10 Tips for Creating a Small Business Plan
10 Tips for Creating a Small Business Plan
Your small business plan is an essential tool that will help you obtain funding and keep your company on track for future growth. A business plan should project about three to five years into the future and will be something you will revise as your company changes and grows and as do your objectives. This written document is one of the most important pieces you need for starting a small business.
Be Purposeful in Planning
Business plans have two purposes. When you start a small business, you likely need to obtain funding. Your business plan allows potential investors to evaluate your current business and your projections for the future. Investors will decide whether or not to offer funding based on the plan, so it needs to be detailed and realistic, but should be written to convince them that you are worthy of their money and will be successful. Be optimistic, clear, and positive. The plan is also a tool for you as you grow your small business. It forces you to take stock of where you are, where you want to go, and how you will get there.
Think Like an Executive
When considering how to make a business plan, the first and most important part is the executive summary, which discusses where your company currently is and the plans you have for it in the future. This is the first section of your business plan and is the first thing anyone will read, but it is the part you should write last since it summarizes the information in all the other sections. It should include your mission statement, a brief history of the company, examples of how the company has grown or improved, a description of the services or products you offer, a brief summary of your current financial situation, and the projections you are making for the future. If you are a startup you will want to focus on your background since you don’t have much information to offer about the new company.
The company description gives a close up view of your business. It should describe not only what you do, but the need your company fills and how it achieves that. In this section you should show how your company is uniquely positioned to be competitive and successful. Where is it located? What tools and resources does your company have that position you to achieve your goals? Be truthful but highlight the excellence your company provides.
Go to the Market
For an investor to fund you, your company has to provide a product or service that is needed in the market. When you create a business plan, the market analysis section of your document should provide an accurate description of the market you are in or will be entering. Narrow your market down to a manageable target and provide information about who your primary customers will be and what distinguishes them. Discuss the market share you estimate being able to capture and how you plan to penetrate that market. If you have any studies, surveys, or market tests that support your analysis, include them. Address the issues you may face as you seek to enter into this market if you are a startup.
When starting a business, an important factor in your success will be your company’s management structure. Your business plan needs to contain a management and organization section that describes how your company is organized, owned, and managed. Include bios for board of director members and upper management. Describe the legal ownership of the company (is it a corporation or an LLC?). Provide information about salary and benefits. Describe how responsibilities are handled among management and employees. In this section you can show that the people that own or work for your company are highly skilled and a key to your success.
Promote Your Business
When creating a business plan, you must include a section that provides details about your product or service. Give details about this so that investors understand exactly what you are selling and how ready it is to go to market. Discuss how the service or product fills a need in the market and explain what sets you apart from the rest. If you have done R&D or plan to do some, include information about that. If you own trademarks, patents, or copyrights, mention those.
Show Your Moves
When starting a business, you have to have a great product or service, but you’re unlikely to be successful unless you can market and sell your product or service effectively. The marketing and sales portion of your business plan will break this down into two sections. Marketing discusses how you will communicate your message, reach your market, and do distribution. The sales section includes information about your sales team and the sales activities and strategies your company will implement.
Ask for Money
In the funding request section be clear about how much funding you are requesting, the type of funding you are seeking, future funding you may need, terms and time period, and how you will use the funds to grow your company.
Project the Future
Your plan should include a funding projections section. Start by discussing your company’s historical finances: income statements, balance sheets, and cash flow statements for the past few years. Next put together projected data for the future: forecasted income statements, capital expenditures, cash flow, and balance statements for upcoming quarters and years. It can be particularly effective to include graphs, especially to show ratios and trend analysis.
Don’t Take Out Your Appendix
The final piece of your business plan is the appendices: copies of documents such as leases, contracts, licenses, market studies, resumes, and credit history. This supporting documentation will enhance the information you’ve narrated throughout the plan and further prove your case.
A solid business plan can help you get your company off the ground by receiving investments. Careful creation of this document will help you achieve your business goals.
LegalZoom provides all the resources you need to start a business. Whether you need help choosing a business structure, or need help trademarking a business name, you can get it done affordably and quickly through LegalZoom.