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Creating a Business Plan that Works

By Toolkit Staff | July 03, 2012

Coming up with a great idea for your new business, or for a way to turn around or expand your existing business, can be a tremendous challenge in itself. While there's never a shortage of raw ideas, finding one that's solid enough to support a successful company for an extended period of time takes a great deal of investigation and research, good judgment, timing, and even luck.

But coming up with a great idea, difficult as it may be, is not enough. Countless businesses have started out well, sailed through the first few months or even years, and then foundered as soon as the first real problems cropped up.

How can you make sure this won't happen to you? You can't, of course. But you can greatly improve your chances by taking the time to thoroughly research your business idea before plunging into it. Then you can take the most important step: using what you've learned to create a written plan that plots out your objectives; marketing strategy; operational procedures; and the right combination of expertise, equipment, location and sheer capital that will be required to convert your ideas into reality.

Creating a business plan need not be difficult. However, it does require a step-by-step approach, and a willingness to persist in digging for information and thinking through all the essential factors that will contribute to your operation. You'll find that the time you spend creating your plan will be some of the most valuable hours in your entrepreneurial career.

By creating a business plan, you'll know exactly what pieces must come together at the right time, place and amount to make your project a success. What's more, you'll be able to explain your idea to others whom you must convince to write a loan, invest in your business, or join you as a partner or co-owner.

While the planning document itself can be important, particularly if you're going to use it to obtain necessary capital, the planning process is even more important. It's during the process of creating the plan that you round out your knowledge base by gathering information, considering numerous alternatives, and making dozens (if not hundreds) of decisions about how to proceed. Putting your decisions on paper has the very important psychological effect of cementing your commitment to action.

Where available, you can and should enlist the help of others (e.g., your accountant, lawyer, consultant or even a professional business plan developer) to help you pull together the physical document. A review of the financial section by an accountant can be particularly helpful. But you must ultimately do the essential thinking and decisionmaking yourself. Your plan must reflect your own individual strengths, personality and intentions for your business, and no one knows them as well as you.

Remember that no two business plans will look alike. Your reasons for creating the plan, and what you hope to get out of the process and the plan itself, will play an important role in shaping the scope and contents of your particular plan. What's more, your plan should reflect your personality and your management style. You'll want the readers to feel as if they know you and have a good handle on what your business is all about.

Business planning software can be a tremendous time-saver in creating your plan, but some business owners are tempted to just "fill in the blanks" of the template provided in the software, without attempting to consider whether another organization or style might be more appropriate for their business. This can be a serious error if you're applying for a loan and your banker has read dozens of plans using the same software (and boilerplate language) already. Resist the temptation--make sure that your plan expresses your creativity and individuality.

Obviously, your business's position in its life cycle will have a significant impact on the type of planning that's needed. A startup may need extensive planning of all its aspects, while an ongoing business might require a plan that relates primarily to a new market that it wants to enter or a new product that it wants to introduce.

Consider the uses to which you expect to put your plan, and the audience who will read it. Will people outside the business see your plan? Will you be seeking outside financing, and if so, from whom? The type of lender or investor you're pursuing will dictate the type of information and details you need to include. On the other hand, if the plan is to be used primarily as a management tool for yourself and/or other owners or key employees, you can be more flexible about the length and contents of the plan. Generally speaking, a 20- to 30-page plan should be sufficient for most small businesses.

Once you've written your plan, don't let it wither on the vine. You should treat your business plan as a dynamic document that will be kept current as your business evolves. Take advantage of the time and energy you've invested by keeping your plan up-to-date and using it to track your progress. Ideally, you would shoot for a five-year plan and revise it every six months. At a minimum, reserve some time each year to evaluate your progress toward your goals--which activities and processes have worked well, and which need to be adjusted or redesigned from scratch? Also take a look at conditions in your industry, in your market and with your competition. What adjustments will need to be made in order to keep up with the changing landscape?

As time passes, you'll find that you get better and better at making the projections and assumptions that go into a business plan and, ultimately, lead to success. Keeping your business plan close at hand, and revising it regularly, will turn it into an vitally useful management tool for your business.

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