Understanding How to Create a Solid Business Plan For Your Company

Whether you have been in business for some time, or you are about to start, it is essential to have a business plan in place. A well-written document is a crucial player for the success of your company. The process is a useful exercise for any business owner.

There are many reasons why an entrepreneur, even for the one-person show, should draft a robust business plan. A strictly followed plan gives the owner guidelines to understand and manage the progress of the company. Here are a few critical points to building your strategy.

Measuring progress

Small businesses face difficult challenges daily, especially in the early stages; measuring progress can be a troublesome task. The business plan becomes the guideline for the owner. Seeing the actual results against the forecast will tell if the strategy needs to be adjusted or not. It also gives the entrepreneur a sense of direction whether the company is on its way to being successful or not.

Cash flow and management

You will not learn a more important lesson than the huge impact that [Cash] Flow can have on the health and survival of your business.

– Michael E. Gerber

Cash management is one of the most critical domains in an organization, and one must dominate to be successful. Regardless of the industry, businesses suffer from seasonal variation in revenues; which renders periods of an abundance of capital as well as shortages. Poor cash management could result in severe consequences, such as not able to make payroll. Understanding your cash flow and the volatility of your industry will give you an advantage. The financial plan you provide you the guidelines to where you will know when it is time to stock up on inventory.

Long-Term Vision

Starting a business is similar to embarking on a road trip. Before choosing a path, you have to know where is your final destination; how much gas you will need; how long it takes to arrive, and so on. All of this information will play a role in how you go about making the trip.

Likewise, a business plan should be a trip plan, providing you with valuable information to assist you in making decisions. The number of employees you need, the target market, the revenue you should be preparing for that month, and so on. Furthermore, the business plan should be a long term vision, providing a snapshot with a clear path to where the company will stand in five years or longer from when it was written. 

Understanding Trends

Many decisions are made in a month, and it can be difficult to tell if they were effective. Building a business plan involves quantifying targets. Comparing those forecasted numbers with actual results can assist with future decisions.
For instance, analyzing the sales growth month-to-month and compare against the forecast is crucial for creating a strategy. The owner will know what month the business sells more, and if it is following the geographical trends. The owner of the company, in many cases, is the only one who can diagnose specific patterns, and wise decisions can only be made by analyzing such data. 

What should be included

The SBA.gov suggests that a business plan should include:

• Executive summary – a business snapshot
• Company description – describe what your company does
• Market analysis – research the industry, the market, and competitors
• Organizational and management – the management structure
• Service or product – the product or service you are offering
• Marketing and sales – how you are marketing your business
• Funding request – if you need any funding, how much and for what
• Financial projections – sales and income forecast
• Appendix – optional section that includes resumes and permits

 

Research

Before you start to write the first sentence of your business plan, you have to examine every aspect of your business.

First and foremost, you have to know your market. I covered how to do it here. It is natural to change the course of the business once extensive research is done. Learn everything there is to learn about the services or products you are offering. Topics such as the price increase in the last five years, or sales volatility are of great importance. You should be spending at least twice as much time researching than writing the plan. 

Determine your audience

As the SBA.gov defines, “Your business plan is the foundation of your business.”  In other words, a business plan is the road map providing directions to your business. Besides, it can serve several purposes, attracting investors, a partner, or simply serving as a guideline. 

Knowing your audience is critical for the way you structure the plan. Bankers would be looking for something different than a venture capitalist. Managers on your team will be looking at the plan as a reminder of the objectives. 

According to SBA, there are two different ways you can format it: traditional or lean startup. 

Traditional business plan

It takes a lot more time to write, as it is much more detailed and comprehensive. You can expect a lender and investor to request this type of format. 

Lean startup plan

It is a much more focus plan, fast write, with crucial elements only. It is a great format when trying to explain your business quickly. Because of the simplicity, it can be easily changed.

Creating a company profile

The profile of your company will require some creativity. It should be an intriguing story of how you came to the idea of providing the product or the service. Explain to your audience how you stand out from the competition and how you can give a solution to a problem. It should be very similar to an about page on your company’s website. The profile is an essential component of the plan as everyone will be looking at it to judge what kind of person you are. It should be drafted carefully.

Create a strategy

Any business plan will also include a strategic marketing plan, including an aggressive marketing plan. Investors, bankers, and employees want to have a secure feeling that you know what you are doing. By creating a detailed strategic plan with actionable steps, will possibly put them at ease. In this section, you should include the following:

• How you plan to introduce new products or new services
• Gaining or extending the market
• Entering territories for the company
• Boosting sales in general and for a particular product or service. Be specific on how you will find new businesses.
• Entering into a long-term contract with desirable clients
• Raising the prices and how often

Add as many details as you possibly can for each of those items, including the budget necessary to achieve the desired goals.

Organizational and Management

You have to tell your reader how your company is going to be structured and who is going to run it. Describe in detail the legal structure of it, stating whether it is a C or S corporation, general or limited partnership, and so on.
Again, think about how you want your business to look like in five years from today. Using an organizational chart, build it as if you were five years ahead. Though you do not have the names to place in the table, you still can set the positions. For each of those positions, add the experience you expect them to have, and the roles of each team player.