What is a Business Plan?
Business planning is about results. You need to make the contents of your plan match your purpose. Don’t accept a standard outline just because it’s there.
What is a Business Plan?
A business plan is any plan that works for a business to look ahead, allocate resources, focus on key points, and prepare for problems and opportunities. Unfortunately, many people think of business plans only for starting a new business or applying for business loans. But they are also vital for running a business, whether or not the business needs new loans or new investments. Businesses need plans to optimize growth and development according to priorities.
What’s a Start-up Plan?
A simple start-up plan includes a summary, mission statement, keys to success, market analysis, and break-even analysis. This kind of plan is good for deciding whether or not to proceed with a plan, to tell if there is a business worth pursuing, but it is not enough to run a business with.
Is There a Standard Business Plan?
A normal business plan (one that follows the advice of business experts) includes a standard set of elements. Plan formats and outlines vary, but generally a plan will include components such as descriptions of the company, product or service, market, forecasts, management team, and financial analysis.
Your plan will depend on your specific situation. For example, description of the management team is very important for investors while financial history is most important for banks. However, if you’re developing a plan for internal use only, you may not need to include all the background details that you already know. Make your plan match its purpose.
What is most important in a Plan?
It depends on the case, but usually it’s the cash flow analysis and specific implementation details.
• Cash flow is both vital to a company and hard to follow. Cash is usually misunderstood as profits, and they are different. Profits don’t guarantee cash in the bank. Lots of profitable companies go under because of cash flow problems. It just isn’t intuitive.
• Implementation details are what make things happen. Your brilliant strategies and beautifully formatted planning documents are just theory unless you assign responsibilities, with dates and budgets, follow up with those responsible, and track results. Business plans are really about getting results and improving your company.
Can you suggest a Standard Outline?
If you have the main components, the order doesn’t matter that much, but here’s the outline order we suggest in Business Plan Pro software:
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 budget.
6. Management Team: Include backgrounds of key members of the team, personnel strategy, and details.
7. Financial Plan: Include profit and loss, cash flow, balance sheet, break-even analysis, assumptions, business ratios, etc.
An expanded plan outline
We don’t recommend developing the plan in the same order you present it as a finished document. For example, although the Executive Summary comes as the first section of a business plan, we recommend writing it after everything else is done.
Who Needs a Business Plan?
You need a business plan if you’re running a business. A business plan is like a map and a compass for a business. Without it you’re traveling blind. With a plan you set objectives, establish priorities, and provide for cash flow.
You need a business plan if you’re applying for a business loan. Most banks require it, and even those that don’t strictly require it expect it. They expect it to be a summary of the business, with some predictable key points.
You need a business plan if you’re looking for business investment. The plan won’t get you the investment, but not having a plan will mean you won’t get investment. Investors require a business plan. They invest in the people, the idea, the track records, the market, the technology, and other factors; but they look to the business plan to define and explain the business. You need a business plan if you’re working with partners. The business plan defines agreements between partners about what’s going to happen.
You need a business plan to communicate with a management team. The day-to-day business routine is distracting, problems come up, opportunities appear, and commitments should be followed and tracked. How do you know where you are in business without establishing where you started and where you intended to go? How can people commit to a plan they can’t see? You need a business plan to sell a business, or to set a value on a business for tax or other purposes such as estate planning, or divorce.
Sadly, many of the people who need a plan don’t know they need it. They get trapped by the myths of business planning. They don’t realize that plans are not just for start-ups, loans, or investment. They don’t realize that business plans are easier to develop than most people think. To succeed in business you simply must plan the steps, set priorities, allocate resources, and manage the cash.
Sure, some people say they don’t plan, but if they’re successful then they’re actually always planning in their heads. And you can keep that plan in your head if your business is very simple, cash flow is always adequate, and you don’t work with other people, and you don’t need to communicate your business plan with other people either.
Don’t accept disadvantages in business. Don’t try to run without a plan. Doing a plan is probably much easier than you think, and much more valuable.
What Makes a Good Plan?
Is it the length of the plan? The information it covers? How well it’s written; or the brilliance of its strategy? No.
The following illustration shows a business plan as part of a process. You can think about the good or bad of a plan as the plan itself, measuring its value by its contents. There are some qualities in a plan that makes it more likely to create results, and these are important. However, it is even better to see the plan as part of the whole process of results, because even a great plan is wasted if nobody follows it.
Planning is a Process, Not Just a Plan
A business plan will be hard to implement unless it is simple, specific, realistic and complete. Even if it is all these things, a good plan will need someone to follow up and check on it. The plan depends on the human elements around it, particularly the process of commitment and involvement, and the tracking and follow-up that comes afterward.
Successful implementation starts with a good plan. There are elements that will make a plan more likely to be successfully implemented. Some of the clues to implementation include:
1. Is the plan simple? Is it easy to understand and to act on? Does it communicate its contents easily and practically?
2. Is the plan specific? Are its objectives concrete and measurable? Does it include specific actions and activities, each with specific date of completion, specific persons responsible and specific budgets?
3. Is the plan realistic? Are the sales goals, expense budgets, and milestone dates realistic? Nothing stifles implementation like unrealistic goals.
4. Is the plan complete? Does it include all the necessary elements? Requirements of a business plan vary, depending on the context. There is no guarantee, however, that the plan will work if it doesn’t cover the main bases.
Use of Business Plans
Too many people think of business plans as something you do to start a company, apply for a loan, or find investors. Yes, they are vital for those purposes, but there’s a lot more to it.
Preparing a business plan is an organized, logical way to look at all of the important aspects of a business. First, decide what you will use the plan for, such as to:
• Define and fix objectives, and programs to achieve those objectives.
• Create regular business review and course correction.
• Define a new business.
• Support a loan application.
• Define agreements between partners.
• Set a value on a business for sale or legal purposes.
• Evaluate a new product line, promotion, or expansion.
No Time to Plan? A Common Misconception
“Not enough time for a plan,” business people say. “I can’t plan. I’m too busy getting things done.” A business plan now can save time and stress later.
Too many businesses make business plans only when they have to. Unless a bank or investors want to look at a business plan, there isn’t likely to be a plan written. The busier you are, the more you need to plan. If you are always putting out fires, you should build fire breaks or a sprinkler system. You can lose the whole forest for too much attention to the individual trees.
Keys to Better Business Plans
• Use a business plan to set concrete goals, responsibilities, and deadlines to guide your business.
• A good business plan assigns tasks to people or departments and sets milestones and deadlines for tracking implementation.
• A practical business plan includes 10 parts implementation for every one part strategy.
• As part of the implementation of a business plan, it should provide a forum for regular review and course corrections.
• Good business plans are practical.
Business Plan “Don’ts”
• Don’t use a business plan to show how much you know about your business.
• Nobody reads a long-winded business plan: not bankers, bosses, nor venture capitalists. Years ago, people were favorably impressed by long plans. Today, nobody is interested in a business plan more than 50 pages long.