Reality check: Passion and hard work aren’t enough to make your business a success. What once fueled the dreams of eager opportunists are no longer enough to fuel those of 21 century entrepreneurs. Nowadays, you need to know the gap that your business fills, who your major stakeholders are, and the research pertaining to your specific market. This needs to happen before you even open your business and it all starts with a great business plan.
What exactly is a business plan? A business plan projects what your business would ideally look like 3 to 5 years from now. It creates strategy for how a company intends to reach its yearly milestones, including its revenue goals. Most importantly, it allows you to step back and objectively think about the key elements of your business, especially as your prospects grow and new challenges arise.
But do you really need a business plan? According to Andrew Schrage of Money Crashers Personal Finance, you do. He explains, “The biggest reason to write out a business plan regardless of any financing option concerns is that it can help you stay organized and remain on track. Businesses without a plan can easily get off-target, and revenues will suffer as a result. Creating a plan with expense projections, revenue forecasts, and more can help a small business remain committed to its long-term goals.”
Still unconvinced? Consider this: Palo Alto Software founder Tim Berry conducted a survey involving thousands of his company’s Business Plan Pro software users. The study showed that those who completed business plans were nearly twice as likely to successfully grow their businesses or obtain capital compared to those who didn’t write a plan. Berry then had the University of Oregon Department of Economics assess the accuracy of the data, and they concluded that, “Except in a small number of cases, business planning appeared to be positively correlated with business success as measured by our variables. While our analysis cannot say that completing a business plan will lead to success, it does indicate that the type of entrepreneur who completes a business plan is also more likely to run a successful business.”
What exactly should every business plan include? Think about these questions:
- What is the purpose of my business? What need will it fill?
- How is my business different from existing businesses in the same field? If our businesses similar, how will I better address my customers’ needs?
- Who are my stakeholders? Who can add value to my business as an advisor?
- Who’s is my market? How fast is this group growing and what is the potential for further growth?
- What is my marketing strategy? How am I going to reach my target audience?
- What does my budget look like? How much money will I need to get started? Who are my investors? What does my revenue stream look like (including expenses, profit margins, etc.)?
If you need a few examples before writing your own, look through bplans.com. As a great resource for writing business plans, the website has hundreds of samples for almost every industry. It can help you write the best possible business plan for your situation. And if you need someone to review your business plan, consider making an appointment with your financial advisor. He or she can calculate whether or not your plan is economically feasible.
If you follow these steps, you’ll set yourself on the path of building a successful business.