Every business starts with an idea or an inspiration for a new venture. Initially, it might just be in your head or a conversation that you had with a potential business partner. Before you think about starting a new company, you need to develop a business plan.
Creating a Business Plan
Think of a business plan as a roadmap for your company. With a plan in place, it will be easier for you to take your business where you want it to go.
Whether you have been in business for years or are just getting started, creating or updating a business plan is an essential activity for long-term success. An effective business plan helps guide you through every stage of your business, from starting up to managing and growing.
A business plan should include:
A description of your business, which can help outside lenders and investors learn more about your business before they decide to offer you funding
A vision of what you want your company to look like
Why your idea has the potential to succeed
You should organize your business plan into several key sections:
What is your business concept? The executive summary should describe what product or service your business will provide the industry it serves and how your team is organized (if you have partners or employees).
Before writing your executive summary, you may need to research your industry and competition. Understanding the market, what your customers want and need, how they decide what to buy and what competitors currently offer can help you write your executive summary.
The executive summary should identify your audience, your ideal customer and the future outlook of your industry. You could also outline your company’s specific goals for the coming year, as well as the next three years and five years.
Having a passion for starting a new business is not reason enough to launch a new company. Ask yourself what problem you are solving with your company’s product, service or store.
First, define the customers you want to reach. These are the people who want and can afford your product or service. Start by making a list of the customers who already like and purchase your offerings or are interested in your idea. What do they have in common? Perhaps it’s their income, gender, age, location or another factor.
Next, analyze other businesses offering a similar product to the same target audience. You can do this by visiting stores or vendors in person or doing an online search. Take note of the aspects of their business (marketing, product placement, product offerings, etc.) that contribute to their success. How can you replicate some of those factors? Then think about what special factors or products you can offer. This information can help you see whether there is an opportunity for your product.
Identifying your business opportunity can help you plan for your business’s future and show lenders or investors why your company will be a success. If you plan to use your business to raise money, make sure to include detailed bios of your management team. Show how their experience and skills can help make the business a success.
Objectives and strategies
What is your plan for making money and how much do you want to make within the first month or year of business? Outline this goal, your plan for meeting it and how you’ll measure your progress.
If you have an objective of being profitable within the first year of business, have a clear plan for how you’re going to meet that goal within the specified timeframe. When creating this plan, you’ll want to keep in mind:
How many customers you plan to reach
How many sales you want to make
The amount of money you’ll need to make in order to be profitable
Milestones you’ll need to meet in order to reach your goal
Another component of a business plan is a breakdown of your company’s financial information. You should include details about where your funding will come from, how you’ll cover expenses, and when you expect the business to start making a profit.
If you are not an expert when it comes to business finance and you can afford the expense, you could hire a qualified financial consultant to ensure your business plan is realistic. If that isn’t an option due to cost, consider asking friends, colleagues and other successful business owners what they think of your plan.
The financial projections section of your business plan can be especially important if you want to borrow money from other people or lenders. You’ll want to give them a clear understanding of the costs, plan for growth and potential for profit associated with your business. Investors and lenders will also want to know how and when you’re going to be able to pay them back.
Need help getting started with your financial statements? Learn how to create a business plan with this template.
Vision, mission and values
Your business plan should include your vision, mission and values statements. These important elements will help you describe the personality and goals of your business to investors or lenders, potential partners and employees. These statements usually stay the same over the life of your business. They can help guide decisions and shape your business as it grows.
Your vision statement should describe what you want to achieve and what you want to offer your customers. It should be brief, easy to remember, inspirational, based on your values and focused on the future. It can also help attract and motivate future employees. As an example, Visa’s vision is: To be the best way to pay and be paid for everyone, everywhere.
After defining your vision, create a mission statement that defines how your company will accomplish its vision. The mission statement explains what your business offers, how it does this and who it helps. It captures the overall value of your product or service. If your business follows its mission, it will achieve its vision.
As you write your mission statement, remember to make it clear, short and specific. You want your customers to understand your purpose and how you provide them value. As an example, Visa’s mission statement is: To connect the world through the most innovative, reliable and secure payment network — enabling individuals, businesses and economies to thrive.
You also want to define your company values, key characteristics that describe your business. Your values outline how you want your company to be seen, how you want your employees to feel and be treated, and how you hope to affect your community. Your own personal values may help drive your company’s values. Some values to use as inspiration are: honesty, efficiency, reliability, commitment, sustainability, ethics, doing good, building community, open-mindedness and creativity.
Once you have drafted your plan, consider finding a mentor to review it with you and identify any potential business challenges. Mentors who have expertise in your industry can provide valuable feedback. Additionally, qualified financial advisors can provide help when analyzing your revenue potential