December is National Write a Business Plan Month, and there’s no time like the present to start writing. In honor of this month, we’re taking you through the basic steps of a business plan and providing helpful tips specific to small businesses.
What is a business plan and who needs one?
A business plan allows you to establish an overall framework of your business to share with others. It covers a range of business elements from marketing strategies to financial projections and ultimately helps you define your goals for your business, whether it’s existing or just starting. As a small business owner, you might be wondering if a business plan is necessary for you. The answer is yes, businesses of all sizes can benefit from writing a business plan as an outline for their success.
Traditional Business Plans
While business plans are unique to every business, there are commonly known elements of a traditional business plan as informed by the U.S. Small Business Administration. It’s important to think through each step strategically and holistically to best demonstrate the roadmap of your business’s future.
Executive Summary: The executive summary of a business plan is a brief overview of your business – it typically includes things like your mission statement or purpose of your business, where it’s located, number of employees and their roles, and a basic view of your business’s financials.
Company Description: A company description gives a more detailed look at some of the points in your executive summary. It allows you to highlight your company’s strengths, explain strategies for reaching consumers, and how your business is structured.
Market Analysis: The market analysis of your business plan allows you to share your business’s unique response to market research, such as the success or failure of your competitors as well as trends and themes in your industry.
Organization and Management: The organization and management portion of a business plan is where you can be specific about the structure and leadership in your business, from owners to employees. Here you can explain each person’s role and the individual skills that they bring to their position.
Service or Product Line: The service or product line is the description of services or products your business offers, including how they will be useful to customers, how and why your product or service is unique from its competitors, and plans for potential patents or copyrights.
Marketing and Sales: Marketing and sales on a business plan indicates the method or strategy in which you will market your product or service to customers. This is how you establish your brands voice, grow recognition in your industry, and build relationships with your community. In order to do these things, it’s important to determine what sort of marketing strategy you will use, whether it be social media, email marketing, or a combination of others, as well as your target profit margin.
Funding Request: The funding request section of a business plan is there for business owners intending to acquire outside financing. It defines your financial needs, repayment terms, and overall funding plan.
Financial Projections: The financial projections portion shows a roadmap for your business’s future finances. In order to establish an accurate financial projection, consider and include things like your sales forecast, break-even analysis, and cost of goods sold, if possible, using past performance to inform these numbers.
Appendix: The appendix includes any additional supporting documents that might be helpful to someone reading your business plan. Examples of these items are letters of reference, credit histories, permits, legal documents, and more.
Business plan tips specific to small businesses:
While these elements of a business plans are highly informative, they may look slightly different for small businesses. Here are some tips for customizing your business plan to reflect your small business needs and objectives:
Considering the size and financials of your small business is important in determining its organization and management. With small businesses, it’s common that each employee performs a range of duties and contributes in multiple different ways. It’s helpful then to establish a structure in your business, like who’s in charge of what and who reports to who.
Marketing is another aspect of a business plan that can be tuned specifically for small businesses. As a small business owner, you may have the advantage of marketing your product yourself or with a small team and in turn, increase the authenticity of your brand’s voice, which can be important to note in your business plan. Additionally, running a small business gives you the opportunity to build relationships with your customers and understand how to best market your product to likeminded potential consumers.
Funding requests are an integral part of setting your small business up with the funds to succeed and turn a profit. One helpful funding option specific to small businesses is applying for a small business loan. These loans can come from banks, credit unions, alternative lenders, as well as several other options and offer small business-specific loans to get your business going.
It’s beneficial for small business owners to understand their finances and goals before defining their financial projections. It’s helpful to look at components of your financial plan like operating income, profit and loss statements, balance sheets and more, all of which are distinct for small businesses as opposed to larger organizations. By grasping how all these factors of your small business’s current finances operate, you can best account for future projections.
Writing a business plan might seem like a daunting task but understanding all of its components is a valuable way for you and others to understand your small business in its entirety. Because businesses and industry markets are always changing, it’s important to set check-ins to review your business plan and make any necessary modifications. While creating a business plan is an important step, following up and continuing to use that plan as an accurate roadmap for your business is essential to its long-term success.