Your idea for a new business has begun to crystalize in your mind. You feel confident enough to move forward. You are eager to launch.
It’s an exciting time – sometimes at this point in the life cycle of a company, everything feels like it’s moving in slow motion, because you just can’t wait to get your service or product into the market and start making that profit.
Don’t be hasty. Channel your excitement: Order some business cards, if you must. Go ahead and lock down the rights to that “perfect” domain name. But before you take your website live or place a virtual “help wanted” sign on Indeed or LinkedIn, take a breath.
Have you created a comprehensive business plan?
If the answer to that question is “yes,” and you are satisfied that you have all the angles covered, by all means … proceed. However, if the answer is “no,” you’ll want to pause and make sure you have completed the most important step at the birth of any company.
Before You Write Your Business Plan
There is no “wrong” order for the steps to launch a business, because every circumstance is unique. One of the keys to successful entrepreneurship is knowing how judge the right time to make the right moves, and speed to market could be the key metric as you begin a new business endeavor.
On the other hand, there are a number of elements that could determine whether a new business has the right stuff to last, or if it succumbs to the statistical reality that 50% of all new businesses fail within five years. As mentioned above, a well-thought-out business plan is a must, but there are steps that typically must be completed even before the business plan is written.
Perhaps the most important of these early steps is market research. The U.S. Small Business Administration (SBA) suggests several methods and resources for conducting market and competitor research, without which a new business owner would be moving into a position virtually blind.
Once a new business owner has determined through market research and analysis that there is a demand for the product or service and a customer base has been identified, the research will become a key component of the business plan.
Why You Need a Business Plan
There is a school of thought that a business plan is not necessary. If the market research is current, the thinking goes, and if there is a solid marketing strategy in place, the future will take care of itself.
Besides, some entrepreneurs believe a business plan is just words. The act of doing the work to bring the business to life is what really matters.
That’s one way to approach it, but consider the potential uses for a business plan. These include:
- Summarizing the initial and ongoing vision of organizational leadership
- Thinking through and sharing the fundamental elements of the business at the outset
- Mapping a general path to follow in the coming months and years
- Determining and illustrating a business structure and officer roles
- Spelling out a strategy for raising capital
- Serving as a document to share with potential investors and partners
- Sharing the relevant market research
These elements and more can be expressed individually, but a business plan serves as a central information hub for stakeholders. This is especially important for a new company that is trying to establish a reputation for competence and efficiency.
The business plan proves that the company is more than a nebulous concept. The business plan is concrete evidence that you have put a lot of thought and effort into the new enterprise, and you are serious about making it a success.
Components of a Business Plan
The first thing to think about as you sit down to write a business plan is this: How will you use it?
There are many components to a comprehensive business plan, most of which are intended for specific audiences. For example, if you intend to use the business plan as a tool to convince potential investors to help finance the enterprise, you will likely wish to emphasize the research you conduct into market segmentation, competition, pricing, projected expenses, revenue streams and other financial elements.
If the document’s main purpose will be to lay out the structure and vision of the company for employees, as a recruitment tool or to inform and educate other stakeholders, then a detailed description of the organization will be in order.
The amount of detail you include in the business plan will depend on the intended audience. Here is a basic breakdown of the components that might be useful to include in a new business plan:
- Executive summary – This is a basic description of the company, an overview that might include objectives, a mission statement, highlights so far and potential keys to success. It is exactly what the name implies: a summary of the company’s purpose and leadership’s vision.
- Company Description – This section will lay out the nuts and bolts of the business, including ownership, its legal structure, its location, its products or services, suppliers, financial management, partners and other fundamental information.
- Marketing Strategy – This component includes market research and analysis, spelling out the reasons behind pricing structure and manufacturing schedules, as well as sales plans, advertising strategy, social media strategy, and anything else related to how the company will build and maintain a favorable impression in the industry and with its customers.
- Appendix – The final section typically includes charts and graphs that illustrate start-up expenses, cash flow, an income projection statement, a profit and loss statement, a sales forecast, a break-even analysis and miscellaneous documents.
Above all, a business plan should be written in clear, concise language. It should give readers a precise idea about where you believe your company is going and explain how you expect to get there.
Finally, a business plan should be a “living” document. Strategic changes can and should be written into the plan on a regular basis. The executive summary and company description can and should be revised to reflect the company’s evolution.