The What, How, Why and When Behind Business Plans
A business plan is a set of documents prepared by a firm's management to summarize its operational and financial objectives for the near future (usually one to three years) and to show how they will be achieved. It serves as a blueprint to guide the firm's policies and strategies, and is continually modified as conditions change and new opportunities and/or threats emerge. When prepared for external audiences (lenders, prospective investors) it details the past, present and forecasted performance of the firm. It usually also contains a pro-forma balance sheet, income statement and cash flow statement to illustrate how the financing being sought will affect the firm's financial position.
Creating Your Plan
A business plan will contain some key components:
- Executive Summary
- Detailed Description of Product/Service
- Operations Plan
- Competitive Analysis
- Human Resources
- Background on key individuals in the organization
- History, Experience
- Marketing Strategy
- Target Market
- Value Proposition
- Pricing Strategy
- Go-To-Market Strategy
- Promotion Strategy
- SWOT Analysis
- Be honest with yourself and potential investors
- Funding Needs
- Return on Investment (ROI)
- Timeline for needed financing
- Numbers, Forecast Performance
- Balance Sheet
- Income Statement
- Cash Flow Statement
- Legal Structure
- S-Corporation, C-Corporation, Partnership, Sole Proprietorship, LLC
Creating a business plan is one of the most important steps you will take as the plan serves as your road map for the early years of your business. The business plan generally projects 3-5 years ahead and outlines the route a company intends to take to reach its yearly milestones, including revenue projections. A well thought out plan also helps you to step back and think objectively about the key elements of your business venture and informs your decision making on a regular basis.
"When should I update my business plan?" The answer to that question is always. You should be updating your business plan every month, every week and every day; whenever things change, you update your plan. And things always change. You should update the business plan when you're at home getting ready for the day, when you're caught in traffic on the way to work and when you're out for a walk. Update your business plan when listening to customers and other managers.
While this may seem like chaos, it's actually the opposite. The constantly-updated business plan is what makes order out of chaos. It becomes a long-term planning process that sets up your strategy, objectives and the steps you need to take by constantly being aware of the results of these steps.
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