing)
In this step you will analyse your operational costs and determine your break even point, determine your pricing strategies and work out what levels of sales are likely to be achievable.
If you have already gone through the steps to determine the profit potential for your business model, you have already done much of the development (initial) work for this stage. You will have identified and classified your operating costs, set your prices based on your pricing strategy and calculated your break-even point.
Now you get to generate a few financial models to work out which level of sales will generate the level of profit you desire.
The next step is a reasonableness check. Is it reasonable to assume that the level of sales you are aiming for is achievable? Given the strategies you are planning to use to initially attract and then capture your customers, are you likely to sell the volume of widgets that you are including in your financial analysis? Will those customers become repeat customers or is your product offering a buy it once kind of product?
Once you are satisfied with the numbers, you can begin to generate the financial plans for your business plan, including a cash-flow forecast and a profit and loss forecast. These forecasts can be then used to demonstrate the profitability of your proposed business to others (potential investors) and as an operating budget for the first few years of operating the business.
5. Objectives and Strategy Development
Your objectives are your goals for the business and regardless of which type of business plan format you go with, the section that outlines your business objectives is a must have section of your plan.
Generally, business objectives or goals focus on things like; profitability, market share, productivity, customer service, employee relationships, the core values of the business, and any ambitions you have for business growth.
Developing your business objectives involves looking at where you are now, where you want to be at the end of the planning period and working out what you need to do or have to get there.
Pulling It All Together
Once you have gone through all five steps (above) you can start to populate your business planning template. In my opinion, this is the easiest part of the process. Basically you just summarise the results of your analysis and outline the objectives/strategies/action plans you developed.
A Simple Format for your Business Plan
When you are just starting out it doesn't pay to get too fancy with your
business plan. Keep it simple and fairly straight forward, rather than spending
money on glossy covers and expensive paper concentrate on developing well
researched and relevant content for your plan.
Most business plans follow a similar format.
Below, I have listed the contents of a small business plan that can be
adopted or modified by most small business startups. Depending on the purpose of
the business plan and who your audience is, you can either include all of the
sections or leave out a few to produce a more streamlined or simple business
A detailed business plan would include the following sections:
Common Business Planning Mistakes
Making serious mistakes
in your business plan through inexperience, skimping on the work or just plain cutting corners can seriously damage your credibility with your target audience, particularly if you are developing the plan to help you convince others to invest in your and your business.
Making serious mistakes like this is far more common than you might think, and can easily be avoided.
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