You would never start a road trip without a map planned destination. So why would you start a new enterprise without a solid business plan?
Every business owner needs a plan, whether they are running a tiny retail store, a stall at a craft market, or an independent social media business.
You only need to look at small business survival rates to see why. According to the United States Bureau of Labor Statistics, only 30% of businesses make it to their fifth year. And though we don't have full details on each failed firm, research from CBinsights shows that:
42% failed because there was no market need for their product or service
29% ran out of funding
18% failed because of pricing problems
A strong business plan can mitigate all of these issues. This article will share five tips to help you build one.
1. Create your plan with a purpose for your business.
Business plans generally include five key sections:
Management and personnel plan
More detail-oriented plans also include a competitor analysis, SWOT analysis of current market conditions (including strengths, weaknesses, opportunities, and threats), operations plan, an analysis of the business's target market, and how you chose your branding.
No matter which structure you use, each section is designed to answer one key question: "why our business will do (x)."
So how do you convey your purpose in your business plan? Ideally, you'll want to convey your values, what you want to contribute to society and your business goals. If your business has employees, you should also outline the working environment you want to give them.
2. Focus on your business model.
If one of your employees read your business model, would it give them enough tangible information to run your new business without you?
While you don't need to reveal all your trade secrets in your plan, sound plans outline the enterprise's business model in detail so anyone can follow it. This means including:
How your business will generate revenue
How your business will reach profitability
How you will grow your business from a side hustle
Every cost your business will incur (and how you will pay for them)
How you hire, train, retain, and care for staff
Who will complete each task
How you will handle business-disrupting disasters like COVID-19
How you will evaluate your business's progress towards your goal
While outlining these details may seem over-the-top, it will save you time and money long-term — as the clearer your business plan is, the easier it is to follow.
3. Seek help from professionals.
When new small business owners design their first business plan, they often leave large sections (like the financial or marketing plan) blank because they don't know what to write.
Leaving a section blank may save you time in the short term, but it could cost you your business. If you don't make proper provisions for an aspect of your business, it's harder to succeed in that area and reach profitability.
That's why you need expert help. Writing a business plan with an expert, like a SCORE mentor can help you build your business model profitably.
4. Draw inspiration from other business plans.
Reading other people's business plans is a fantastic way to strengthen your plan, as you can see what worked for them, what didn't, and how they appealed to investors. Additionally, consulting other people's plans will help you identify minor but helpful elements you may have forgotten (like a profile of your target audience or a staff retention plan).
There are many ways to read high-quality plans, including:
- Through the Small Business Administration's website
- By asking a friend or family member with a successful business to share their business plan with you
- By reading investor packets from publicly-traded companies
Alternatively, you could use a template to help you write your business plan.
5. Support your claims with evidence
What would make you say, "yes, I'll invest" as an investor? Maybe, you'd say "a documented path to profitability" or "strong financial projections." These answers have one thing in common: they are forms of evidence.
Though you may want to create a business plan that promises potential investors significant returns, your investors are more likely to invest if you can prove you can generate profit with tangible evidence.
There are many types of evidence you can include in your plan, including:
Budgets, projected sales figures, and profit and loss statements to back up your financial projections
A buyer persona to back up your projections for potential customers
Website traffic data to back up your digital marketing plans
Statements to back up why you made particular business decisions (for example, "we used a business name generator to create an easily recognizable name")
Why a good business plan is your secret to business success:
Crafting a strong business plan will help your business succeed long-term, as it gives you a roadmap to follow when you've lost sight of your goals or need to face an unexpected challenge.
To design a plan that works for you, make sure you set a purpose, focus on your business model, get professional help if you need it, consult other plans for inspiration, and support your business plan with evidence.