One of my mom’s favorite things to say to me is: “Failing to plan is planning to fail.” So as much as it pains me to admit she’s right (just this once, Mom!)—she is. Especially now that I’m a business owner, I clearly see the value of thorough planning and preparation.
When you’re just getting started with your business, it can be tempting to dive right into the more creative and exciting parts. But it is important that you put down a solid foundation first. What exactly does this mean? You need to create a business plan for your startup. Sounds dry and boring, right? But if done well, your business plan will be your roadmap to success.
There’s no doubt about it—business plans can be intimidating. Simply hearing someone utter the phrase is enough to send shivers up my spine. But I assure you, it’s not as complicated as it seems. Think of it like piecing together a puzzle: You just need to have the right pieces.
Now, you might be wondering how the heck to know what pieces you need. Have no fear, my fellow entrepreneurs! I’ve outlined the essential components of a business plan for you below.
Of course, business plans will vary greatly based on your type of business and intentions with the plan itself (i.e. is it just for your reference or are you using it to approach investors?). But these essential elements will get you started. Happy planning!
Before you can get into things like budgets and marketing strategies, you first need to provide the general overview of your business. This summary should touch on all of the nuts and bolts—the need to know facts that make your business tick.
What is your business structure? Are you a sole proprietorship, a partnership, an LLC, etc.? What is your mission and purpose? Where will you be located? What is your means of doing business? Are you an online business or will you require a brick and mortar location?
You might feel a little overwhelmed by these questions at first and that’s totally normal. Just sit down with a notepad and pen, do some research, and start jotting down your business basics. You’ll have these questions answered in no time!
2. Products and Services
Obviously, in order to be a business, you need to offer something to customers. So, your business plan should also describe your products and/or services.
For the sake of organization, it’s a great idea to categorize your products and services. For example, if you’re starting a custom invitation design business, you might want to classify your design services by event type, such as weddings, corporate events, holidays, etc.
When doing this, you’ll also want to write a brief description of each product or service. This not only makes for a detailed and comprehensive business plan, but will also make it simpler for you to complete other sections.
3. Sales and Marketing Plan
Once you’ve outlined your products and services, you need to describe the pricing structure for them. How much will you charge and what justifications do you have for establishing that price? You may also want to include research that indicates your customers will be willing to pay that determined amount.
Of course, setting the price is one thing—but how exactly will you reach these customers? The marketing portion of your business plan will detail the strategies and tactics you plan to implement in order to market your business to potential buyers. Perhaps you plan to launch an engaging social media campaign or you’ll place banner ads on targeted websites and blogs. Whatever tactics you intend to employ, map them out here!
4. Market Analysis
In order to effectively reach your customers, you need to know who exactly they are. This is where your market analysis comes into play. “Market analysis” sounds like one of those snooty terms that men in business suits shout at each other over a long, mahogany conference table. But, it’s definitely an essential piece of your business plan.
To start, you’ll want to describe the current state of your industry. Do some research to discover key indicators like the size of your industry, any notable trends, and the projected growth.
Another key part of your market analysis is identifying your target customer. What gender do you reach? What age range do they fall into? What are their defining behaviors and characteristics? Where do they like to get their information? This will help you ensure that you channel your marketing efforts appropriately.
5. Competitive Analysis
Unfortunately, there’s a lot of competition out in the business world. But, it’s incredibly important to be informed about who exactly your direct competitors are. This section will describe these current competitors, as well as some other facts about their businesses. What do they do well? What things could they do better?
In addition, take some time to think about what exactly sets you apart from these competitors. Are your products of a higher quality? Do you specialize in a very particular niche? Do you have more experience and expertise? Determine what differentiates you, and then outline the methods you’ll use to consistently outshine that pesky competition.
6. Financial Plan/Budget
Finally, it’s the part that everybody dreads the most: the budget. This section should contain any and all financial information that is relevant to your business.
If you’re using your business plan to approach an investor or bank, first establish the amount you require in order to start and maintain your business. Beyond that, you should describe any ongoing business expenses you anticipate such as supplies, salaries, professional fees, and insurance.
Your budget should detail the money that’s going out, but you also can’t neglect to mention the money coming in. What are your projected revenues? What’s your breakeven point?
Finally, you’ll want to outline your plans for using the funds to benefit your business. Investors aren’t likely to throw money at a business willy-nilly, so you’ll want to demonstrate that you’ve thought long and hard about the best places to spend your pennies.
Undoubtedly, this section will involve some frustrating number crunching. But, whip out that calculator and tackle it head on! Like it or not, finances are pretty much the be-all and end-all of your business.
Yes, crafting your business plan can be intimidating. But it’s also incredibly exciting! Rather than thinking of it as a hassle you need to check off your list before moving on with your business, look at it as the first step on your exciting adventure. Plus, with a comprehensive business plan in place you’re one step closer to success!