What is a Business Plan?
A business plan is a document that outlines how you are going to achieve your small business goals.
It’s a brief time investment in the future growth of your company. In the past, small business owners would spend weeks outlining each and every painstaking detail of their plans.
Today, a lean format is the preferred model. With lean business planning, the focus is on outlining your strategy, understanding your tactics and setting useful metrics.
A lean plan outlines the most efficient path to business success, without the rigidity or complexity of past planning tools.
Why Do I Need One?
It’s true that some people succeed without a plan, but it’s unusual. There are a few important reasons why you need to take a moment to prepare a strong business plan.
- Your plan will act as a written blueprint that will guide your decisions
- It creates clarity and helps you stay on track and on target
- A plan is an essential tool if you need investors for your business
- It will help create buzz and excitement about your model, products or service
- Your plan will help you build a financial track record to attract the right funding
Keep in mind that there is no wrong way to draft a plan for your business. You decide whether to create a 100 page document, or a one page summary plan. These are your ideas brought to life!
Do Business Plans Evolve?
A good plan always focuses on business growth, which means that it’s ever-changing. The world of business is too fast paced to plan 5 years into the future with complete certainty.
The recent events involving COVID-19 have proved it. At any given moment, a disruptive force like a pandemic, or a new technology, could change your strategy in its entirety.
The early days of a company often invite rapid changes. Then with markets shifting from one moment to the next, it’s wise for your business plan to be a work-in-progress.
The best kind of plan never goes out of date, because it’s always being updated. Consider the companies that have moved to remote work due to the pandemic – they will have entirely new strategies to add to their plans when the dust settles.
What Goes into a Business Plan?
It’s time to flesh out the details of your plan, and commit it to paper. According to Harvard Business Review, high growth-orientated entrepreneurs are 7% more likely to plan, while entrepreneurs looking for funding are 19% more likely to have a plan in the works.
The two common denominators are growth and finance. Your business success is linked to what goes into your plan – here are the basics.
A Unique Value Proposition
The most important element of a company plan is a unique value proposition or UVP. It succinctly outlines how your customer will benefit from your business, how your offering will solve their problem, and what sets you apart from your competition.
Only 2% of companies have useful UVPs! This ‘elevator pitch’ proposition is valuable when pitching to investors and will form the foundation of your marketing strategies.
A Mission Statement
A mission statement clearly defines your company’s purpose and primary objectives. Unlike a UVP, it’s created for internal use. This changes the aim of the message quite a bit.
The statement itself will often contain a general description of the business, along with its main functions and key purpose. This is your ‘reason for existing’ statement.
A Competitor Analysis
Another essential component of your plan is the competitive analysis. This identifies your closest competitors and takes a strategic look at their strengths and weaknesses in relation to your plans.
Evaluating your competitors helps you make stronger decisions. You will look at each company under a microscope and learn how to be different or better than they are.
A Target Market Rundown
A target market analysis is part of your planning process. This is when you clearly define who your target customers are, and collect as much data on your niche as possible.
It’s important to understand exactly who you’re selling to, so that you can amplify your chances. Market research is an enlightening step in the development of your business plan.
A List of Key Stakeholders
It’s time to list the key stakeholders in your business. This means anyone who has an interest in your business is defined or listed in this section. Stakeholders can include investors, suppliers, employees, experts, government officials or consultants.
Everyone with a stake in your business needs to be here. It also helps if you briefly outline the role they play in your company. Build a hierarchy and lay it out for everyone to see.
A Cost Structure Outline
You will need to understand the fixed and variable costs of your business. Where do your expenses come from and what are your operating costs? Your plan should outline all expected costs.
This means adding in a basic starting costs sheet, or stating what your expenses, assets and funding sources are. You can also add financial projections if you have past data to base it on.
What Can I Do to Ensure My Plan Stays Relevant?
It’s a savvy move to regularly update your plan, and it’s the best habit that you can adopt for your growing business. A plan that is always updated stays relevant.
Plans should be reviewed once every 6 months, or once a year. In the event of a disruptive force like COVID-19, your plan should be immediately updated.
- Frequently update your plan twice or once annually
- Create regular feedback systems for clients, customer and employees
- Have a business consultant or tech professional review your plan and offer advice
- Consider the economic trajectory and take trends into account
- Review expansion plans and investigate new markets
- Consistently review suppliers, partners and funding sources
Consistent business growth and reliable funding are the building blocks of a successful company. No-one really knows what the future holds, so the best we can do is plan for change.