by Shaun McGowanIf you’re just starting out in business, you may be thinking, “Do I really need a business plan?”
The short answer is yes. You do.
Every budding small business needs a solid business plan. And once you’ve got one, I promise you won’t be sorry.
It will act as your foundation, a pivotal piece to your ability to survive and to grow. And it’s not just about the finished product – the planning process itself will be incredibly valuable to your business.
To put your business plan together you’ll need to look at your numbers in detail, get clear on your goals, and decide exactly how you intend to make your business work. It’s a process that will provide you with a realistic understanding of your potential, what you need to do to achieve your goals, and what obstacles you’ll have to overcome on the way.
Business planning is a process that should never really end – it’s an ongoing analysis and evaluation of your plans and your performance that will help you stay firmly on track throughout the lifecycle of your business.
Need a little more convincing?
Ok.
Here are six reasons why you absolutely need to create a business plan
It’s your map
Would you get into the car and drive to an unknown location, an unknown distance away, without first checking a map or looking up the route on your phone?
I’m pretty sure your answer is ‘No’. Not unless you were happy to spend a lot of time bumbling around until maybe... possibly... if you were lucky… you got to where you wanted to go. (And, of course, you had unlimited resources to spend on petrol, accommodation and food along the way.)
A business plan works the exact same way. It’s your roadmap to business success, complete with timescales, objectives (your destinations), and milestones along the way to make each step achievable. When things get tough (and I hate to say it, but they will) you’ll have your map to show you that you’re on the right track – or help you calculate an alternative route to your ultimate destination.
What’s more, it will help you conserve your resources and manage your cash flow – and that couldn’t be more critical, because a staggering 82% of businesses fail due to issues with cash flow.
It can help you spot problems before you hit them
A business plan forces you to think about all obstacles your business could face.
Does that sound scary?
It can be. A little.
But while identifying all the things that could go wrong with your business might feel overwhelming, it’s so much easier than having to solve those problems once they’re happening.
Here’s an example.
Say you don’t research your market carefully enough and end up setting your prices too high. The outcome? You don’t sell as much as you need to sell. You might not even realise you aren’t hitting the sales volumes you need to sustain your business, so you don’t take corrective action until it’s too late. Fast track to business failure.
With a solid business plan, you’re far less likely to make mistakes like that – and far more likely to spot them quickly if you do, so you can fix them, fast.
Fewer surprises? Sounds good, right?
Setting small goals will help you achieve the big ones
Setting milestones is a crucial step that will make it easier to achieve your grand aspirations. After all, one huge goal is always more achievable when you break it into component parts.
The small goals you set during business planning will help keep you and your team moving, motivated, and positive. Those milestones will also give you a way to check your progress – if something goes wrong and you don’t hit a milestone, you can pivot and set a new course, without charging headlong too far down the wrong track.
Ask yourself, what do we need to accomplish in one month? In three? Six? By the end of the year?
You can set targets for your business as a whole, for different areas (finance, sales, marketing) and even for specific people.
It forces you to plan for the worst
Nobody likes thinking about the possibility of failure. I sure don’t, and I’m pretty sure you don’t either.
But the fact is, sometimes, the worst does happen, even if you’ve taken all the right steps to avoid hitting problems.
By building a backup plan into your business plan, you’ll be ready to act, not panic, should something go wrong. That will give you a much greater chance of being able to bounce back.
Talking about failure sounds so negative, I know. But knowing what trouble you could run into – and thinking in advance about what it would take to fix it – might just save your business someday.
It could help you get funding
A solid business plan is a valuable document that you can present to people who are in a position to help you.
Believe me, this will really increase the chances of them sharing their expertise, investing in your business, or offering you a business loan.
Why?
Because as well as giving them concrete facts and figures about your business, a business plan shows that you are committed, responsible, someone who has a clear and concrete vision of how to build a successful business.
It will keep you focussed
Why did you start your business?
The chances are, you were driven by a lot more than the desire to make money. It takes a huge amount of passion and dedication to build a business, and it’s all too easy to lose that fire along the way, especially when things get tough.
So, why is this business important to you?
Encode your passion in your business plan. State your mission. Write down your purpose. And always, always keep sight of your goals.
Okay, you might be thinking, I get it. A business plan is important.
But…
Do you need a business loan?
See if you qualifyWhat is actually in a business plan?
Good question.
While business plans vary in length and structure, they should all contain roughly the same information.
If you’re just creating the plan for your own use it’s a good idea to put together a 'lean plan’ instead of a full, formal business plan, as it’s quicker, easier and far more agile.
However, if you need the full document, here’s an outline of what to include:
Executive Summary
An executive summary is really important, because it’s the first piece that potential investors or lenders see when they read your plan. If that part isn’t convincing, they’re done. They’ll stop reading right there, and your business could be left without the funding it needs.
