by Spectrum Business
When you’re thinking about starting a business, one of the most valuable things you can do is create a business plan. It doesn’t have to be 100 pages long, but research shows that having a formal business plan can double your chance of success.
How detailed a business plan you write – and what you focus on in your plan – should depend on the size and stage of the business. Startup entrepreneurs looking to attract outside investors or financing, for example, will likely have to include sales and income projections and an explanation of how the financing will be used in their small business plan. Those not looking for money, though, can simply focus on creating a guide that will help them stay focused as they build their business.
Regardless of the size of your business and the scope of your business plan, these guidelines will get you started:
A business plan should typically cover six key areas, says D. Anthony Miles, CEO and founder of Miles Development Industries Corporation, a consulting and venture capital firm. These include: who will hold key leadership positions and what those roles will entail; key marketing strategies; how operations will be handled; the mid-to-long-term strategy for evolving the business; how the business will make money; and a contingency strategy for what happens if the plan doesn’t pan out as expected.
Fortunately, you don’t have to reinvent the wheel. There are several online resources for developing a small business plan. Bplans.com, the Small Business Administration (SBA) and Score offer a variety of templates, along with tools to help you write your plan.
In order to write a realistic plan, you must understand both your market and your competition. A good place to start is the U.S. Census Bureau. It provides economic indicator data on a wide range of U.S. industries. Then use the SBA’s SizeUp tool to establish a benchmark against your local competitors. It will help you map your customers, competitors and suppliers, while providing tips on the best place to advertise.
One of the most important parts of a business plan is the section on financial projections, says Priyanka Prakash, a business finance expert with Fundera, a marketplace for small business financing. In that section, you’ll need to provide three to five years of expense, revenue and income projections. “Doing these projections manually can be difficult because they depend on your company’s expected level of growth, all of which can vary based on your industry, size and business model,” she adds.
Business plan software such as LivePlan or PlanGuru can calculate projections for you. By plugging in some business data, such as your industry and basic financial data, you can forecast out up to 10 years.
When developing your small business plan, don’t be too bullish about your prospects, especially with your financial projections, Miles cautions. This may raise a red flag with prospective investors or financial institutions, he says, and can throw off other parts of your planning. “Prospective investors won’t believe your plan is viable if your financials are inflated,” he says.
Your business plan shouldn’t be too diversified in either the business model or your target market, Miles adds. Instead, it’s better to have a niche that you specialize in. You can expand beyond that niche later on as the business grows.
Like the adage that it takes a village to raise a child, it takes partners to sustain the business, Miles says. “A business plan should have a section that discusses its partnerships with other businesses that are key in driving the revenues,” he adds.
Of course, as with every other aspect of your business, your plan is going to shift in concert with changing customer needs and economic trends. Reviewing your plan frequently and making adjustments when necessary will help keep you and your business on course.
