If you're serious about the success of your Home Business and Small Business, then you need to find ways to give yourself every advantage you can over your competition. One strategy that I can almost guarantee your competitors haven't tried is building a customized blueprint that outlines exactly how your businesses will succeed. The process of writing a business plan for your company can be a crucial step in getting your profits to where you want them to be.
If you're thinking, "But I'm just a one-person business working part time out of my home. I don't need a business plan," think again! Unless you want your business to stay small and to keep your day job, you desperately need a business plan. It's one of the best ways to motivate yourself to drive your business to the next level.
Business Plans define your Business
5 factors for Effective Business Planning
Clearly define your business idea and be able to succinctly articulate it. Know your mission.
Examine your motives. Make sure that you have a passion for owning a business and for this particular business.
Be willing to commit to the hours, discipline, continuous learning and the frustrations of owning your own business.
Conduct a competitive analysis in your market, including products, prices, promotions, advertising, distribution, quality, service, and be aware of the outside influences that effect your business.
Seek help from other small businesses, vendors, professionals, government agencies, employees, trade associations and trade shows. Be alert, ask questions, and visit your local SCORE office.
A business plan defines your business, identifies your goals, and serves as your firm's resume. The basic
components include a current and pro forma balance sheet, an income statement, and a cash flow analysis. It helps you allocate resources properly, handle unforeseen complications, and make the best possible business decisions. Because it provides specific and organized information about your company and how you will repay
borrowed money, a good business plan is an important part of any loan application. Additionally, it informs sales
personnel, suppliers, and others about your operations and goals.
The importance of a thoughtful business plan cannot be overemphasized. Much depends on it: outside funding, credit from suppliers, management of your operation and finances, promotion and marketing of your business, and achievement of your goals and objectives.
Despite the importance of a business plan, many entrepreneurs drag their feet when it comes to preparing a written document. They argue that they just don't have enough time. But just as a builder won't begin
construction without a blueprint, eager business owners shouldn't rush into new ventures without a business plan.
Before you begin writing your business plan, consider five core questions:
What service or product does your business provide and what needs does it fill?
Who are the potential customers for your product or service?
Why will they purchase it from you?
How will you reach your potential customers?
Where will you get the financial resources to start your business?
Sample Business Plans
Business advisors, entrepreneurs, bankers, and investors generally agree that you should develop a business plan before you start a business. A plan can help you move forward, make decisions, and make your business successful. However, not all business plans are the same, not every business needs the same level of detail. You might develop a fairly simple plan first as you start a small business, and that might be enough for you. You can also start simple and then elaborate as you prepare to approach bankers and/or investors.
This first stage of a plan, focuses only on a few starter elements. The Mission Statement, Keys to Success, Market Analysis, and Break-even Analysis give you a critical head start toward understanding your business.
One suggestion for getting started is to develop your plan in stages that meet your real business needs. A few key text topics might be enough to discuss the plan with potential partners and team members, as a first phase. You may well want to add a basic sales and expense forecast, leading to profit and loss, as next phase. Adding business numbers helps you predict business flow and match spending to income.
Ultimately, the choice of plan isn't based as much on the stage of business as it is on the type of business, financing requirements, and business objective.
Here are some important indicators of the level of plan you'll need, even as a start-up:
Some of the simpler businesses keep a plan in the head of the owner, but every business has a plan. Even a one-person business can benefit from creating a plan document with ideas written down, because the process of producing a plan is useful and valuable.
As soon as a second person is involved, the need for planning multiplies. The plan is critical for communicating values, goals, strategies, and detailed implementation.
As soon as anybody outside the company is involved, then you have to provide more information. When a plan is for internal use only, you may not need to describe company history and product features. Stick to the topics that add value, that make you think, that help support decisions. When you involve people outside the company, then you need to provide more background information as part of the plan.
Text is enough to get a plan started. Try describing your mission, objective, keys to success, target market, competitive advantage, and basic strategies. How well does this cover your business idea?
A good market analysis can help you see opportunities that might not otherwise be obvious. Understand why people buy from you. What are the needs being served? How many people are out there, as potential customers?
Do you sell on credit? If you are a business selling to businesses, then you probably do have to sell on credit, and that normally means you have to manage money owed to you by your customers, called accounts receivable. That usually requires a more sophisticated plan.
As you approach banks and other lending institutions, expect to provide more detail on personal net worth, collateral, and your business' financial position. Some banks will accept a very simple business plan as long as the collateral looks good. Others will demand to see detailed monthly projections. No bank can lend money on a business plan alone; that would be against banking law.
If you're looking for venture investment, take a good look at your plan. Professional investors will expect your plan to provide proof, not just promises. They'll want to see market data, competitive advantage, and management track records. They'll want to see robust and comprehensive financial projections.
So, however you cut it, your business plan is very important, even at the early start-up stage, and even if you can keep it in your head. Before you purchase business stationery, telephones, or rent a location, you should do a business plan.