From Pawn to King: Crafting a Powerful Business Plan
Jun 28, 2023
I’ve heard a couple of competing thoughts over the years when it comes to business plans. The old school camp says that a business plan is essential. It serves as your road map, guiding your venture and giving you the ability to respond rather than react. The other new school camp says that a written business plan, in the traditional format, is a waste of time. That is not to say they don’t believe you should have a plan. Their plan is based on having a well-oiled machine with team members and departments that work on a living plan that moves and breathes with the business. In my opinion the latter camp is right… with a caveat. You need to have a solid team, a healthy culture, and regularly maintained lines of communication. You will still have a written strategy. It’s just less formal than the old school camp.
For this article we’re focusing on the old school camp. If you’re just starting out or trying to bring order to chaos, then stick with the classics. It will be the foundation that you can use to morph as you grow into something more forgiving.
A comprehensive business plan acts as a roadmap, outlining your path and providing a blueprint for your enterprise. Whether you're starting a small business or entering a new industry, understanding the process of creating a solid business plan is crucial. And, if you plan on borrowing any money, there is a better than decent chance that the lender is going to ask for a copy. Don’t hand your lender a poorly thought out half-assed turd and think you’re going to get the cash you’re looking for. These people look at new business ideas every day. Yours needs to show that it has staying power and that you understand the industry, have a strong vision and mission, and that the numbers support an investment. In this blog post, we'll break down the steps involved in crafting a strategic business plan, offering guidance to those new to the concept.
1. The Executive Summary
The executive summary takes center stage in your business plan, offering a concise overview of your business. While it's typically written last (yes, you will write all of the other components and get to this at the end), it serves as an introduction to key points. Include your business name, location, the product or service you offer, and a mission and vision statement. Highlight the unique aspects that set your business apart. Remember, this is your opening salvo to someone that wants to peak under the hood. It should be as brief as possible while providing the important details. Long and rambling ESs suck to read. If you’ve packed it full of fluff and hyperbole about your amazing new venture, you’ll likely end up in the round file.
2. Presenting Your Business: Company Description
In this section, provide a more detailed description of your business. Explain the problems your business solves, identify your target market, and illustrate how your products or services meet their needs. Describe the competitive landscape and where your business fits into it.
SOLVE A PROBLEM. So many people start a company thinking it’s a Field of Dreams kind of thing. “If I make it, customers will buy it.” NOPE. That’s not how it works. You have to make sure your understanding of your offering aligns with a customer’s need. Check out the blog on Developing Your Niche to learn more.
3. Analyzing the Market: Market Analysis
Conduct thorough research on your industry, market, and competitors. This should include your direct and indirect competitors. Direct competitors are the folks selling the same product and service you do. Indirect competitors are alternatives. If the customer chooses not to buy from you, what alternatives would they turn to? Provide information on the size and economic prospects of your target market, as well as its growth rate and current trends. Include an analysis of your competitors, highlighting their strengths and weaknesses, and outline how your business will differentiate itself.
4. Organizational Structure: Organization and Management
Outline the structure of your business, including ownership details and the qualifications of your management team. Specify the legal structure of your business, whether it's a sole proprietorship, partnership, corporation, or LLC. If you don’t have an attorney, I’d recommend it now. The way you set up your company will affect how the money flows through to you and your taxes. It will also impact how you scale, and what you have to do year after year to maintain compliance. They aren’t all “set it and forget it” structures.
On a side bar, when it comes to attorneys, get one that understands business law. Attorneys are specialized. Although your cousin might have a general understanding of business law, unless he’s a corporate attorney he’s not your long-term solution.
5. Showcasing Your Offering: Product or Service Line
Describe your products or services, explaining how they benefit customers and their lifecycle. If applicable, include details about any intellectual property rights or patents. If your offerings are still in the development phase, provide updates on your progress.
6. Winning Over Customers: Marketing and Sales Strategy
Present your strategy for attracting and retaining customers. Outline your marketing plan, sales strategy, and how you intend to grow your customer base. Discuss your pricing strategy, sales channels, and marketing tactics.
If you’re new to this, it can be a little overwhelming. But this is critical. If you went from baker to bakery owner these are things that you’ve probably not considered. Don’t skip or skim this part. Do the research. Know how you are going to reach your customers.
7. Seeking Financial Support: Funding Request
If you require funding, specify the amount you need, how it will be used, and the type of funding you're seeking. Additionally, outline your plan for repayment or providing returns to investors. Even if it’s Mammy. If someone’s giving you money, they need to know when and how they are getting it back. If it’s an investor or banker, they will expect a return on that investment. Spell it out.
Provide a budget forecast or profit plan (same thing). This will serve two purposes:
1. It demonstrates to the lender that you have a plan for their money. They kinda like that.
2. It gives you a roadmap to make sure you’re sticking to your plan. Use it.
8. Financial Projections: Planning for the Future
Demonstrate the stability and potential profitability of your business through financial projections. Include income statements, balance sheets, and cash flow statements for the next three to five years. Highlight projected profits and losses, incorporating operating costs.
You can use the same template that you created in #7. Just forecast out years 2-5. Now it’s easy to get hung up on the whole forecasting thing. The reality is that forecasts are educated dart tosses. It does need to be thought out, and you need to be able to justify the numbers you put in. If they look too good to be true, you’ll get called out. But, the reality is that you don’t know exactly what the numbers will be. It’s kind of uncomfortable at first. Get past it. As long as you can reasonably justify realistic numbers, you’re good.
9. Additional Documentation: Appendix
The appendix is an optional section where you can include supporting documents, such as legal papers, permits, contracts, leases, or product images. It provides supplementary material that validates your business plan.
Conclusion
Creating a business plan may appear daunting, but it's an essential step in your entrepreneurial journey. It helps you gain a deeper understanding of your business while effectively communicating your vision to others. Remember, a business plan is a dynamic document that should evolve as your business grows. Regular updates ensure it remains a valuable tool for decision-making and strategy development.
By following this guide, you'll be well on your way to crafting a solid business strategy that propels your business toward success. Embrace the power of planning and let it guide you toward realizing your business's full potential.
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