Every business owner should realise that failing to plan is planning to fail. A successful business is always backed by proper planning. If you are an entrepreneur, or you intend to start a business, a business plan is vital to your success.
When I first started Offset Warehouse, my business plan was a fundamental part to deciding whether my business had any chance for success. A business plan specifies what your business is all about; its vision, goals and objectives, and how you intend to achieve them. The plan will also discuss your financial strategies, your customer market and the scope for growth.
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Who Needs A Business Plan?
Every entrepreneur needs a business plan if they want their enterprise to grow in the long run. Business plans, however, aren’t compulsory. In fact, many fashion and creative enterprises start up and operate without a strategy in place. One of the reasons is that it requires you to step out of your comfort zone, so it can feel easier to either put it off or skip it altogether.
It is nevertheless a valuable exercise, which will immensely contribute to the success of any enterprise. Here’s how.
Why Do I Need A Business Plan?
The main benefit of having a business plan is that it acts as a comprehensive guide to your business, and suggests where it is headed. Without such a document, you may not have a clear idea of the future of your business, and this can hamper your growth potential. When I first started out, the most important thing I learned about business plans, is that primarily they aren’t meant for investors or for your friends and family – they are meant for you.
Reasons Why You Should Consider A Business Plan:
- It makes it easier to plan and communicate the goals and objectives of your business to partners, employees and yourself.
- It allows you to think rationally and objectively about your business.
- It helps you identify your target customers and how you can satisfy them better.
- It tells you what issues may arise, and how to tackle them.
- It allows you to measure progress and identify areas where you need to improve.
- It allows you to plan your finances.
- It allows you to identify the scope of development for your enterprise.
What Should Your Business Plan Include?
Whatever you like! As I mentioned, your plan is primarily for you, not for anyone else. So you can make it as long or short as you like. Of course, if your plan is for an investor, then that’s a totally different matter and you will have to do a much more in-depth plan.
Many business owners find the idea of creating a business plan daunting, despite how easy it actually is. All you need is a systematic approach. A good business plan constantly evolves with the business. So, I suggest that you create an initial plan after doing the required research, and then elaborate on it as your business grows.
A Basic Business Plan Should Cover The Following Three Areas:
1. Business Concept
This section summarises your product and business strategy. It conveys information about your goals, your competitive advantage, the structure of your business and activities planned for the future.
2. The Market
Here, you identify potential customers and why your product appeals to them. You also discuss your market research and strategies, competitors, possible problem areas and corresponding management plans.
3. Finances
This is where you discuss your startup cost, income and cash flow. You should also include your profit and loss forecasts for the next three to five years.
The article, An Introduction To Business Plans on Entrepreneur, suggests the following format for a business plan. This is a business plan that is clearly geared towards showing other people (would you put an executive summary in a document for yourself?? Probably not!):
- Executive Summary
- Business Description
- Market Strategies
- Competitive Analysis
- Design & Development Plan
- Operations & Management Plan
- Financial Factors
The Importance Of Market Research
Market research is essential to planning your business strategy. It will help you find out why customers buy your product, what will make your products more attractive and how you can make it possible. You will also have to study competitor information to know where you stand and identify areas where you can improve.
Market research has to be conducted using the two methods:
- Primary research where you directly obtain information from a target consumer group through interviews and online surveys.
- Secondary research where you obtain information from website reports, competitor websites and industry blogs.
Find out more details on the best ways to do market research for your business plan in this great article on The Entrepreneur.
Financial Analysis & Projections
The financial section of your business plan covers the costing and pricing strategy, overview of sales, cash flow and profit and loss forecasts. How you draft the financial section of your business plan would depend on your business model. However, every plan should contain the following sections.
A sales forecast that predicts your sales for the next three years. Older businesses can look at past results to do this, but if your business is new, you can fill this section with an educated guess.
An expenses budget that includes both fixed costs and variable costs. You will also have to estimate interest and taxes.
A cash-flow statement. Existing businesses can look to financial statements to develop this. New entrepreneurs can create an annual estimate initially.
Profit and loss statements which can be calculated using a business planning software. It should allow you to calculate a gross margin and net profit based on your sales forecast, expense projection and cash-flow statement. You should also project when your overall revenue will exceed your expense, and how this amount may vary based on other factors.
For more information on how to prepare the financial section of this document, I’d recommend this article on Inc.com.
Now you know what you need to create your basic business plan and all that it should contain – so go for it! Don’t forget that it is always a work in progress. This will allow you to measure your business growth and also compare it to that of competitors, and plan for the future.
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The post An Easy Step-By-Step Guide To An Essential Business Plan appeared first on The Swatch Book.
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