What Is Business Plan.pdf
- 1. What is a business plan? If you’ve ever jotted down a business idea on a napkin with a few tasks you need to accomplish, you’ve written a business plan—or at least the very basic components of one. At its heart, a business plan is just a plan for how your business is going to work, and how you’re going to make it succeed. How long should your plan be? Typically, a business plan is longer than a list on a napkin (although, as you’ll see below, it is possible—and sometimes ideal—to write your entire business plan on one page). For me in practice, and for most real businesses, it can be as simple as the Lean Plan that has a few bullet points to focus strategy, tactics, milestones to track tasks and responsibilities, and the basic financial projections you need to plan: cash flow, budget, expenses. How should you present your business plan? A note on format: business plans should only become printed documents on select occasions, like when you need to share information with outsiders or team members. Otherwise, they should be dynamic documents that you maintain on your computer.The plan goes on forever, meaning that you’re constantly tweaking it, because you’re regularly evaluating your business health, so the printed version is like a snapshot of
- 2. what the plan was on the day that it was printed. What does a formal plan include? If you do need a formal business plan document, then that includes elements like: An executive summary A company overview Some information about your products and/or services Your marketing plan A list of major company milestones Some information about each member of the management team and their role in the company Details of your company’s financial plan These are often called the “sections” or “chapters” of the business plan, and I’ll go into much greater depth about each of them below. How often should you revise your business plan? In all cases, the most important element of business planning is the review schedule—set specific times to reviewyour progress toward your goals. That’s as simple as “the third Thursday of every month” to cite one obvious example. Specifically, it’s the time to review your progress on milestones and to compare your actuals against your financial projections. A real business plan is always wrong— hence the regular review and revisions—and never done, because the process of review and revising is vital.
- 3. Who needs a business plan? If you’re just planning on picking up some freelance work to supplement your income, you can skip the business plan. But, if you’re embarking on a more significant endeavor that’s likely to consume a significant amount of time, money, and resources, then you need a business plan. If you’re serious about business, taking planning seriously is critical to your success. Unfortunately, many people think of business plans only for starting a new business or applying for business loans. But business plans are also vital for running a business— strategic planning—whether or not it needs new loans or new investments. Existing businesses should have business plans that they maintain and update as market conditions change and as new opportunities arise.Every business has long-term and short-term goals, sales targets, and expense budgets—a business plan encompasses all of those things and is as useful to a startup trying to raise funds as it is to a 10-year-old business that’s looking to grow. 1. Startup businesses The most classic business planning scenario is for a startup, for which the plan helps the founders break uncertainty down into meaningful pieces, like the sales projection, expense budget, milestones, and tasks.
- 4. The need becomes obvious as soon as you recognize that you don’t know how much money you need, and when you need it, without laying out projected sales, costs, expenses, and timing of payments. And that’s for all startups, whether or not they need to convince investors, banks, or friends and family to part with their money and fund the new venture. In this case, the business plan is focused on explaining what the new company is going to do, how it is going to accomplish its goals, and—most importantly—why the founders are the right people to do the job. A startup business plan also details the amount of money needed to get the business off the ground, and through the initial growth phases that will lead (hopefully!) to profitability. 2. Existing businesses Not all business plans are for startups that are launching the next big thing. Existing businesses use business plans to strategically manage and steer the business, not just to address changes in their markets and to take advantage of new opportunities. They use a plan to reinforce strategy, establish metrics, manage responsibilities and goals, track results, and manage and plan resources including critical cash flow. And of course, they use a plan to set the schedule for regular review and revision. Business plans can be a critical driver of growth for existing businesses. Did you know that businesses that write plans and use them to manage their business grow 30 percent faster than businesses that take a “seat of the pants”
- 5. approach? A study by Professor Andrew Burke, the founding Director of the Bettany Centre for Entrepreneurial Performance and Economics at Cranfield School of Management, discovered exactly this. For existing businesses, a robust business planning process can be a competitive advantage that drives faster growth and greater innovation. Instead of a static document, business plans in existing businesses become dynamic tools that are used to track growth and spot potential problems before they derail the business.