When most folks think about writing their own business plan, they get nervous. It’s the one thing they must have to get things moving to start their dreams but they stall for months because they don’t know where to begin. Most small and medium sized business owners consider it too difficult a task to undertake because a comprehensive business plan includes budgets and pro forma financial statements. While writing a business plan can seem like a daunting task for someone who’s never done it before, many entrepreneurs ultimately find the process very rewarding and beneficial for many reasons. This is especially true during the early start-up phase when you’re bursting full of ideas but are not sure which one you should start with.
All too often, I meet with entrepreneurs who don’t know how to write a business plan. They are more concerned with which template is a better choice over the other, font choices, what items should be highlighted as priority and so on because they are worried about not attracting investors. None of that matters at the beginning. Rather, your very first business plan should focus on clearly explaining your idea for the business, including your vision, goals and opportunities for the business, the risks and challenges that you face (the value proposition), and how you will achieve financial grown while tackling the risks (the business model). Keeping your first plan shorter and on point is a great first step and will help you when you later on as things change and you want to add stuff later. Remember, a business plan is not something that you do and stick on a shelf for posterity’s sake. Instead, it is a living blueprint for how you want your business to run and needs regular review and updating – meaning at least annually, if not semi-annually or quarterly. Nothing is set in stone and successful business owners re-evaluate their business plans every few years.
Writing it Out
Your business plan, just like your actual business, starts with an idea. While you may think that it is best to draft the business plan on your own, if you have partners/co-owners, I highly suggest that everyone get together, grab your computers, and do not leave the room until you cover these next questions thoroughly. This is a great first step to getting your feet wet and is invaluable to any business lawyer with whom you consult.
- What is the business about?
- What value does it bring to customers? Why would they want to buy my product or service?
- Are there competitors doing the same thing? Who are they? What are their strengths and weaknesses? What could we do better that they aren’t?
- What is our potential market size?
- What goals do we want to reach? How will we achieve these goals? When do we estimate that we can achieve these goals?
- What do we need to execute my plan?
It does not matter what your initial answers to these questions look like. No one but you and any partners will see the initial draft. Shoot, some great ideas and business plans came together over a lunch outing where things were scribbled down on the back of a napkin, or on a golf course and sketched out on a scorecard. You can always type it out later. You never know when some insignificant note may turn into one of the most important ideas you’ve ever had. The key is to write it down somehow so that you can then go back and flesh it out.
Once you’ve tackled these starting questions, you probably came up with other questions or ideas. Write them all down. While a number of business consultants advise that before you start answering questions to form your business plan, you should undertake an extensive investigation that studies the market, customers, competitors, etc. I disagree. I think that if you are wanting to start a business, you already identified an area/idea/market, and recognized some shortcomings that presently exist in the marketplace. As such, start by outlining your ideas/thoughts/observations, and then undertake an investigation wherein you compare your ideas/thoughts/observations with what you find. Comparing the research you complete with your own initial thoughts will make it easier for you to accept the idea that you don’t know everything (which is okay!) and will help you hammer out those details if you discover other areas or insights you weren’t even aware of in the first place. In essence, this process helped you undertake a SWOT analysis – you identified Strengths, Weaknesses, Opportunities, and Threats.
Once you finished this step, you can start filling in these subjects as much as possible with your notes.
- Business Type: Will you be an LLC? Sole proprietor? For more on this, visit my past blog on business formation.
- Market Analysis: What is your industry? How do you fit in? How has this industry grown?
- Customers: Target demographic? Why? Opportunities?
- Products/Services: If it’s a product: how do you make it? What materials are needed? How much do the materials cost? How long does it take to make? Will it be mass-produced or handmade? If it’s a service: What is involved in the service? How many people are needed? Is it easily trainable? How do you account and measure quality?
- Operations: What are the roles of everyone during business hours? Who oversees them? Who makes sure the product or service is up to company standards? Who is in charge of billing? Customer support? Etc.
- Marketing/Sales: How do orders or requests come in? Who fulfills them? Who delegates issues that arise? How will people know about the company? How much will be spent for that to happen? How will that be measured? Is there someone in charge of the sales department?
- Organization/Management: Dependent on how the business is structured. Ownership details? What are their roles? Who has the final say in matters? How do issues get resolved? How are profits divided?
- Competitors: Who are they? Where are they? How long have they been around? What are their strengths and weaknesses?
- Real Estate: Will you need office space? Have you done research on locations? How much space do you need to start?
- Measuring Milestones/Financial Projections: 100th client by X date. 5,000 orders projected to be fulfilled by X date. Estimated number of employees after the first year.
Filling in these pieces of the puzzle helps the bigger picture reveal itself. Through this process, you will realize: no you are not going to be making a billion dollars with only 8 hours of work per day; and, yes there are competitors in your market. However, if you developed a solid business plan, it will reveal the opportunities that exist, but only if you are brave and willing enough to truly commit yourself to the entrepreneurial world. If you are still not sure why you should undergo this process, I suggest taking a few hours to watch some episodes of Shark Tank, and you will quickly realize the usefulness of a business plan, and get some great ideas on questions that you should consider when drafting your plan.
I am honored to have helped many other entrepreneurs with their business ventures. Please contact me if you are seeking more information on writing your business plan or need a second set of eyes.
