The jumping off point for most entrepreneurs is writing a business plan. This is usually done to secure financing, but it is also requested by business advisers, vendors, partners and others. There are hundreds of free templates available, all of which are very similar and relatively straightforward. Keep in mind that your business is unique and some elements may not apply. You may also need to add other sections if your product or service is unusual or unique.
Unfortunately most “small business” business plans end up being vague, static descriptions, with minimal detail and very little meat on the bone. The “plan” part is non-existent. After it is written, it goes in a file and sits there, neglected and untouched, for years.
However, a good plan is a living document that provides useful and relevant information along with clear objectives and action steps. Updating the plan regularly, once a year at a minimum, can help keep a company on track. It can also serve as the foundation for a Selling Memorandum if you decide to sell the business in the future. Updating should take a couple of days at the very most and should be reviewed by all stakeholders to ensure everyone agrees on the direction the company is taking. The owner, or a senior manager, should be the one updating the plan. This is not something an administrative assistant should handle.
Many business plans are too long. They simply regurgitate the same information with slightly different wording throughout the document. Seven to twelve pages is often sufficient. Of course, the more complex a company is, the longer the business plan will be. A $10 million business with 40 employees will generally need a more detailed plan than a start-up funded with $75,000.
Below is a breakdown of some of the most common elements of a business plan, along with a brief explanation of what each section should include, and how it should be updated.
Basics — This section describes the owner’s idea of what the company will eventually be.
Updates — As the company evolves, update the description. For example, you started with one product, then expanded to three. Update the description accordingly.
Basics — This is often left out of most business plans. It explains what the short and long term goals of the company are. It should include goals for the next two to three years. It can also include broader goals for the future.
Updates — Continually adjust the goals based on current and historical realities. Companies are living entities that tend to evolve, hence the goals and objectives need to evolve. Revisiting this section will help remind you of your core objectives; updating will reflect the evolution of the company and always provide a target.
Basics — Market analysis describes the current state of the industry, including trends and projections for future growth. (See previous post on market research.)
Updates — Did the trends hold true? What has changed since the last time you updated the plan? How does this affect projections going forward? Are there new competitors? Have competitors launched new products/services?
Basics — Your business plan should at least include a high level marketing plan, which goes above and beyond simply stating what channels you will use. How will the various components be executed? How often? Who will do it? Flesh out a plan that can be monitored for return on investment. Include at least some detail. Don’t just say “social media”; include each platform, how it will be used, how often, etc. Don’t forget to list public relations, networking, organizations, certifications, etc.
Updates — Were the components of the plan executed? If so, were they successful? If not, why? Are there new methods/venues for marketing? Update to reflect new potential avenues as they arise. Marketing is extremely dynamic, and you need to stay on top of current trends, even if you decide not to follow them.
Basics — How will sales take place? Who will do the selling? List every possible revenue stream. If you are selling a product, break out online, bricks and mortar, wholesale, broker, distributor, etc. If a service, explain the entire process, methods for up-selling, etc.
Updates — Is your sales process working? Do any adjustments need to be made? Have new sales staff been added? Was a new market defined?
Management and Staff
Basics — List all of the key positions, even if they will be outsourced. For example, if you use an accountant, list him or her. The key is to know who will be performing each task required to keep the business going. List any positions that will be filled in the future and at what milestone they will be filled.
Updates — Add any new positions that were created, any employment changes, any new outside services utilized. Is everyone performing the jobs detailed? Do adjustments need to be made? Do new milestones need to be listed?
Basics — This is the section that usually gets the most attention: start-up costs, income statements, break even analysis, etc.
Updates — This is also the section that most owners monitor through their bank account. But instead of just relying on bank statements, you should prepare standard financial statements (P&L, Balance sheet, Cash Flow) at least once a year. This will help you see the big picture in terms of what is going on in your company, and make it easier to compare your company’s performance with others.
By updating and revising your business plan as your company evolves, you will be equipped for almost anything. Should a sudden incident make selling a must, you will be prepared. If you ever need a new loan or line of credit, you’ll have your documents ready to show a banker or investor. Most importantly, you will regularly be looking at the “big picture” instead of always putting out the latest fire.