Keep your executive summary concise, but make sure you fully and articulately explain what problem your business will solve, and how. Tell investors why your business will be successful.
You’re confident that your business is the best. Make others confident, too.
Executive summary sample: Café Paradiso executive summary.
Overview
The overview is a profile of your business, including:
- Location
- Date formed
- What type of business you are
- Legal structure
- How you are doing your business (online, brick and mortar, etc.)
- Your achievements and successes
Business overview sample: Café Paradiso business overview.
Analyses
There are three types of analysis you should include in your business plan:
Market analysis
This section offers details about your market. How large is it? What’s its trajectory? What factors might impact it? Where do you (or do you plan to) sit within it?
You should back up your analysis with solid data, facts and charts. Basically, evidence. Show you know your stuff.
Market analysis sample: Café Paradiso market analysis.
Customer analysis
This section offers details about your market. How large is it? What’s its trajectory? What factors might impact it? Where do you (or do you plan to) sit within it?
You should back up your analysis with solid data, facts and charts. Basically, evidence. Show you know your stuff.
Customer analysis sample: Café Paradiso market analysis.
Competitor analysis
Time to talk about the competition. Who are they? What are their strengths and weaknesses?
And, most importantly…
Why are you better? Describe all the advantages that you have – your expertise, your USP, your brilliant ideas. Why will you be more successful?
Customer analysis sample: Café Paradiso competitor analysis.
The products and services you offer
This section is pretty straightforward. Describe each product and service that you offer.
What do you sell? What do you provide? Why? How well does each line perform?
Products and services offer sample:
Operational, marketing, and financial plans
This is the real meat of your business plan – your detailed plans for each aspect of your business.
Operational plan
Your operational plan is a blueprint for the way your business will work, including your objectives, the strategies you’ll put in place to achieve them, your timelines and performance measures, and who will take responsibility for each objective.
Operational plan sample: Café Paradiso operational plan.
Marketing plan
You know how amazing your business is. But unless everyone else knows it, how will you thrive?
In your marketing plan you’ll outline how you are going to market your products, your services, and your brand.
Marketing plan sample: Café Paradiso marketing plan.
- Who and where are your target customers?
- Which channels will you use to attract them?
- Will you focus on advertising or content marketing?
- Do you have the expertise in-house or will you bring in consultants?
- What are your targets and how will you measure if you’ve met them?
Financial plan
This part, of course, is all about the money – that all-important cash flow.
Your financial plan is absolutely critical to potential investors or lenders. They want to know where their money will go, how you’ll use it to make more money, and how much return they can realistically expect.
- What are your start-up costs? How much money do you need in the next year. Two years? Five years?
- How will you use that money?
- What ongoing business expenses will you have? This includes salaries, insurance, marketing, etc.
- Do you predict any need for additional funding down the track? Why?
You’ll need to support your financial plan with financial statements (balance sheet, profit & loss account, cash flow statements) and detailed financial projections. If you’ve already been trading for a while, you should also include performance ratios among your supporting documents.
You can include all this detailed material in the appendices, along with other important information to help potential investors understand and value your business, like your customer lists and details of any patents.
Financial plan sample: Café Paradiso financial plan.
By now you’re probably thinking, “That's a huge amount of information to include. How do I bring all this together? Where do I even start?”
I’ve got good news for you:
It’s not as daunting as it seems.
In fact, there are plenty of resources to help you plan for your business, and to get it off the ground.
Here are some to get you started.
Great resources to help you create your business plan
This template and guide from the Australian government is an excellent resource for all small business owners. It provides a downloadable business plan template and a heap of useful information to make the process easier.
You’ll also find long list of other great resources at business.gov.au, all designed to help you start your own business. What’s more, it tells you how to access valuable business and financial advice.
You may be surprised to discover just how many great tools and apps there are out there to help you plan, launch and run a successful business. Here is a list of the five top Business Plan Software and Tools for Your Small Business.
The best among these, according to business.org, is LivePlan – a comprehensive but affordable strategy and planning tool, with fully customisable features and a collaborative, step-by-step process to follow.
If you still don’t feel confident, you really don’t have to go it alone. Enlist the support of your financial advisors, hire a business consultant to advise you, or reach out for help from a business mentoring service.
Conclusion
As a small business owner, it’s absolutely essential that you know how to plan for business success – and how to execute that plan.
I won’t deny that creating a business plan is time consuming, and it can even be stressful. There’s a lot of research involved and plenty of materials that you need to gather.
But your business plan is your roadmap to success (not to mention the evidence you need to convince people to invest in or lend to your business) and you can’t do without it. I promise you, it really is worth every second you spend on it.Luckily, there are plenty of tools, resources and people out there to help you along the way.
How do you feel about starting work on your business plan? Do you have any additional advice? What resources have worked for you?
Let us know in the comments!
