The most important reason to write a business plan is create a roadmap for the entrepreneur or business owner. A business plan can also be a valuable tool for communicating your business idea to others, for example, to secure financing or attract investors.
Whatever your reasons, any business plan will be stronger by following these basic guidelines.
- Anticipate the questions readers will have and answer them in your business plan. They’ll want to know about you, your business, and your industry. They’ll be interested in your financial and employment history. They’ll need to know that you understand your customer, and that you know how to makes sales and serve customers.
- Forecast sales a bit lower than you think they will be. Smart business planners will intentionally err on the conservative side, showing viability with as few sales as possible.
- Estimate expenses a little higher than you believe they might be. The brutal truth is that contingencies or expense buffers are all too often necessary and get spent once the business is in play.
- Remove some of the guesswork from your sales projections by gathering items such as signed contracts, letters of intent or some other form of written confirmation that customers are willing to buy your products or services from your business.
- Provide a complete set of clear and realistic financial forecasts, and make sure you know them well enough to discuss them intelligently with your banker or investor. Demonstrate your understanding of how money flows in and out of your business, and convey your knowledge with sales projections, a cash flow forecast, and pro forma income statements and balance sheets.
- Be frugal. In your business plan, show readers that you make wise buying decisions and that you are sourcing the best products and materials. If you can get by with an older truck, don’t ask for financing for that shiny new one.
- Be realistic and factual throughout your business plan. Nothing undermines your credibility quicker than inaccuracies. Where it makes sense to do so, state where the information comes from.
- Communicate various ways that you know your business, including, understanding your customers, having a savvy approach to pricing, and knowing how to make the operation work efficiently.
- Your business plan needs to communicate your knowledge of the industry you will operate in. What types of goods are sold? Who are your competitors? What competitive advantage will motivate customers to buy from you?
- Somewhere in your plan you’ll want to talk about your qualifications, and share information about any business-relevant assets such as your educational background or work experience.
Everything you do to create a business plan will increase or decrease your confidence in the business idea. As your confidence increases you move toward launching the business; if it decreases, you have more work to do.
For most small business or micro-business ventures, the business plan doesn’t need to convince anyone that you’ll be wealthy or retire early. It has only to demonstrate viability, that is, to show that the business will provide you with enough of a salary to pay your monthly living expenses, and hopefully earn a bit of profit as well.
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