How does one create a business plan?
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How do you create a business plan?
I get this question a lot! You have an idea that you have transformed into a service or product. What should you be thinking about to make your business grow successful? Here is a list of typical content pieces in a business plan. Use it as a checklist.
You don’t need everything, unless you are seeking outside investors, in which case, you should seek help from a consultant or business coach. In general, this is what should be included and more importantly, given your thought and consideration.
- Cover sheet
- Table of contents
- Executive Summary
- Mission Statement:
What is the purpose of your business? Why do you exist?
- Description of the Business
What problems are you solving, for whom, and how?
If you have a physical office, where is it? What type of legal entity are you: sole proprietorship, corporation, LLC, LLP, etc.
- In-depth Management Plan:
How will you lead and manage your staff? What roles and responsibilities will everyone have in order to make your business work?
SWOT yourself/ personnel and your environment to identify who has which strengths and weaknesses and which strengths and weaknesses the relevant opportunities and threats in your external environment require your and/or staff to have.
What salaries, benefits and vacations will you be offering? How will you meet your staffing needs during vacations and absences? How often will you be absent from the office? Who assumes management duties during your absence?
Describe how your personnel needs could change and how you will handle this.
Describe your management structure and how decisions will be made.
Who are your competitors. How are you different? How will you grow? Who is your target market?
Operating plan. Will you need an office, manufacturing facility, or other space? What equipment and technology do you need? Will customers/clients/consumers be coming to you? If so, what do they need to get to you easily? Will you need insurance? What will it cost you to run your business weekly, monthly, annually?
People. Who do you need to help you do everything that the business requires to be successful? What skills do the need?
- In-depth Financial Plan:
Set up and describe your start-up budget (business capitalization) or annual budget. Loan and credit facilities arranged. Equipment and services required, and whether these are leased or purchased, ex.software and hardware costs and supplies.Personnel costs. Deposits, permits and office improvement costs. Accounting startup fees.Utilities, etc. Estimate all fixed and variable costs and ‘unanticipated’ expenses. Build in all fixed expenses (rent, insurance, staff, leases) and variable (file disbursements, part-time staff, taxes and expenses that are dependent on the volume of business).
Describe your budget by quarters, second and third years. Detail everything by month, first year. (See above -Describe all costs including salaries, insurance, rent, loan payments, taxes, marketing costs, accounting and bookkeeping costs, payroll expenses, utilities, professional dues and subscriptions, repairs and maintenance costs etc.). Your salary.
Balance sheet (assets, liabilities, retained equity)
Breakeven analysis. Describe your sources of cash for all periods from startup up to and including your projected break-even date. Describe how you will repay these sources of cash after your practice turns into the black. When will you breakeven? What profit do you expect to make each year after?
Plan for Profit and Loss statements. Daily? Weekly? Monthly? Annually?
Formally state all assumptions upon which cash flows were based (to include: billings, salaries, income, collections and write-offs)
Describe how your accounting system will monitor your budget against actual costs. Show that you understand how to use your accounting system to produce the reports that you need to manage your practice. Demonstrate that you know what are the key financial indicators for your practice (WIP, billings, billings per client, unbilled disbursements, accounts written-off, accounts receivable, change in receivables, receivables as a % of total billings etc…).
- In-depth Marketing Plan:
Describe your target market and its sub-segments.
Describe what will attract them and keep them coming back?
Describe how you propose to reach your target market
Describe your sales funnel. How will you reach your targets? With what value will you reach them? Once you reach them, what will you ask them to do? How will you get them to buy whatever you are selling? How will you keep them returning to your business?
Describe your lead magnets, sales platform, and avenues in.
Identify marketing costs.
Have SMART marketing goals.
Describe how you will build your customer loyalty and referral network within your target market
Demonstrate that you understand your competition and their pricing and how your marketing and pricing will lead to sales and profit
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Depends on business objectives of the plan. They vary widely, from the lean plan for managing an existing business, or lean plan for a startup, to strategic plans, annual plans, operational plans … the traditional formal business plan is a small subset of business plans people develop, but seems to get most of the attention.
Form follows function. What you do for a lean business plan to run a company is different than what you do for a traditional formal business plan for showing to bankers or investors.
The best thing to do is start with a lean business plan, just big enough to meet your needs, just lists and tables and essential numbers; it covers key points of strategy and tactics (some like to use business model or lean canvas for this, which is fine; plus milestones, metrics, assumptions, task assignments, projected sales, spending, and cash flow. See Lean Business Planning for complete how-to guide, free on the web. (Illustration below). The lean plan sets the parameters for a startup and/or main management needs for the ongoing company. Every business needs one.
From there, you keep your plan current with monthly review and refresh. Compare actual results to what was planned, and make adjustments. A business plan is useless without this, and with regular review, it becomes a vital and extremely useful management tool.
As needed, take the lean plan and add descriptions and explanations to make it a formal business plan to show outsiders. Wait until you have the business need for all that extra work. For that, see Bplans.com: Business Planning Resources and Free Business Plan Samples and Online Business Plan Software (bias alert: my company; but Bplans.com is entirely free.)
Here’s a simple summary of the lean business plan you start with: