How To Develop A Business Plan (And Why You Need To)

We recently talked about how to know if you’re ready to start your own business How to Know You’re Ready (To Start Your Own Business!). While an aspiring entrepreneur (like you!) has a range of important items to consider before taking the leap — from the state of their finances to their business’s 3 Ps (Purpose, Processes, and Pricing) — one of the most crucial includes the creation of a business plan.

A common misconception by many small business owners is that they don’t need a business plan unless they’re going to use funding from investors to get their business off the ground. They wonder why they should write down a bunch of information about their business if it’s already in their head. In reality, though, if you want clarity and desire longevity for your company, you’ll need a business plan in place before you get started.

What Is The Purpose Of A Business Plan?

More than anything, a business plan essentially serves as a roadmap for your company. It’s not set in stone and will likely twist and turn and change after your business launches and starts to mature. But at least your business plan (aka roadmap) gives you a solid starting point by which to begin the business journey. Before you venture into business, make sure to write your plan down.

Keep in mind that your business plan is intended to help you, the business owner. Creating one gives you the opportunity to thoroughly think through all the aspects of your business and how it will be sustained (even in light of some sort of interference — like a pandemic). In other words, it allows you to consider all contingencies.

What Are The Parts Of A Business Plan?

Ultimately, you should develop a business plan that suits you and your business - there’s some flexibility there. But, in general, according to small business association NFIB, most business plans include the following standard sections: 1) executive summary, 2) company description, 3) products and services, 4) market analysis, 5) strategy and implementation, 6) organization and management team, and 7) financial plan and projections.

It’s easy to find more information about each of these sections (or to download a business plan template) by searching online. At a minimum, though, when it comes to certain sections (like the financial and/or marketing sections of your plan), consider enlisting the assistance of a professional (e.g., a business accountant or marketing expert) to ensure accuracy. Additionally, some people hire a consultant to help them think through their business plan (note, though, that consultants can vary in cost significantly).

Some Questions That Your Business Plan Should Answer

You’d be surprised at how confused (sometimes speechless!) many soon-to-be business owners are (those who believe they have their plans fully figured out in their head) when asked questions that are typically answered within a business plan. They think they know it all already, but do they really? Below are some questions that should be included in your business plan.

1. How big is your market? How many people will potentially buy what you’re selling?

It’s important that the answers to these questions be actual numbers and not generalized terms like “many,” “large percentage,” or “significant portion.” Be specific.

2. Who are your five closest direct competitors?

Remember that you’ll want to compare your business against competitors that are comparable in size to yours. Meaning: they are early-stage companies that operate in the same space as you. Don’t pick well-established, large companies to compare yours against.

3. How many people (employees or contractors) do you need to operate your business efficiently?

Small business owners frequently start off doing everything themselves (whether they want to or not). But this just isn’t realistic or sustainable. For your business to grow and be efficient, you’ll need to figure out how many people you’ll need to hire to operate it. Ideally your business plan will even include an organizational chart. 4.

4. How long until your business will financially break even?

This time-frame will stem from the financial projections section of your business plan. It should be based on real research about the size of your market, potential sales, and your ability to deliver.

5. Who will regularly maintain/update your company’s website? How much will this cost per year?

In addition, take into account any other professional service providers you will need. Some examples include graphic designers, IT service providers, social media content creators, etc.

6. Who is going to respond to business-related emails and handle customer service?

As the business owner, you’ll be laser focused on efficiently delivering your product or service. With your concentration elsewhere, it can be easy to get behind on answering customer emails and calls. This is a problem, though, because providing exceptional customer service is imperative to the success of your company. Unread emails can result in missed opportunities like key growth partnerships and can impact your customer retention. So make sure you identify who is going to take care of this critical part of your company.

A Final Word From Tuesday Brooks Founder of AJOY

While many new business owners blow off the need for a business plan, it’s actually very important to create one and put it in place. Developing a business plan will force you to really think through all the nitty-gritty details and potential contingencies of your business idea. You’ll end up much better prepared for everything that is to come your way. So, do some research, write out answers to all the questions found in a business plan template, and sleep better at night knowing that you’ve thought through exactly how your business will operate and achieve success.

Check back next week for more quick and easy business tips!