A business plan is more than just a document to impress potential investors, it’s the basis of a real strategic plan that ensures you’ve done all the thinking and gathered all the information you need to start your business. Your business plan will guide your actions and provides you with goals and milestones so that you can track how you’re doing.
1. Have a Business Plan
Even if you never show it to anyone else, having a business plan is vital to your success. Many small businesses start up without any clear plan, haven’t checked out their competition, have no idea what their costs and income will be and so on. Not having a plan can cause a great business concept to fail.
You don’t just need a business plan when you start up. It should be a living document that can be applied to your business at any given time in its lifespan. All too often, business plans are drafted and then left to gather dust.
2. Use Concrete Facts
Fact-finding can take a lot of time, but if you do your homework, you’ll have a good idea of what to expect from your new business. Research your market, your competitors and be realistic and even conservative in estimating your business income.
It’s great to aim high, but if the success of your business is based on an outside chance, you reduce the odds of surviving the difficult first years after your business launches. Be cautious in your estimates and then aim for the stars in practice. It’s better to exceed your initial expectations than it is to fail to meet them.
Avoid making any statements you can’t substantiate and go easy on the adjectives. By using as many concrete facts as you can find, you can test out your business idea in the light of realities. Starting a new business always involves risk, but if you can gauge your risks and have a factual basis for confidence, you’ll know that your concept is sound.
3. Write Your Own Business Plan
It doesn’t matter if it’s imperfectly phrased. It doesn’t matter if it isn’t pretty. You can always get someone else to shine it up for you later, but the essence of the plan should be your thinking, your research and your ideas. If you use a consultant to advise and guide you, make sure that you’re still the driving force behind the plan. The end result should be something actionable that you can believe in.
4. Keep It As Brief As Possible
You need to strike a balance between including all the salient facts and writing a plan that’s so long and complex that no-one, not even you, will feel like going through it. If you can say what you need to say in a few words, don’t stretch it to a paragraph just because it sounds nicer that way. Get to the point as quickly and as cleanly as possible.
If you’re pitching your plan to possible investors, they’ll be more impressed by something that’s to the point and allows them to get a clear picture of what you’re planning.
5. Use a Template, But Don’t Begin With the First Item
Using a template to ensure that you’ve included all the necessary elements in your business plan is a great idea, but the first item on the template, the executive summary, should be completed last. In your executive summary, you’ll attempt to sum up your whole business plan in a few, short paragraphs. That means that you need the rest of the plan before you can begin writing the summary that encapsulates it.
6. Your Financial Projections Are Vital
If you’ve never budgeted for business before, it would be wise to get an accountant to help you draw up your financial projections. How much will it cost to get your business started? What will your fixed costs or overheads be? Where will you get the finance to launch your business, and what income can you expect the business to make? Will you need a small business loan to operate your business financially?
You also need contingency plans so that your business doesn’t crumble if one of your predictions is slightly off track. You may even foresee times when you’ll be needing extra finance. Know where and how you will source it in advance.
If you use your business plan as a working document, you will find that you return to your financial projections more often than you’ll refer to anything else, so making them as realistic as possible is absolutely vital. Your first year’s projections are most important of all.
What if your costs exceed your revenue? There are three possible solutions: cut down on costs, increase revenue or do both. If you can’t do any of these, it’s time to put the business idea aside and start from scratch with a new concept.
7. Update Your Business Plan Regularly
During your first year of business, you should re-visit and update your business plan at least quarterly. No matter how good your plan was to begin with, there will be some variances when it’s applied to reality. How does that affect your strategy going forward? Do you need to implement contingency plans to keep your business afloat?
If you’re able to run your business more or less according to plan, your quarterly reviews won’t be that extensive. At the end of your first year in business, you’ll do a full review of your business and its environment and adjust your strategy. This time around, it will be a lot easier, and your planning will be more accurate since it is based on your actual performance and experience.
Take note of trends in your market, changes in your business environment and what you can expect from your suppliers. By being alert to changes, you’ll be able to strategize more effectively and ensure that your business continues to succeed in a changing environment.
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