This course explains the importance of business planning, defines and describes the components of a business plan, and provides access to sample plans, and resources that can help you develop a very good business plan.
How to Write a Business Plan
Welcome to the How to Write a Business Plan course. The topics are relevant to those individuals who are planning to write a business plan. The course is comprised of two topics. It begins and sets the tone by defining a business plan as well as appropriate audiences and its importance to business success. The course continues by explaining in detail the contents of each section within a business plan.
What is a Business Plan? Let me refresh your mind with a popular saying “By failing to prepare, you are preparing to fail.” – Benjamin Franklin. Imagine you throw a surprise party for your favorite relative who is turning 90. Would you plan the food, entertainment, table setup, etc.? Of course, you would. Starting or running a business without proper planning is like throwing a party for 100 people, without a plan.
Planning will help shape the end result and provide the best path to get you there. Planning gives you a roadmap to follow. If you don’t plan for the success of your business, you will likely fail. It is that simple.
Blueprint for Your Business Plan
Like throwing a party without an agenda, if you’re running a business without a plan, you won’t know in what direction you’re headed. For businesses, planning is usually presented in the form of a business plan. As the blueprint for your business, a business plan provides an outline to the framework of your business, declares your visions, and showcases the necessary steps to fulfill the vision you’ve outlined.
It summarizes your business’s history and background and models your core values and mission. As the roadmap for your business, a good business plan helps you navigate your business towards your strategic direction.
The more thorough you are, the better your blueprint for success will be. To put it into perspective, a business plan explains:
• Who you are
• Why you’re in business
• What you do,
• How you do it
• Where you operate
• How you will generate profits
• Who your customers are
• Why your business is important
So, who will read your business plan? Who’s your audience? Business plans are designed to communicate to a specific target audience: internal or external stakeholders. Stakeholders include anyone with a potential vested interest in your business. Even if you’re not looking for outside funding, a business plan is useful for persons internal to the business: you, employees, management, sales, etc. to know your mission and vision as well as your target market and customer. However, business plans are often the first thing an outside funder will request; therefore, much of what is in the plan will be directed at an external audience such as potential investors or lenders (government). So, for investors, banks, and loan advisors, business plans are essential.
Tailoring Your Plan
Tailor your plan to your intended audience. And, remember, as your business expands, so will your plan. When writing for internal stakeholders, focus on the detailed operation of the business. For example, include comprehensive data on the operating budget, market research, competitor analysis, sales lists, product design specifications, etc. When writing for external stakeholders, focus on the financial aspect of the business. For example, if you’re looking for a traditional loan – you should include the amount you’re looking for, how the funds will be used, what those funds will accomplish, how you plan to repay, and any collateral you have to offer. If you’re looking for investors, talk about growth; e.g. what funds you will need in the short term as well as the long term (up to five years) and how you will use those funds to grow. Calculate Return on Investment (ROI) estimations and how financial reporting will work. Tell them what percent ownership you’re willing to give to investors, what milestones or conditions you will accept, how you expect them to be involved (board membership, management, etc.), and any proposed investor exit strategy (such as buyback or sale options).
Categories of Plans
There are two main categories of business plans: traditional and alternative. While traditional business plans cover key established business aspects, alternative business plans offer their target audience innovative approaches that emphasize speed, flexibility, and the ability to change direction and adapt.
Traditional Business Plan
Depending on a company’s needs, a traditional business plan can cover key business concepts such as marketing and finances, and/or be used as a tool to effectively operate the business by organizing company goals and objectives. A traditional business plan can save your business money because its primary function is to manage current and future financial projections. You are better equipped to manage spending since budgets are set within the plan. In addition, marketing dollars are allocated more effectively because the plan helps pinpoint the characteristics of the company’s target market.
A business plan contains mini-plans to address the different aspects of your business: Sales and Marketing analysis provides specific information regarding the industry in which the business operates. Financial information such as accounts payable and receivable, break even projections, and the current financial picture of the business give an accurate depiction of the business’s finances. Ownership and management structure of the business is also a key element of the business plan, detailing the qualifications and duties of the individuals in charge.
Alternative Business Plan
Alternatives to the traditional business plan provide the target audience with an innovative approach when outlining the business framework.
Let’s discus variety of business plans and considerations when deciding what’s best for your business idea.
Scenario: Michael and Jennifer Michael and Jennifer, who are brother and sister, have both worked in their mother’s veterinary clinic as technicians for many years after college. While clients are very happy with the veterinary care, many clients have voiced concerns about having nowhere to take their animals for grooming services. Michael and Jennifer decided to open a separate business catering to their furry friends that initially will provide grooming, supplies, and dog walking services, but depending how the business goes, may eventually steer towards kenneling the animals as well. As you progress through this course, Michael and Jennifer will need your assistance with making decisions that will help them write their business plan.
A: Think About It
Let’s see how you apply what you’ve learned in this topic. As Michael and Jennifer begin the planning process, what vital document, considered the blueprint of the business, do they need to create for themselves as well as for the bank?
Choose one –
a. Marketing Plan.
b. Financial Plan.
c. Business Plan.
d. Staffing Plan.
The correct answer is c. Business Plan.
All other options are incorrect because they are components of the business plan; the business plan is the blueprint, the roadmap for the entire business.
Let’s see how you apply what you’ve learned on this topic. Michael and Jennifer will need a financial loan to start the business. Based on what you have learned about the categories of business plans and given what you know about Michael and Jennifer’s situation, which type of business plan do you think they should write?
Choose one –
a. Their business is too small for any type of documented plan.
b. Traditional business plan
c. Alternative business plan
d. Marketing plan
The correct answer is b. Traditional business plan.
The other options are incorrect because they will not provide the detailed financial data essential for the lender.
Summary This topic presented the definition of a business plan and its importance to business success.